Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Kinross Gold Great Bear Preliminary Economic Assessment Virtual Conference Call. At this time, all participants are in listen-only mode. Following the presentation, we will hold a question and answer session. To queue up for questions by phone, please press star one and an operator will contact you. I would like to remind everyone that this conference is being recorded today, Tuesday, August 10th, 2024. I will now turn the meeting over to Dave Shaver, Senior Vice President of Kinross Gold. Please go ahead.
Thank you, operator, and good morning, everyone. Before we begin, I'd like to state that we will be making forward-looking statements during this presentation. For a complete discussion of the risks and assumptions which may affect actual results differing from estimates contained in our forward-looking information, please refer to page two of this presentation and our news release and preliminary economic assessment report, which were both published this morning. I will now turn the call over to Paul Rollinson, CEO of Kinross, for opening remarks.
Thanks, David. Good morning to everyone, and thank you all for joining us today. We're very excited to be speaking to you about the Great Bear PEA results, which we released this morning. I'm joining you today from Tasiast in Mauritania, so I'll keep my comments relatively brief and then hand it over to our technical team in Toronto for a deeper dive of what we've accomplished in the last 30 months. We became the new owners of Great Bear in February of 2022. What we saw in Great Bear at that time, and continue to see today, is a top-tier asset with significant potential for a large, long-life, low-cost mining complex. Through our due diligence work, our technical team saw that Great Bear had both classic Red Lake vein-style mineralization and, importantly, also mineralization more similar to what is seen in the Hemlo Camp.
Our thesis was that this Hemlo-style mineralization would extend high grades to depth. The Hemlo deposit has produced more than 20 million ounces to date. With our surface drilling so far, we have been proving this thesis out, and the results have been exceeding our initial modeling. As I said, in the 2.5 years since completing the acquisition, we have made substantial progress. Today, we are excited to be releasing both a PEA and an updated resource, proving out that original thesis. First off, the PEA mine plan has clearly demonstrated the top-tier production potential, showing approximately 500,000 ounces of annual production. Second, the PEA economics have demonstrated the high margin, significant cash flow, and strong return potential of this asset.
With an impressive AISC of just over $800 per ounce, we would expect this asset alone to generate substantial annual cash flows based on recent gold prices. Also impressive, the after-tax NPV is estimated at $3.3 billion and an IRR at approximately 30% at a $2,500 per ounce gold price. Third, the updated resource has added approximately 500,000 ounces to the total inferred resource as compared to year-end 2023, bringing the total inferred resources to 3.8 million ounces, supplementing 2.7 million ounces of M&I resources. Overall, we believe an impressive resource inventory, considering that we acquired the project 2.5 years ago with no existing resource at the time. Lastly, the exploration drilling at depth below the current resource demonstrates significant upside potential for additional underground resources beyond what we have outlined today.
We continue to see wide, high-grade intercepts at significant depths. It's important to note that the PEA is a point-in-time estimate and is only showing an initial window into the long-term potential of this asset. We continue to see geological potential to support a multi-decade mine life, which will be realized over time as we progress exploration underground. We are extremely pleased to have added this high-quality development project in a top-tier jurisdiction to our portfolio, driving significant value for our shareholders. We believe we can continue to prioritize our balance sheet and comfortably fund Great Bear, along with several of our other growth projects. Lastly, our significant progress to date at Great Bear is thanks to our strong and dedicated in-house projects team.
I'd also like to acknowledge the continued support of our local communities and our First Nations partners, Lac Seul and Wabauskang, whose traditional territories the project is located on. With that, I will now pass it over to the team.
Thanks, Paul. Our progress to date has been a testament to our strong technical team, which has been hard at work across numerous key project disciplines. In addition to myself and Geoff, we have from the technical side, Yves Breau, Vice President of Metallurgy, Nicos Pfeiffer, Vice President of Geology, and Matthew Hart, Project Manager. I'd like to dive a little bit into the work we have been progressing for the last two and a half years, culminating in the PEA results released this morning. Broadly speaking, the technical work has been focused on two key areas.... First, exploration drilling to outline our initial high-grade open pits and to provide a window into the longer-term underground potential for the PEA. And second, progressing baseline studies, technical studies, and diligence to support our project design, our economic studies, and to de-risk project construction and permitting.
Regarding the exploration drilling, we had completed over 420 km as of early April to support the current resource estimate, which has brought in 2.7 million ounces of M&I and 3.9 million ounces of Inferred. An impressive feat over 2.5 years since acquisition, demonstrating the exemplary nature of this deposit. We've done a significant amount of directional drilling at depth over the last year, and although the directional drilling increases the efficiency, it is still expensive to be drilling at depths beyond 1,000 m, and we have reached the point where drilling from underground will be more efficient.
As Paul alluded to, the reason we have done this deeper drilling from surface with a narrower focus on the LP Zone, is to provide a window of visibility into the underground margins and production potential we anticipated at the time of the acquisition. We have now done this and demonstrated it in the PEA. But again, it's important to note that this is only providing a window into the underground potential. Nicos will cover in more detail how the progression of the resource to date and current drilling below the resource shows significant potential for further expansion of the underground resource at depth. So clearly, we are very happy with how the exploration has progressed to date. Although the drilling and resource has been a headline focus, we have also been progressing extensive technical studies, which you can see highlighted on the slide here.
The primary focus of these studies is doing technical work early to de-risk both project permitting and project construction. We are doing this early work because we have seen projects in the industry require a scope change driven by a lack of understanding of things such as geotechnical conditions, overburden characteristics, and metallurgy. So we decided from the start to do as much as we can early to fully understand these characteristics. This work adds significant confidence to our PEA and our capital estimates, which Matt will cover later.
You can see on this slide a bit more detail on the key highlights from the PEA, including annual production of over 500,000 ounces, an average underground grade of five grams per tonne, and an average open pit grade of three grams per tonne over the life of mine, manageable initial CapEx of approximately $1.4 billion, and an impressive bottom quartile average AISC of $812 per ounce over an initial 12-year PEA mine life. This drives an initial after-tax NPV of $3.3 billion and a 36% IRR at spot prices of $2,500 per ounce, with a payback period of less than 2 years at these prices. So overall, very impressive margins, production scale, and payback.
You can see some of the key highlights from this early technical work, including clean metallurgy with high recoveries of over 95%, a straightforward 10,000 tonne per day CIP mill circuit, which Yves will talk more about, competent geotechnical conditions, strong underground widths to support high productivity underground longhole mining, significant production flexibility from concurrent open pit and underground operations, and a robust tailings and water management strategy to ensure the highest environmental standards. I have to say, it's a rare privilege to be involved in a project like Great Bear, where not only is the geology turning out to be better than expected, but across the board, technical diligence is demonstrating a clean and straightforward project with strong margins in a stable jurisdiction. We will now cover in more depth some of the fundamentals of the project study that support the PEA results.
Following a planned two-year project construction period, Kinross expects potential first production from Great Bear in 2029, subject to receipt of permits. As you can see here, the PEA mine plan drives a Tier 1 production profile of approximately 500,000 ounces per year, with concurrent open pit and underground mining. It's the very strong grades that allow us to hit production of over 500,000 ounces per year with a relatively small 10,000 tonne per day mill. This is a big driver of the low AISC, supporting the strong margins, impressive cash flow, and quick payback demonstrated in the PEA. The decision to mine the underground with the open pit concurrently also provides significant production flexibility and provides time to continue exploration drilling from underground to further expand the resource.
The current PEA shows the underground mining peaking at six thousand tonnes per day and tapering off in the last few years. However, as we progress to drilling from underground and expand our visibility at depth and along extents, we see significant potential to increase the underground mining rate in those later years, driving higher milled grade and production. It's worth noting that at the peak run rate of six thousand tonnes per day, the underground average is approximately three hundred and thirty thousand ounces per year over four years, beginning in twenty thirty-five, so this gives you a sense of what we see today as potential for the longer term as we expand our visibility on the underground. As you can see here, the most impressive aspect about this open pit is the grade.
With our stockpiling strategy, this drives an average open pit processing grade of 4.2 grams per tonne in the first eight years before we start feeding more moderate grade stockpiles towards the end of mine life in the current plan. Obviously, extension of the underground later in the mine life, with new resources drilled from depth, would defer some of this moderate-grade stockpile. But the stockpile will also provide a benefit to underground extensions by keeping the mill full well past completion of mining of the initial open pits. Another feature worth noting is that the Vigo Pit will be mined early to provide material for construction and to provide robust storage as part of our tailings management strategy. Yves will cover this later...
Lastly, looking through the PEA, you will also note the very strong geotechnical results from our initial studies, showing a conservative overall wall angle of 45 degrees. You can see here a long section of our underground design and stope shapes. The grade is good, with an average diluted grade of approximately five grams per tonne over the life of mine. However, it's when you combine this with the geometry and extents of the system, that you really show the potential for high-margin production. You can see on the figure on the slide that the system allows for opening up of many separate mining horizons, represented by the various colors. You will also note in the PEA, strong strike lengths, good long hole mining widths, and the presence of multiple stacked lenses in close proximity. All of this works together to support high productivity mining rates.
Additionally, the PEA shows strong geotechnical conditions with a rock mass rating between 70 and 80, which, together with the systematic ground support and paste backfill, provides supportive conditions for high productivity mining. We will use primarily longitudinal long hole stoping to exploit this good geometry and drive an underground mining cost of just under $70 per tonne. I will now pass across to Yves to discuss the mill and project infrastructure that will support this production profile.
Thanks, Will. As most of you know, Great Bear is located in the Red Lake mining camp in northern Ontario, which is a highly attractive and stable mining jurisdiction. The Red Lake district is a region with a strong footprint of existing mines that has a skilled labor pool and significant regional infrastructure. The project is approximately 24 kilometers southeast of the town of Red Lake, and our site infrastructure will sit approximately 1 kilometer from the Highway 105, which is accessible via an existing forestry road. As you can see, the main hydro transmission line to Red Lake crosses our property, and the regional natural gas supply follows the highway, providing easy tie-ins. There is also existing aggregate pits on the property.
The main power supply for the project will come from the existing 115 kV overhead power line from Hydro One, which will support us during construction. For early operations, the PEA has included the cost of temporary use of natural gas power to bridge us to an upgrade of the power line, which will likely be needed to provide our initial operations power demand of 30 megawatts. However, we are working with Hydro One to get our full power demand met as soon as possible. The strong infrastructure, easy access, close proximity to town, and regional supply of materials and skilled labor will be a benefit as we undertake construction activities.
We are really looking forward to bringing Kinross' strong people, community, safety, and environment-focused culture that you can see across our operations to Ontario and to bringing a positive impact to our employees, stakeholders, and First Nation partners. On this slide, you can see the initial PEA site layout and get a sense for what we are planning on building here. A few things worth noting. First off, we have relatively flat topography, allowing for easy layout of site infrastructure, including processing facilities, underground portal, truck shops, and camp facilities. The camp facility will be used for construction and will stay open for the operation in order to ensure the ability to attract and retain skilled labor. You will also note that the site does not have significant water bodies, which would complicate the layout of the surface facilities.
The processing plant has been designed for a 10,000 tons per day capacity. The design capacity of the plant was chosen based on multiple factors that include, first, having the mill right-sized for the short and long term, so we can process the combination of open pit and underground ore in the early years and move on to underground only in the latter years. Secondly, to obtain the very manageable CapEx spend, and finally, to deliver a typical size mill that has very low construction risk. We are already well advanced on our processing plant design, as you can see on the 3D views on this page. The process plant will consist of two main areas, the crusher building and the process plant building.
The proposed flow sheet envisions a conventional circuit for free milling mineralization, including primary crushing, SAG and ball milling, gravity concentration, and carbon-in-pulp leaching, followed by carbon processing and smelting to produce Doré bars. The PEA envisions a life of mine throughput of 45 million tons of material in an impressive grade of 3.9 grams per tonne. Our extensive metallurgy test work campaign has indicated very strong recoveries across all grades, with no indication of deleterious elements. Overall gold extraction in the variability test work to date has ranged between 88% to 97%, which includes a high gravity recovery of up to 60%, giving us an overall recovery of 95.7% for the life of mine.
In addition to the conventional gold recovery circuit, Kinross has invested substantial effort in ensuring our design for tailings, processing, and storage leverages the best available technology, given our focus on environmental stewardship. To this end, the processing facility will include a flotation circuit to desulfurize the tailings and render them non-acid generating. The flotation concentrate will be stored in the mined-out Vigo Pit, which, as Will mentioned, we will mine in advance of starting the mill to allow for robust containment of the concentrate. This will allow for primary tailings storage facility to only include desulfurized tailings and to be non-acid generating. The tailings management facility reflects a flow-through dam concept, where a downstream pond will collect and recycle all the water to the process plant in a closed circuit.
The clean metallurgy, high recovery, and simple flow sheet not only helps drive the high margins and low AISC, but it also beneficial to in further de-risking the project construction and ramp up. I will now pass across to Matt, who will discuss the CapEx for the project.
... Thanks, Yves. The total initial capital comprises of construction capital costs of $1.2 billion, plus capitalized mine development costs prior to commercial production of approximately $250 million. Over the last two years, we have seen cumulative inflation of at least 10%-12%, with some categories much higher, which has been incorporated into these fulsome estimates. The capitalized mine development of approximately $250 million is comprised of $105 million in open pit mining and $143 million in underground capital development that will support higher production in early years.
The majority of the open pit capital is driven by the strategic decision to pull forward mining of the Vigo Pit during construction to provide low-cost construction rock, early mill feed, and an in-pit tailings solution for the tailings concentrate, as discussed by Yves. Within the construction capital, the infrastructure area includes the truck shop and admin facilities, the camp, and state-of-the-art water treatment, including ultrafiltration and a robust site-wide water management strategy. Underground infrastructure includes a backfill plant that will return roughly 40% of the underground milled tons back underground. The processing scope was covered well by Yves. The capital estimate of our infrastructure and tailings areas reflects learnings related to geotech and water management from recent projects in Ontario and reflects our focus on ensuring the highest environmental standards at Great Bear. To this end, I do want to reiterate a few key design decisions.
Desulfurization of the tailings, in-pit tailings concentrate storage in the Vigo Pit, a state-of-the-art water treatment system, including ultrafiltration, and a robust site-wide water management strategy. Additionally, this estimate includes a fulsome indirect and contingency cost, where indirects and owner's costs are roughly 40% of total direct cost, and contingency is 22% of the direct and indirect cost, providing further confidence in our total estimate. Sustaining cost is very reasonable, averaging $86 million per year, with capitalized mine development being the biggest contributor. Ahead of the construction of the main project, we intend to spend an additional $340 million, approximately, on the AEX project and study costs over the next three years. As Paul indicated, project capital requirements for Great Bear are very manageable and are budgeted within our annual CapEx profile in the range of $1 billion.
The initial capital provides the platform for a rapid payback, which at $1,900 gold is 2.7 years, or less than two years at spot prices. I will now turn it over to Geoff to discuss next steps and permitting.
Thanks, Matt. Looking forward, our project team will continue to advance work across technical and permitting areas for both the advanced exploration program, what we call AEX, and the main project, the mine. Both AEX and the main project remain subject to permitting. For background, AEX is a provincial permitting process, and while the main project does have some provincial permitting components, it is mainly a federal permitting exercise driven by the Impact Assessment Agency of Canada, IAAC, review process. With respect to AEX permits, we have made significant progress working closely with the Ontario authorities and expect to obtain our permits in the near term to enable us to commence surface works activity this year. In terms of the main project timeframe, we were pleased to recently receive from IAAC our final tailored impact statement guidelines on August first. Kinross plans to file its impact statement next year.
Kinross has commenced negotiations of a project agreement, what is commonly referred to as an IBA, that is expected to support the impact statement filing with its First Nations partners, Lac Seul and Wabauskang, on whose traditional territories the project is located. We are working closely with the federal authorities and expect the IAAC permit process to be comprehensive and fulsome. Once we submit the impact statement to IAAC, the waiting period for final approval is largely in the hands of IAAC while it takes the necessary time to complete its review, analysis, and consultation process. Based on our understanding of the IAAC review and consultation process, we estimate a review and consultation period of approximately two years following filing of our impact statement.
Once we receive the permits, we will be ready to commence our estimated two-year construction period and plan first production in 2029, as Will indicated earlier. I will now turn it over to Nicos to provide an update on our resource estimate and recent exploration results.
Thanks, Geoff. As of early April, we've completed more than 420 km of drilling on the property, and results have been very strong. In a short period of time, this drilling has delineated a high-quality, high-grade open pit and underground resource that will support a blended feed profile. The resource outlined in the PEA is based on an updated mineral resource for the main LP zone and reflects drilling up to early April. Since this date, we have drilled approximately 100 km. The total project resource now stands at approximately 2.7 million ounces measured and indicated, and 3.9 million ounces of inferred resource, representing the addition of just over 500,000 ounces of inferred resource on the back of six months of drilling.
The resources run at a $1,700 gold price, and the open pit reflects a $1,400 pit shell. Our resource was constrained by pit shells and underground stope shapes. The open pit resource cutoff is 0.55 grams per ton, while the underground cutoff is 2.3 grams per ton. As is generally the case when moving from a resource to a mine plan and economic assessment, not all ounces drilled within the resource are included. The mine plan, reflected in our PEA, considers 5.5 million ounces of total contained gold, with 2.3 million ounces in the open pit at a diluted grade of approximately 3 grams per ton, and 3.2 million ounces in the underground at a diluted grade of approximately 5 grams per ton, and in total, reflects the vast majority of the resource.
Our 2022 exploration strategy was focused on drilling off our high-grade open pit resource and establishing an initial underground resource above 500 meters. In 2023, we took a narrower focus, extending selected mineralized shoots to depth between 500 meters and one kilometer, providing this window into the underground potential that has been discussed. In 2024, we have focused on testing the LP Zone, improving stope continuity between 500 meters and one kilometer, linking zones together and also extending the resource at depths below one kilometer. The progression of the resource has shown us a clear trend consistent with our initial acquisition thesis, that this mineralized system continues at depth, and the deeper we drill, the more resource we unlock. There's also a great video that illustrates this, which you can find on the link on the slide.
As can be seen on the slide, we recently drilled the deepest hole on the property to date, BR-888, which returned high-grade mineralization at nearly 1.6 kilometers vertical depth at the main LP Zone, well below the PEA inventory, demonstrating the impressive continuity of this system and the significant upside potential that we continue to see for future resource growth. Furthermore, exploration drilling at both Discovery and Yarrow zones has also intersected mineralization beyond the PEA inventory, with holes BR-770 intersecting approximately 23 meters at 6.5 grams and BR-896 intersecting approximately 5.5 meters at just under 8 grams, showcasing the successful expansion of the mineralization not just at depth, but also along strike, demonstrating the coalescing of multiple zones.
While the main LP Zone was the focus of most of our drilling, we are also seeing encouraging results from directional drilling at the nearby Hinge and Limb Zones, which are not yet incorporated in the PEA, but represent an exciting value creation opportunity as we continue to advance drilling at these deposits. Moving forward, we'll continue to focus our drilling on linking zones at depth in LP, further directional work at Hinge and Limb, and we're excited to now be in a position where we can dedicate resources to brownfield exploration work on the broader, newly expanded 120 sq km land package, looking for both open pit and underground opportunities. As you can see on the slide, we have drill coverage over only 4.5 km of the significant regional LP structure that spans the full length of the 18-km property.
We look forward to sharing more updates as our exploration work on the property continues to unfold. With that, I'll turn the call back over to Will.
Thanks, Nicos. As Nicos has demonstrated here, we really do view this PEA as just the beginning of the value story at Great Bear, given the indications of continued mineralization at depth. But we are at the point where we really need to get underground to continue to show the story and the significant resource upside, which is why we're focused on progressing AEX. This is quite typical for deeper, higher-grade underground systems like this, where the resource is drilled off over time as you progress development and mining underground. Many of us on the team previously worked in the Russian region, and we saw this story play out over many years. You can see on the slide the history of resource and mine life expansion over the years at Kupol.
When we started there in 2007, we had four million ounces of resource and six years of mine life, and by 2022, we had produced over seven million ounces. To summarize, we are extremely encouraged by the high-quality nature of this project, given both the compelling initial economics and exceptional technical attributes discussed today. Key project metrics outline a modest and manageable capital requirement, robust margins, and Tier 1 production scale, which we expect to support significant free cash flow. Furthermore, initial economics are complemented by an attractive operating jurisdiction and excellent project technical characteristics, where our detailed work to date has established exceptional metallurgy, favorable geotechnical conditions, and production flexibility across a combined open pit and underground mine.
Lastly, we see significant upside beyond this initial point in time estimate of the project that we have outlined in the PEA as we continue to expand the high-grade resource at depth and progress exploration on the wider property. With that, I'll pass it over to Paul for final remarks.
Thanks, Will, and thanks everyone for your time today. In conclusion-
... We are pleased with the progress we have demonstrated since the initial acquisition, and remain very excited about the future at Great Bear. The PEA marks an important milestone for what we strongly believe will become a world-class operation in a stable jurisdiction, supporting our longer term production and cash flow outlook. In addition to the high quality initial economics, we are also excited to see the strong potential for resource growth, which we expect will continue to drive long-term value for our shareholders. With that, operator, we'd now like to open up the line for questions.
Thank you. We will now take questions from the phone. As a reminder, to queue up to ask a question, please press star one and an operator will contact you. Our first question is from Matthew Murphy from Jefferies. Please go ahead.
Hi, thanks for all the details on the study. Just interested in how we should think about future updates. So I guess on the exploration side, it sounds like, you know, a bit of a pullback in the deeper exploration. Am I interpreting that correctly?
Hey, hey, Matt. Just gonna refer over to the guys in the room. Thanks.
Yeah, yeah, I think as we've alluded to, we are continuing to do some deeper drilling. However, we really have gotten to the depths where it makes sense to start doing our drilling from underground to try and convert up at the deeper depths. So that's why we're focused on progressing AEX. But certainly we're gonna continue to do some directional drilling through the rest of this year and into next year to continue to build out our knowledge to support the final line design, et cetera, as we progress to construction on the project.
Can you remind me when you think you might be in a position to drill from underground?
Yeah, we're hoping to be underground next year. Obviously subject to permitting with AEX, and that should put us in a position to start drilling towards the end of next year, or early into the following year from that underground decline. And obviously, we'll provide routine updates to our resource on an annual basis.
Okay, and, yeah, you've done a lot of drilling since April already, so, what additional project studies will be ongoing in the next year? Like, should we expect there will be, at some point, you know, a pre-feasibility, or is this like, you know, kind of the basis to move forward with? Just wondering how you're gonna update the market over time.
Yeah, this is the main basis. This is as we had said on the call there, we really drilled this window into the underground to be able to give external visibility into what a combined underground and open pit looks like, because that's certainly what we're planning to build based on all the knowledge that we have to date. So this PEA is the main focus for externally showing the economics of the project, and certainly based on the results, it makes us more than comfortable to proceed with permitting and construction. So those are the things we're gonna be focused on, is doing the detailed engineering to support construction, doing a bit more drilling to support the final mine design, and frankly, getting underground and getting this project going as soon as possible.
Okay, so we might see additional resources added over the next couple of years, but probably not further study releases. Is that correct?
Yeah, as our current plan, that's correct. This is the main focus in terms of an external study, to give you guys an idea of the value in the underground.
Got it. Perfect. Okay, sorry, one last one, if I could, and then I'll hand it off. Just the capital number, the initial project capital, you know, you're not spending the bulk of the money for a number of years. So should we think of this as a 2024 number, or are you thinking of it as, you know, these are 2028 dollars?
Yeah, I mean, these are today's dollars. You know, we haven't added additional forecast inflation from today until we start the major spend in 2027 and 2028. So you can think of the capital estimate as an end of 2024 number.
Okay, thank you very much.
Thank you. Our next question is from Anita Soni, from CIBC World Markets. Please go ahead.
Guys, and congratulations on delivering this update, and increasing the overall profile of this project. So my first question, I'm just wondering, as you are proving this out, how should we think about sort of the targeted increases for the open pit and the underground? Are they relatively proportional, or do you think you'll get more in the underground versus the open pit?
Yeah, I think our main focus at the main LP Zone right now is on continued extensions at the underground, kind of all across the strike that you guys have seen in the presentation today. So some of that being very deep in the central LP Zone, but also underneath other areas, such as Discovery and, you know, Red Lake-style mineralization, such as Hinge and Limb. So that's really the primary focus of the drilling. I think we're pretty comfortable with our, with our open pit design and our drilling near surface. So for the main LP Zone, that's the case. But we will also be, you know, taking some drills a little further out on our field. Nico alluded to larger land package. So that's certainly where, where we'll be looking for more open pit optionality as well.
on an earlier stage exploration basis, and we do see potential for that as well, but the real focus, you know, for the initial mine plan and production is on continued extensions of those underground that we already have in the resources.
Sure. And then if you did extend the underground substantially, what would you use as the additional supplemental feed for the plant, if it's at 10K ton per day, and you're doing 6,000 ton per day?
Yeah, I mean, as you can see, I think we have highlighted in one of our slides there, and it's certainly in the tech report. There is a tail towards the end where the underground is ramping down for the last few years, and we're using up more stockpile during those years. The reality, you know, that we hope to see, and certainly what we're focused on trying to drill out, is that we stay at that 6,000 tons per day for a longer period of time, in order to... And that will push out some of that lower grade material from the pit in terms of stockpile.
So it'll help continue to bridge us, and longer term, as we alluded to, you know, we're also looking at, as we bring in things like Hinge and Limb and other deposits, that does offer the potential to go above 6,000 tons per day, as we expand the underground resource and get more faces open. So it's that combined blend and the mineralized material from the pit that will help to ensure it's full.
All right, and then so I guess that sort of answers my question. If you get mine life extension in the underground, what kind of things would change if you're gonna increase the process, or sorry, the tonnage that supposedly bigger mining fleet, bigger infrastructure to get that out?
I don't know if I'd say, you know, bigger infrastructure. We're the size of our haulage ramp won't change, and you know, we'll make a final selection of trucks, but we will either be going with 50- or 60-ton class trucks, so they will be big and efficient at moving the material. It's more just how many faces do we open up? You know, longer term, there's other options we'll look at for material handling, but right now we're comfortable that even just with expanded zones, there's potential to go above that 6,000 tons per day in the longer term.
Okay. And then just a couple more questions. I think the 334 that you're spending over the next two or three years, that's outside of the, the PEA numbers, like the initial capital and things like that. Can you give us a breakdown of, how you're gonna spend that in 2025, 2026, and I guess part of 2027? I think the PEA starts in 2027, right, the spending?
Yeah, you are right that that is up separate from the initial CapEx for the project, which will start once we've permitted it. And the $340 million, roughly, you can roughly break that up a third, a third, a third over the next three years, 2025, 2026, 2027. Obviously, it'll be a bit dependent on final planning and construction, but that's roughly the split of that.
Okay. All right. That's it for my question. Thank you very much.
Thank you. Our next question is from Mike Parkin, from National Bank. Please go ahead.
Hi, guys. Congrats on the good numbers. Just have one question. You had some good slides there at the back of the presentation, just showing, like, the iteration of growth in the overall resource. Maybe you have it in front of you, but how has the grade changed on the overall resource, like, total resources over that time? You're up 32%, if my math is correct, on total ounces, but just given the color plot of those slides, it would seem like your overall grade probably ticked up as well.
Yeah, I'll pass across to Nicos, who's been intimately involved in this drill planning and the expansion of this resource.
Hey, guys. In terms of the total resource base, we see the grade increasing as the proportion of underground increases. So as we kind of refine where that open pit underground boundary occurs, we're increasing total resource grade, with the underground obviously being higher grade than the open pit. But we are seeing some increased grade as we get deeper in the system in our drilling as well, which is very encouraging for us, and obviously a trend we hope to continue to see.
And then, Hinge and Limb, can you just remind us, like, is the mineralization like LP, where the mineralization comes fairly close to the surface, and if you were to develop that, would it be something similar, start or open pit transition to an underground, or is that mineralization a little deeper, so those, if developed, would be primarily underground only?
Yeah, they're underground targets. So at Hinge, we have fairly narrow, but very high-grade quartz vein-hosted mineralization. It does come up to surface, but it's not gonna support a open pit strip. And at Limb, it's kind of broad, but it's like a sheet of plywood, right? So it's really continuous, nice, straight-going lens, a little bit lower grade at Limb, but both would be underground targets. Where we've positioned the decline, it's kind of in between the LP zone and Hinge and Limb, so it allows for us to explore both deposits simultaneously from the same infrastructure.
What would be the distance from the decline over to Hinge and Limb, like, approximately?
Yeah, so from LP, it's about seven hundred meters to Hinge and Limb, and we've kind of put the decline right down the middle there. So it'll provide a standoff for mining at LP and also Hinge and Limb and service both-
... So it lets you not only explore both, but also exploit and mine both from underground areas?
Yeah. To be clear that, you know, the PEA doesn't include Hinge and Limb right now, but obviously we'll provide drill access, and really it's, we just need tighter drill positions, which are hard to do from surface on those type of ore bodies.
Okay. And in terms of study advancement, are you gonna do a PFS next, or are you comfortable just going straight to feasibility? How should we think about that kind of news flow going forward?
I mean, from a news flow perspective, I guess you should think of the PEA as the main economic document, because this is the way that we can communicate our plan, which is to build an underground and an open pit concurrently. You know, the underground, obviously, until we're well into underground drilling, where it will continue to be classified as inferred. So internally, we're really focused on the detailed engineering and other, you know, thoughtful steps that we'll take as we de-risk the project and get it built. But from an external perspective, the main technical document is the one you guys have received this morning.
Yeah. All right, thanks very much.
Thank you. Our next question is from Carey MacRury from Canaccord Genuity. Please go ahead.
Hi, good morning. Hi, good morning, guys. Just thinking about the future, maybe this is early days, but, you know, if the open pit is done and the stock piles are done and you're underground only, like, is there a scenario with Hinge and Limb that you could be mining at 10,000 tons per day from the underground, or do you think it's more likely it'll be 6,000 just going forward?
Yeah, I mean, it's a long time away, but one of the key decision points in having the 10,000-ton-per-day mill and not going bigger to, you know, mill all the material in those early years that we can is that longer term, it's also easier to derate that mill, should we choose to. So if you had to come down to 9,000 tons per day or 8,000 tons per day, you can easily do that from the 10,000-ton mill with an operating experience of changing all the pumps and other systems.
So it does give us that flexibility if you're underground only, but obviously our goal is to get enough different zones open, and I think this is something we've seen with other deposits in the past, where the underground really ramps up as you bring on more zones underground to try and keep the mill full. And, you know, supplementing that with-
Right
... with any other open pit targets that come from our exploration on the large land package.
That was my second question. Are there other open pit targets that you've drilled or more early stage?
Yeah, that's, that's what we were alluding to with the, you know, the main LP structure running the full length of the property. So that's in the, in those felsic rocks are where we see the most potential for further open pit properties. To date, our focus has really been on kind of that 4.5 kilometers, where we have the dense drill coverage. We're now looking forward to kind of stepping out, doing a little more. To be clear, it's, you know, it's gonna be one or two rigs. It's not gonna be a massive program, but, we're excited to do a little more scout brownfields kind of work.
And the reason for that, the reason it's one or two rigs, as you can see, we've got, you know, well past a decade of the mine plan well filled up. So we've got a lot of time to find those other targets, but we certainly see a lot of other targets on the property, and believe that this. As we've said, this is really just the initial point in time. We're focusing on getting going with what is already a phenomenal resource to build a mine on the back of, but certainly the longer-term story has a lot more to it.
Great. And maybe one last one. In terms of, like, stope sizes, what's the sort of typical stope size in the plan, and how many stopes would you be operating at 6,000 tons a day?
Yeah, we're going with 30 meters. Sublevel spacing is what we targeted in the PEA. We'll obviously do final refinements on that as we get underground, and we better understand geotech, but they're fairly large stopes. Decent stope widths, you know, five meters, and we'll take 25- to 30-meter panel lengths, so they're sizable stopes. We'll wanna have, you know, available in the range of 10 stopes, so 10 different areas. but on any active day, you'll be mucking at call it 1,300 tons per day out of any active stope. so we're only gonna need five or six of those actively running to keep us at that higher rate, but you want around the 10 available.
Okay, great. Thank you, guys, and congrats on the study.
Thank you. Our next question is from Lawson Winder from Bank of America Securities. Please go ahead.
Yeah, thank you. Thank you, operator. Good morning, guys. Great update. Thank you very much for that. Wanted to just ask a few follow-up questions. In terms of the permitting, what sort of flexibility do you have on the throughput? So for example, I mean, at what point do you have to fully commit to the 10,000 tons per day versus potentially doing a slightly larger option with the initial permit?
Yeah, look, I'll start off just by saying, again, we put a lot of time and thought into the sizing of the mill, and we believe the 10,000 tons per day is the right size, but I'll pass across to Matt, who's been heavily involved in this, to discuss the permitting side of that.
Yeah, no, thanks, Will. So 10,000 tons per day is the sweet spot on an annual average, but we are putting in the permitting flexibility where there are gonna be days where we run 11,000, 12,000 tons a day as needed. So that-
... flexibility is being built into our permitting process, but on average or even a bit higher, but we are at sweet spot, the nominal will be 10,000.
Okay, perfect. That's great, Colin, thank you. Could I also ask, what was the for the underground mining portion, what was the assumption around the dilution?
Yeah, we did dilution based on actual width of dilution beyond the stopes, and that was assessed based on a geotech assessment of each zone. So it's highly variable, obviously. There's internal dilution, which is driven by our minimum mining width. So we have about a 2.5-meter minimum vein width, and then we always have at least 0.5 meter of dilution on the edges of the stope beyond that. So it's a properly calculated dilution for each zone based on the geometry of that stope and the geotech in that particular area. The overall average is in the kind of 20-25% range if we add them together.
Perfect. And then, maybe just one more for me on the effective tax rate. I mean, the IRR is very robust. I mean, actually maybe even a bit more robust than I might have otherwise thought. I think tax might be the difference. For how many years do you expect to be not paying corporate income tax? And I assume you will have to pay the Ontario mining tax, but please correct me if I'm wrong.
Yeah. Hi, it's Andrea. That's right. We are paying the Ontario mining taxes throughout. In our base case, at $1,900, the NOLs are used up by 2035.
Ah, perfect. Thank you very much.
Thank you. Before we take our next question, I'd just like to remind everyone that if you'd like to ask a question, please press star one, and an operator will contact you. We have a follow-up question from Anita Soni from CIBC World Markets. Please go ahead.
Hi, I was just, just trying to be clear about what's included in the open pit and what's in the underground. So, the LP and Vigo are in the open pit when you have that open pit profile, is that correct?
Yes.
Yeah, and then is there a reason why the discovery, it looks like it's being mined from underground? Like, why would that not be open pit material?
Yeah, it's primarily because of a trade-off. You know, it was more profitable to mine it from the underground, but it's also in terms of total footprint, et cetera. We saw positive benefits from an environmental footprint perspective of taking that underground, and we believe we'll make more money underground.
Okay, and I'm sorry, I hate to go over this granularly, but what's the average grade of that Discovery Zone?
Yeah, I think it's around three and a half, but we can confirm after.
Okay, that's it. Thank you.
Three and a half grams per tonne, I suppose I should like.
Thank you. We have no further questions in the queue.
I'll jump back on from Cassius. Paul here. I just thanks everyone for joining us this morning. We look forward to catching up with you all in person in the coming weeks. We may see a bunch of you down in Colorado, of course, next week. Thanks, everyone.
Ladies and gentlemen, this concludes today's call. Thank you for participating. You may now disconnect your lines.