CEO Quarterly Update: 2021 Q3 Results

On November 10, we released our 2021 Q3 results. Overall, our portfolio performed well, and we remain on track to meet our revised production and cost guidance, as well as our capital guidance. We also remain on track to grow production to 2.7 million and 2.9 million Au eq. oz. in 2022 and 2023, respectively.

Operationally, I’m pleased to report that the Tasiast mill has re-started following the mill fire in June, on schedule and at costs lower than original estimates.   

On the project development front, we released the results of studies at our Udinsk project in Russia and Lobo-Marte project in Chile, which reaffirmed our view that both projects are attractive, high-quality assets with the potential to significantly contribute to our future production profile at low costs.

Financially, our balance sheet remains strong and we continued to enhance shareholder returns with our share buyback program and another quarterly dividend payment.

Key third-quarter highlights include:

First Priorities

  • With a fatality and major business interruption events already this year, I am, more than ever, watching our safety performance very carefully, as I know you all are. In order to meet our milestones and targets, we must do it safely, the right way, the first time. There is no schedule milestone or production target that is so important that we can compromise on safety.
  • I am encouraged by the actions taken to review our hot work programs, blasting and explosives management, and mobile equipment safety. In particular, I would point out Tasiast’s implementation of weekly Safety Stand Down sessions, which have introduced site-wide, cross-functional discussions of best practices and challenges.  
  • I encourage everyone to stay focused on what steps need to be taken to do your job safely – and to raise your hand to your manager if you have a question, or see a better way to do it.
  • While the COVID-19 pandemic continues to persist, our employees are stepping up and getting vaccinated. I’d like to thank those who have done their part, and strongly encourage anyone that hasn’t yet to please get vaccinated against COVID-19.
  • We established an ESG Executive Committee that will report to the SLT, and to our Board on a quarterly basis, to help improve our governance in this area. While we have a strong ESG track record, I believe we can benefit from a holistic ESG strategy across the Company.
  • We are proud to once again partner with Trout Unlimited (TU) to create the Alaska Abandoned Mine Restoration Initiative, and have committed $540,000 to the restoration of Resurrection Creek, the initiative’s first project. We have partnered with TU on various projects over the years, and we look forward to pursuing new initiatives that make a real and positive difference.

Delivering Sustainable Cash Flow

  • Operational highlights: We produced 483,060 Au eq. oz. in the third quarter.
    • At Tasiast, the mill has re-started and is expected to achieve sustained throughput levels comparable to the first half of the year in December. The site is expected to produce approximately 15,000 Au eq. oz. during Q4.  
    • Fort Knox performed well, with production increasing and cost of sales per ounce sold decreasing compared with the previous quarter.
    • In Nevada, Bald Mountain increased production compared to the previous quarter. At Round Mountain, the north wall of the Phase W area was stabilized following instability issues detected in Q1, and the movement of waste material at the top of the pit is now complete.
  • Financial performance: Cost of sales increased to $870 per Au eq. oz. sold and all-in sustaining cost increased to $1,225 per Au eq. oz. ounce sold. Capital expenditures increased to $231 million. 
  • Our margins remained strong at $920 per Au eq. oz. sold, driven largely by strong gold prices.
  • Adjusted operating cash flow was $190.5 million, with free cash flow of $38.9 million.
  • Adjusted net earnings were $90.2 million, or $0.07 per share. 
  • We repurchased $50 million of shares as part of our share buyback program as of November 10, and declared another quarterly dividend of $0.03 per share.
  • We ended the quarter with cash and cash equivalents of $586.1 million, and total liquidity of approximately $2.1 billion.
  • Russia and Bald Mountain had strong cost-management performance, and across the Company, we effectively managed labour costs, offset by increasing maintenance costs.

Deliver Future Value

  • We completed the pre-feasibility study for Udinsk in Russia and the feasibility study for Lobo-Marte in Chile, which have reaffirmed our views of both projects’ strong potential to be large, low-cost producers with attractive returns.
    • Together, Udinsk and Lobo-Marte represent approximately 9.7 million gold ounces of our probable reserve estimates and could potentially add approximately 6.7 million ounces to our production profile over their life of mines. They are located in jurisdictions where we have deep experience and have operated effectively for many years.
    • For Udinsk, a feasibility study is underway and is expected to be completed in Q3 2022, with first production planned for Q4 2025. Lobo-Marte remains a long-term development opportunity with the potential to be a large production, low-cost and long-life mine. 
  • The Tasiast 24k project is advancing well and remains on schedule to increase throughput to 21,000 tpd by the end of Q1 2022 and then 24,000 tpd by mid-2023. The first phase of the project is 96% complete, and the power plant remains on schedule to be operational by year-end, following successful first tests.
  • In Alaska, a feasibility study on the Manh Choh project is on schedule to be completed by the end of 2022, and at Fort Knox’s Gil satellite pits, the first blast at the site occurred in September, with first production expected before year-end.  
  • The La Coipa Restart project continues to advance well and is on budget and schedule to commence production in mid-2022. We continue to study potential mine life extensions, and expect to provide an update in Q1 next year.

Continuous Improvement (CI) and Innovation

  • Our operations continue to focus on productivity improvement efforts targeted at improving our cash flow. This year’s CI&I conference was held virtually and showcased the many initiatives underway at our sites to improve productivities.
  • We have seen an increase in submissions to the Innovation Opportunity Fund in the last quarter. I encourage all employees to take advantage of this fund to find solutions and technology that will improve our sites and operations.

We made good headway on advancing our business strategy over the quarter, despite a number of challenges, due to the hard work and dedication of our global teams.

Thank you for continuing to prioritize safety and for maintaining your focus on our shared goals.

Let’s have a strong and safe finish to 2021 as we continue to execute on our targets.

J. Paul Rollinson
President & CEO

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