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Good morning. My name is Denise, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Kinross Gold Corporation Q2 2018 Financial Results Conference Call and Webcast. [Operator Instructions] 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, and good morning. With us today, we have Paul Rollinson, Chief Executive Officer; Tony Giardini, Chief Financial Officer; Lauren Roberts, Chief Operating Officer; and Paul Tomory, Chief Technical Officer. Before we begin, I'd like to bring your attention to 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 August 1, 2018, the MD&A for the period ended June 30, 2018, and our most recently filed AIF, all of which are available on our website.I'll now turn the call over to Paul.
Good morning, everyone, and thank you for joining us today. Our portfolio of mines performed well in the second quarter. We generated solid cash flow and maintained our strong balance sheet and we also continued to advance our development projects. We saw a strong showings at most of our operations in the second quarter. Highlights would include Paracatu, which achieved its highest throughput in 4 years; Chirano, which performed well in the first half with improved cost of sales; and our Russia and Nevada mines continued to produce good results, particularly Bald Mountain, which achieved its lowest cost of sales since Kinross became the operator. However, we are also working through some temporary challenges at our Fort Knox and Tasiast mines, which impacted production and cost at those operations. Notwithstanding that, the second quarter was in line with expectations, and our overall performance in the first half of the year has been strong. As well, we continue to be on track to meet our 2018 guidance.I'd now like to provide an update on Mauritania and our Tasiast expansion project. First, I'm pleased to report that the construction of Phase One is complete, and we're in the final stages of commissioning. For me, a picture is worth a thousand words, and the video we posted last night really provides a great visual on where the project is. It also includes some footage of the first ore going through the mill, and I'd encourage you all to take a look.Second, we remain engaged with the government to understand and address their position on our activities in Mauritania and related benefits for the country. I think it's very important to note however, that it has continued to be business as usual at the mine in the Phase One project. In other words, notwithstanding the government's request for discussions, the mine continues to operate as it has for the past 8 years. In addition to political risk insurance that we've already arranged with MIGA, the division of the World Bank, we've also made progress on the project financing for Phase One. Tony will have more details for you, but I want to highlight we've continued to see strong interest from organizations like the IFC and EDC. We see the project financing as a good opportunity to bring in these additional multi lateral partners. However, until we have greater clarity on what the government of Mauritania is seeking, we have decided to pause spending on the Phase Two project. This is very much in line with our commitment to capital discipline. In parallel, we have started analyzing alternative scenarios to incrementally expand throughput above 12,000 tonnes per day. Completing the analysis of these alternatives and a decision on next steps for Phase Two are subject to our ongoing engagement with the government.I'll now turn over to our other development projects where we also continue to make good progress. In June, we approved the Gilmore project at Fort Knox, adding another U.S. project to our development pipeline.Gilmore is a low-risk, low-cost brownfield expansion that is expected to extend mine life to 2030 at one of our top performing mines. Also, both projects in Nevada are progressing well. We expect to begin mining in the fourth quarter at the Moroshka satellite deposit in Russia. And we've initiated studies at La Coipa and Lobo-Marte to evaluate the potential for a return to production in Chile. As we look forward, we are confident that we have the financial and technical strength to invest in our future and our teams are highly focused on the delivery of our development pipeline.With that, I'll now turn the call over to Tony.
Thank you, Paul. I'd like to begin with a review of our financial results. We produced 602,000 gold equivalent ounces in the second quarter at a production cost of sales of $767 per ounce. Our operations generated approximately $232 million of adjusted operating cash flow roughly in line with the same period last year. Adjusted net earnings were $0.03 per share, which is roughly in line with the $0.04 per share last year. Capital expenditures were $247 million for the quarter, and $494 million for the first half of the year. While we have paused Phase Two, we are maintaining our 2018 capital guidance of $1.1 billion, plus or minus 5%. This is due to the incremental costs associated with the Gilmore project, which we approved in July. The project studies for La Coipa and Lobo-Marte in Chile, and spending on Tasiast Phase Two, which was underway earlier in the year and now also includes costs associated with preserving optionality following the decision to pause the project. In addition to our financial results, I'd like to highlight 2 other items of interest during the quarter namely, the Tasiast project financing and extensions to our credit facilities. First, we have continued to advance the project financing for Tasiast, where we are targeting to raise approximately $300 million. During the second quarter, we signed a mandate letter with the International Financial Corporation, a division of the World Bank, confirming their interest in participating in the financing subject to further due diligence. We're also financing a mandate letter with Export Development Canada, which is subject to due diligence. In addition, we have received expressions of interest from commercial banks. While no decisions have been made on the final makeup of a lending landing group, we are pleased with the level of interest we've seen in the financing. Lenders are finalizing engagement of their legal counsel and technical consultants, and we expect a due diligence site visit to take place later this year. Second, we extended the maturity dates for our revolving credit facility as well as our letter of credit guarantee facility. In July, we extended the maturity date of a $1.5 billion revolving credit facility by 1 year to August 2023. The bank group remains very supportive of the company and there were no changes made to the lending syndicate. Also in July, the $300 million letter of credit guarantee facility with EDC was extended by 2 years to 2020. This facility is used for reclamation bonding obligations at some of our U.S. operations. Turning now to our financial position. Our balance sheet remains strong. We have approximately $920 million of cash, a total of $2.5 billion in liquidity, no debt maturities prior to 2021, a trailing net debt-to-EBITDA ratio of approximately 0.7, and strong cash flow generation from our portfolio of mines. It is worth noting that subsequent to the end of the quarter, we closed the acquisition of 2 power plants in Brazil for $254 million. Given the strength of our balance sheet, we've funded the transaction with cash while we continue to consider a future debt financing for the acquisition. To sum up, we're in a strong financial position. Our focus on disciplined capital management and the strength our liquidity position will continue to be priorities. I'll now turn the call over to Lauren for a review of operations.
Thank you, Tony. During the second quarter, our mines in Nevada, Brazil, Russia and Ghana all performed well, with overall production and costs in line with our expectations despite some temporary headwinds at Tasiast and Fort Knox. Our performance was underpinned as always by our cost of focus on the safety of all of our employees and contractors. Starting with Fort Knox. In mid-July, I was pleased to host the mine tour, which was well attended by both analysts and investors. It was a great opportunity to showcase the excellent operating team we have there as well as the future potential we see with the Gilmore project.As we mentioned last quarter, we experienced a minor pit wall failure in the first quarter. As those of you who attended the site visit will attest, it was relatively minor. It is, however, poorly located, and it is restricting the access to higher grade material. As a result, production decreased and cost to sales were higher quarter-over-quarter. As we discussed on the mine tour, we expect production in 2018 to be approximately 30,000 ounces lower than the estimate in the technical report published in June. We do not anticipate any impact next year and we'd expect to recover those ounces in 2020.At Round Mountain, production was in line with the first quarter as fewer tonnes of ore placed on the heap leach pad was partially offset by higher mill production due to an increase in mill grade and recoveries. Cost of sales per ounce sold was higher quarter-over-quarter, primarily due to mining of ounces recovered from the pads -- timing of ounces recovered from the pads as well as higher fuel costs. At Bald Mountain, production decreased compared with the previous quarter mainly due to timing of ounces recovered from the leach pads. I'm very pleased with the performance of Bald Mountain since it came into our portfolio. For example, costs in the second quarter were record low and Bald Mountain was recently named the safest surface mine in the state by the Nevada Mining Association. These are achievements our team is extremely proud of and are strong indicators of a well-run operation.At Paracatu, mill throughput was strong in the quarter, reflecting increased efficiencies in the mill and mining in a more consistent zone of the orebody. However, production decreased slightly compared to the first quarter primarily due to timing of ounces processed through the mill. Cost of sales per ounce sold was lower compared to the first quarter mainly due to an increase in operating waste mined.Paracatu has experienced significantly improved rainfall compared to last year. Combined with the benefits of our mitigation efforts, we expect to be well positioned for the remainder of the year. At Maricunga, gold production was ahead of plan due to better performance from rinsing of the heaps.Turning to West Africa. Production at Chirano was largely in line with the first quarter due to better mill performance despite slightly lower grades. Performance also benefited from more reliable power supply from the grid.With new leadership, the mine has made a lot of progress in the last year, and it's become a steady performer with improved costs, which are down 12% from where they were a year ago. At Tasiast, the Phase One project was handed over to operations, which is highly focused on completing the commissioning. The mine, however, experienced a few operating challenges in the second quarter, which impacted production and cost of sales. This was mainly a result of a slower than planned ramp-up in the mining rate, delayed access to higher grade material, and downtime at the mill related to tie ins for the Phase One project. For the balance of the year, we will be focused on ramping up mill throughput and accessing the higher grade ore that is about to be released by the current phase of stripping. I'm proud to report that in early June, the mine site completed 1-year without a loss time injury, which totals almost 10 million work hours, a testament to the excellent quality of our teams, which have been operating the mine while executing a large construction project.Moving to our Russia region, Kupol and Dvoinoye continue to be consistent performers. Our production was largely in line with Q1, cost to sales was higher quarter-over-quarter mainly due to higher maintenance costs partially offset by favorable foreign exchange movements.Development of the Russian satellite deposits continues to progress well. The twin declines at Moroshka are proceeding on schedule, and production is expected to commence in the fourth quarter.At the Dvoinoye Zone 1 deposit, portal construction is complete and mine and surface infrastructure development are progressing as planned. Production at Zone 1 is expected to commence in mid-2019.In summary, we are moving in the right direction at all of our operations. Our overall performance for the first half of the year has been strong and we continue to be on track to meet our company-wide guidance for the year.I'll now turn the call over to Paul Tomory for a review of our projects and exploration highlights.
Thanks, Lauren. As Paul mentioned earlier, we've got a great deal on the go right now with our projects, which includes completing the commissioning of the SAG mill at Tasiast; executing on the construction of our 3 projects in the U.S.; initiating project studies in Chile; and last but not least, work on our priority exploration targets. Over the past 3 months, we've made significant progress on all of these projects. Let me start by providing an update on the Tasiast Phase One expansion. I'm very pleased to say that construction is now complete. We have fully commissioned the CIL plant: the conveyor, the crusher, pebble crusher and all ancillary systems. And the SAG mill is now in its final stages of commissioning and that is proceeding well. During this past week, we were all very excited when we reached an important milestone. Running the first batch of ore through the SAG mill. Another major milestone we achieved in this past week is when we officially handed the project over to the operations team.We look forward to the final ramp-up of throughput, which has already peaked at 12,000 on a couple of days in the past month.Turning now to our Nevada projects. The Phase W expansion of Round Mountain is progressing well and on budget. Detailed engineering is essentially complete and earthworks in the new infrastructure areas are approximately 90% complete. The new dewatering pond is complete and we've made good progress on the new heap leach. Initial construction activities for the vertical CIC plant have begun and the remaining major construction and procurement contracts are progressing nicely. Work has been largely focused on pre-stripping, which is proceeding very well, and we continue to expect to reach initial Phase W ore in the middle part of 2019.At Bald Mountain, we've also making -- been making very good progress in the Vantage Complex Project. Engineering is also almost complete and construction is well underway. All major equipment and construction packages have been awarded. Project is on schedule, with commissioning of the new heap leach and process facilities expected to commence in the first quarter of 2019.At Fort Knox-Gilmore project in Alaska, we've initiated early works on the new heap leach and permitting is complete. We expect initial production from Gilmore in the early part of 2020. We continue to explore the prospectivity and upside potential of the Fort Knox area as the orebody remains open to the west, south and east as we demonstrated at the analyst visit. Drilling of the East Wall extension is ongoing and has yielded encouraging results from the first few holes. We've also started generative work in and around Fort Knox property and we are reviewing the Gil Sourdough target to evaluate potential synergies with the ongoing operations at Fort Knox. In addition to the project and execution, we're also continuing to look at additional future development opportunities in the portfolio, particularly the return to potential production in Chile.With permitting advancing well at La Coipa, we've initiated feasibility study that will contemplate refurbishments of the existing mill and the processing of high grade material from the Phase 7 deposit. We expect to complete the study in the second half of 2019. Parallel to that, we've also initiated scoping study for the Lobo-Marte project, which is located about 80 kilometers from La Coipa. This study will assess the potential for a production start at Lobo-Marte at the end of La Coipa's mine life. And we expect to complete this study in the first half of 2019. The 2 studies will also look at the potential for synergies, resource sharing between the 2 projects.I'd like to conclude by providing a brief update on 2 of our exploration priorities. First, at Bald Mountain, drilling has mainly been focused on the north area of the property. We're analyzing results from the drilling completed in the first half of the year, and continuing the program with a goal of potential mineral resource additions and mineral reserve conversions from the year-end from the Top, Redbird and Winrock deposits. Exploration drilling in the JV zone and to the south area of the property is also ongoing, and we've seen some encouraging results from some of the targets.Second priority of the highlight is Kupol, where we've continued to explore the main Kupol vein and mineralizations in the north and south along the trend. Initial results for potential mineral resource additions to extend mine life have been promising. Drilling at the North Extension continues to confirm mineralization and vein widths similar to those intercepted in 2017, and at the 650 Zone in the Southeast, drilling is indicating potential mineralization at depth beneath the current resource. Drilling in the second half will continue to probe depth extensions and hanging wall structures parallel to the main Kupol vein. In summary, we're making good progress on all our projects, and we look forward to updating on a number of important milestones later in the year. With that, I'll turn it back to Paul.
Thank you, Paul. So just to wrap-up before we open up the line for questions. Our portfolio of 8 operating mines has delivered solid results in the first half of the year, and we are on track to meet guidance. Our balance sheet is strong, and we continue to advance our development portfolio. With that, operator, I'd like to open up the call for questions.
[Operator Instructions] Your first question comes from Stephen Walker with RBC Capital Markets.
Just wanted to ask. There's a new Mauritanian tax legislation that's being proposed, and I kind of guess my question is -- and you made reference to discussions with the government officials. Have -- is this an escalation or are the taxes within this proposal in and above what has been previously discussed with Kinross and what are the proposals within it that could have an impact that may not have been previously discussed?
Yes, Stephen, it's Paul. Just on the one point, and I think it's really important here, your question about escalation. There's absolutely been no escalation. It's business as usual. In fact, we put out a press release on the last quarter indicating the government wanted to have a conversation. In our meeting subsequent to that, they very much want to deescalate what resulted from us putting out a press release. But Tony maybe will speak more specifically to the -- to add point.
Sure. And I think the first point I want to make, Stephen, is that these changes, first of all, they're just proposed changes at this point, but they will apply to all taxpayers. It's not focused on the mining industry or Kinross specifically. So a couple of points that I'd just like to make. So after preliminary review of the full document, we've reached some initial conclusions that are still subject to a more detailed review. The draft is a result of the long standing need to refresh the 1982 tax code. So if you think about that, that's over 35 years old. It has been prepared with assistance from the tax -- French tax administration and it's been financed by the EU. At this point, there are no significant changes or effect on proposed changes to the Tasiast income tax, withholding tax or VAT position. However, we're relying in part on the stabilization clauses within our mining conventions. There may be some impact on payroll amendment taxes, and we're not clear on when the implementation date would occur if this is actually passed through the Mauritanian government. But it would likely not apply until 2019. There's going to be some additional compliance requirements that we'll need to address and those will be the primary focus of what we're looking at. There also may be some positive effects such as VAT and income tax, withholding tax offsets. So that's in a broad sense where things are at. It's all preliminary. It hasn't been approved at this point. But we're focused obviously on getting a better understanding, and I would just point out that it's not related to ongoing conversations and...
And in fact, they're seeking our input as well.
Right. And they're seeking our input as well. So...
Sorry, input into the proposed structure to the Tasiast agreement or input into the proposed tax legislation?
They've held -- they've already held a briefing session for taxpayers in Mauritania and have requested a further input in terms of written comments. So we're in the process of preparing those comments for submission later this month.
But again, this is not a Kinross-specific, mining-specific, it's a general tax for the entire country initiative.
The income tax versus royalty structure or other production taxes?
It's not even necessarily geared to mining taxes, Stephen.
Okay. And If I can change the subject, just maybe for Paul Tomory. At La Coipa and Lobo-Marte, how should we think about Lobo-Marte? Is there going to be concentrate that's produced and potentially sent up to La Coipa? I know there's a copper component to Lobo-Marte and there was previously considerations for a SART plant. I mean, can you give us some high level sort of thinking on kind of what that project could look like?
Right. So high level, the concept is a potential return to production, first at La Coipa, and then during the La Coipa production period, we would advance permitting and further study and ultimately construction at Lobo-Marte. So we're looking at these projects in series rather than in parallel. So Lobo-Marte, obviously, has a much longer lead time.In terms of specifically answering your question, as you know, Lobo-Marte is a large resource. We currently have as primarily measure-indicated. And we are doing a scoping study, so we're taking it right back to the beginning to assess the impact that new technologies have had in the intervening years since we last looked at it. Take into account our experience at Maricunga, you mentioned the SART plant, we've made very good use of the SART plant in Maricunga. The same thing with a lot of the best practices in heap leaching we've put in place at Round Mountain, Bald Mountain, and Maricunga, Fort Knox. So it's a scoping study. We're starting from the ground up. But your points are valid, SART, crush, leach are all going to be part of what we assess. And I'd say at this point, it's too early to say what it will be, what the throughput rates will be, what the mining rates will be. But we will know that at the end of the scoping study. And as I mentioned in the script earlier, we are also looking exclusively at synergies between the 2 projects. Can we share certain resources like water, fleet, other capital equipment, camp. And you mentioned potentially, the trucking of high grade concentrate from Lobo-Marte, La Coipa. I think that, that's unlikely but we'll look at that as well. So in a nutshell, these are projects we're looking at in series. And we're looking at the opportunities to synergistically deploy capital between the 2.
And just 1 follow-up question, if I might, Paul. The issues with the metallurgy was, again, the copper more so than the leachability of the residual ore or the -- excuse me, the ore that is there, the oxide ore. Did you see any issues with the leachability of the oxide ore or the mixed ore that is within the resource number that you have?
Yes. So we are going to be doing pretty comprehensive metallurgical test work to relook at the challenges that were encountered previously. But again, as we've pointed out, our experience with the SART plant and with heap leaching in general will be brought to bear in these studies. But you're quite right, there's a high copper content and so it's a question of cyanide recovery and the production of a salable copper product. And like I said, it's a scoping study, so we're really beginning from the ground up.
Your next question comes from David Haughton with CIBC.
Just having a look at Bald Mountain, some pretty strong throughput rates there, mining rates and stacking rates. Just wondering what we should be thinking about rates of stacking going forward, and I guess, the other question to that is whether we'll see a catch up just specifically for Q2, production versus sales.
Hi, David, it's Lauren. Yes, David, so the stacking at Bald is a function of which series of pits we're mining at which point in time and where they are in their individual strip cycles. So it will ebb and flow over time how much ore we stack versus how much waste we're stripping, and how much recoverable metal is reporting to the process. We are anticipating another really good year at Bald, should be solidly in line with the guidance on the previous analyst visit. And in answer to your second question about the catch up. You'll also recall that our carbon and the gold production occurs off-site for us at gold strike. So there's always a little bit about a lag in terms of the processing and it shows up more prominently at the end of a quarter, of course.
Yes, I just -- it's just matter of the timing of shipments, really, as to whether it falls into one quarter or another?
Correct. And then also the gold strikes demand in terms of carbon processing for their own purposes. So we have an agreed arrangement on how much of our material is processed. There's always a little bit of flex in, in terms of how things happen at the end of a quarter but it'll come right back.
And a similar question at Paracatu. We've got milling levels, the likes of which we didn't think we'd get back to you for quite some time. So looking at 20,000 tonnes a day sort of thing, wondering what we should be considering going forward for that operation?
So Paracatu, as you'll recall is 2 large plants. There's the original Plant I through which, we're processing a healthy stream of tails as well as ore from the mine and Plant II in which we're processing predominantly pit run material. So the improvement that you're seeing in throughput is really a result of a couple of things. We've been heavily analyzing that asset over the last year or so. And it's led us to some very good outcomes in terms of our understanding of the metallurgy and the work index curve and how to operate that plant. In parallel with the technical studies, the operations team has been extremely focused on improving efficiency of the operation. Culmination of those 2 things is that we're seeing record high plant efficiency, is actually world-class availability on and utilization of SAG mill. And we're performing above our work index curve. So the combination of those 2 things is resulting in a really a very stellar throughput. And quite proud of the team and the work that's been done there to achieve those outcomes.
Okay, so that's pretty encouraging looking forward then.
Yes, I think so.
Last question for Tony. Going for project financing on a project that you've already spent the money on and now looking in retrospect to fund externally seems a little bit asked about. And just wondering what the strategy is there and whether it's partly to get some heavyweights on the lending books that can help you in negotiation with the government, or whether you're also positioning for additional funding for Phase Two win this clarity in that country.
Well, I think the history on project finance actually goes back quite a ways. As you may recall, when we were looking at the 38,000 tonne per day expansion a couple years back, we had initiated a project financing process where we're looking to raise $600 million. When we broke the project into 2, we made the conscious decision that we wanted to complete the 12k, before we initiated the project financing process and the reason is quite simple. One of the challenges associated with getting project financed done is you'll agree to the completion test, that you need to negotiate with multilaterals. So there's a lot of time and effort built in terms of doing that. So the thought process was let's get the 12k completed, up and running, so that when the technical consultants did their review, we're not arguing about the completion test, and that puts us in a position where the negotiation of the terms associated with the project financing is much more easily reached.In terms of whether we ever contemplated that, that financing would assist this part of Phase Two, clearly, we were of a view that if we raised money, once we completed Phase One and the project financing was recoursed to Phase One, we'd have that money available to us for Phase Two. That doesn't preclude us though from, if we decide to pause Phase Two for a period of time, either using that money for some of the other potential initiatives that we're looking at or effectively repatriating that money and using it in terms of our other business or paying down other debt and having that debt recourse to the project. In terms of bringing in multinationals -- or multilaterals, our view was always that we wanted to have other partners at the table with us, and the IFC has been pursuing us for a long period of time in terms of getting engaged with the project. And so it's not something that has just come about or we thought of in the context of our ongoing discussions with the government. It's something that we've thought about for the long -- for a long period of time. But we wanted to make sure that it fit in terms of timing and process, and we're hopeful that not just the IFC, but EDC will be able to participate. And there are other multilaterals that could come into the project financing. So while it seems a bit unorthodox, the thought process is actually to diminish the amount of time that we spend on the completion test to make it more efficient in terms of moving forward and to make sure that when we're having discussions with the multilaterals, it's focused on the real important considerations of the project moving forward.
I guess, I just would add that's -- the other thing to keep in mind as well, David. This is something that's, we think, good for us, but also good for the country. The government of Mauritania is -- wants to see this happen because it really becomes an IFC-World Bank stamp of approval, this country is good for lending. There is an alignment of interest because completing this will signal to others that project financing is available.
And the last thing that I'll point out is that the government of Mauritania, in fact, the Finance Minister has met with the IFC and has indicated that they welcome their participation in the project and they see them as an important part of the financing plan moving forward. And they're encouraged in terms of having the IFC involved and that occurred recently. So we're hopeful that subject to due diligence, we'll be able to get something in place on the project financing.
All right, great. So anything that diminishes the perceived geopolitical risk of that country is obviously going to be a benefit to you going forward. I'll leave it there.
[Operator Instructions] Your next question comes from Greg Barnes with TD Securities.
It's a question for Paul Tomory. Can you give us some kind of idea of the alternatives you're looking at to increase the 12,000 tonne per day capacity at Tasiast Phase One?
Yes. So what we're basically looking at is, in some ways analogous to what we did with Phase One, Phase Two is looking for where the next bottleneck is. So on our path to 30,000 tonne a day throughput, we looked at the flow sheet and looked at where the natural bottlenecks are. And there's a couple of them that show up. So I'll give you an example. Into 30k, we would have been running the SAG mill followed by the installation of a new ball mill. So one of the things we can do here as an interim throughput scenario is look at what can the SAG mill do without any ball milling. And that's one of the natural bottlenecks. So the SAG mill without any ball milling behind it could do 20,000 tonnes a day. And then that project would be in the -- the scope of that would be debottlenecking, pumping and piping as well as the addition of some tanks and upgrades to some of the infrastructure, water and power. So basically, in a nutshell, we're looking at a range of potential throughput scenarios that follow natural bottlenecks. And there are a number of them. It isn't just that one number, there's a number of bottleneck points. In a nutshell, that's how we're looking at the breaking Phase Two up into potentially a couple of stages.
I see. But anything you do on that would have to wait until you've got some kind of agreement with the government about how this moves forward?
Yes, that's right, Greg. I mean, it's what we typically would do around here. While we're trying to sort out -- to understand better what the government is looking for, we're not sitting on our hands, we're looking at the operational execution of alternative scenarios in a sort of a lower or slower capital spend until we get some clarification.
But just listening to everything you've said today, it sounds fairly constructive, as it's not really higher taxes and royalties. And they're just looking to revise the code for everybody. Have you got any sense of what it is the government is looking for?
Well, yes, look, we don't -- this is moving slower than we would like. I'll be frank. And -- but again, I can't -- it is a priority for us. But I can't presume or speak for the government as to what priority they assign. They've got a country to run and they've had a very busy agenda in the last several months. And for me, context is important here. We're literally one quarter into getting this letter. And I think, for me, it's almost as important as what's happened and what hasn't happened. And as we said, what hasn't happened is any kind of escalation or the mine is running just like it did the week before we got the letter and as it has been for the last 8 years. So business as usual. And we've talked about what has happened with the continued interest in pursuit of the IFC, EDC, those -- and even some commercial banks have approached us. We've completed the Phase One without any sort of issues. And I -- and you will note -- and you may have seen this, they are -- they have been busy attracting -- there's been a big push on foreign investment in the oil and gas sector. There's been a few deals announced on offshore gas with big oil. So in our view, this is a country that's very much open trying to attract foreign investment and we can't speculate but we're hopeful we're going to have a reasonable discussion here. There's been no suggestion, for example, of reopening the convention, which is our legal agreement on our fiscal terms. So we're keen to get this resolved, but we also need to be patient as well and again, frankly speaking, as we operate mines around the world and we deal with governments on all kinds of different issues, it's pretty typical things don't move as quickly with governments anywhere as fast as we corporates would like to deal with things. So it's business as usual and again, we -- for all those sort of macro context points, we expect to have a reasonable discussion with them.
There are no further questions queued up at the time. I'll turn the call back over to the presenters.
Okay. Well, thanks, everyone. I know we're standing in front of a Canadian long weekend. So thanks for dialing in, and we look forward to catching up with you in the coming weeks. And thanks, everyone, for dialing in.
This concludes today's conference call. You may now disconnect.