Today, I’d like to share our 2022 Q2 results, provide key updates across our portfolio, and discuss our focus for the remainder of the year, particularly in light of our re-balanced portfolio after completing the sale of our assets in Russia and the pending sale in Ghana.
Last week, we tragically lost a colleague at Tasiast in a fatal accident during a routine maintenance task. We are shocked and saddened and are looking at ways to avoid such tragedies going forward following the completion of a detailed investigation. Over the past months, the team at Tasiast has gone to great lengths to strengthen the safety programs at site, and this terrible incident highlights the inherent risk in our business and that we need to continue getting better.
Operationally, while production improved compared with the first quarter, we continued to face headwinds across our portfolio. As a result, we expect to be at the low end of our 2022 guidance range of 2.15 million Au eq. oz. We have increased our 2022 production cost of sales guidance to be approximately $900 per Au eq. oz. sold and all-in sustaining cost to be $1,240 per Au eq. oz. sold. The changes to our guidance are mainly due to inflationary pressures across the portfolio and the temporary mill ramp up delays at La Coipa.
We expect a significantly stronger second half of the year, with higher production and lower costs to drive an increase in free cash flow. Paracatu, Tasiast and La Coipa are expected to drive most of our production increase, with higher production at our U.S. mines also contributing. Each site has a clear mandate as to what it needs to do to contribute to a strong second half – on production, costs, and safety. It is critical we safely meet our plan for the rest of 2022 and all stay focused on our goals.
Q2 Four Point Plan (4PP) Results
Starting with our First Priorities, we have been focused on safe operations and implementing important initiatives, including joint site reviews to drive cross-learning between sites to improve the quality of our programs. We have high expectations from everyone in this area and are committed to continuously improving our risk management and safety systems to safeguard every member of our team. Please continue to keep safety at the forefront through every shift and every task.
We also released our second annual Climate Report, providing comprehensive climate-related disclosures and our GHG emissions data for 2021, which is in alignment with the framework of the Task Force on Climate-related Financial Disclosures (TCFD). In early 2022, we released our multi-faceted Climate Change Strategy, which outlines a comprehensive GHG reduction plan as we work towards our ultimate goal of being a net-zero GHG emissions company by 2050.
In the Deliver Sustainable Cash Flow section of the 4PP, we were challenged by higher costs that were largely due to global inflationary pressures. With expected higher production and lower costs in the second half of the year, we are well positioned to grow free cash flow, however, we will require all sites to achieve production targets and remain focused on costs so that we can control spending and deliver on our commitments over the coming months.
At La Coipa, we have been addressing the mill throughput delays, at Tasiast, the mill is regularly delivering in excess of 21,000 tonnes per day and remains on track to produce more than 600,000 ounces this year, and Paracatu is poised for a strong second half as it has moved into a higher-grade section of the orebody.
As we remain focused on Delivering Future Value, the Targeted Strategic Accomplishments outlined in the 4PP are critical to the next phase of our company. In Alaska, we are proceeding with the Manh Choh project, which provides an attractive growth project for Kinross, adding high-grade, low-cost production to Fort Knox. At Great Bear, we continue to make excellent progress, with drilling results from the first half of the year continuing to confirm our vision of developing a large, long-life mining complex, and the Tasiast 24k project remains on plan to reach 24,000 tonnes per day throughput in mid-2023. We continue to advance the Round Mountain optimization program, which is on schedule to be completed later this year.
Our sites have been busy developing Continuous Improvement (CI) and Innovation initiativesto make the best use of available resources, with a key focus on our energy practices. We are taking a cross-company look at opportunities to use synthetic oils and share hauling best operating practices. We continue to encourage participation through the Innovation Opportunity Fund.
In conclusion, I am looking forward to getting back on track in the second half of the year as we increase production, and lower costs, through planned higher grades and throughput levels at essentially every site.
We believe Kinross is significantly undervalued and we must work hard to execute on our plans. Fundamentally, Kinross is expected to be a two million ounce per year producer for the remainder of the decade focused largely in the Americas with strong cash flows bolstering our investment-grade balance sheet. We have two top tier assets – Tasiast and Paracatu – that together are expected to produce more than one million ounces annually into the next decade, and the exciting world-class Great Bear project that has the potential to become a third top tier asset.
Safety must remain our First Priority. Please maintain your commitment to safe operations as we move into this next phase for our company.
- Paul
J. Paul Rollinson
