We have Executive Vice President and Chief Financial Officer, Jamie Porter. Jamie, I see you coming up to the stage, and I believe you're gonna make a few initial remarks. I'll turn the podium over to you, and then I believe you'll join me at the chairs for a chat.
Excellent.
Morning.
Good morning, everyone. I will start the presentation today with an overview of Agnico. We'll talk about our strategy and how, you know, we believe it's led to strong value creation over the last several decades, and how we expect it to continue to do so in the decades ahead. I'll touch on our first quarter results, talk about the strong start that we had to the year from an operational perspective, and obviously a phenomenal start to the year from a financial perspective with the gold price environment we're in. I'll briefly present our recently announced proposed consolidation in Finland, where we've through the proposed acquisition of Rupert Resources, Aurion Resources, and the Fingold Joint Venture, we've consolidated 2,500 sq km land package in what we believe is the most highly prospective ground in Northern Europe.
Lastly, I'll touch on our key value drivers, and that I believe is a key differentiator for Agnico. We currently produce 3.4 million ounces a year, but we have 20%-30% production growth in the decade ahead, and we're excited to look forward to delivering on that. I will be making forward-looking statements as part of the presentation today, so I'd encourage you to refer to slide 2, our cautionary notes disclosure. Just by way of overview, Agnico is, as Lawson Winder mentioned, the second-largest gold producer in the world. Our targeted production this year is about 3.4 million ounces. We operate 10 mines across 4 different countries. While we are a global mining company, we consider ourselves to be a regional miner.
We focus on regions where we see the geologic potential and political stability to operate multiple mines over multiple decades. A great example of this is our footprint in the Abitibi, what we call the Abitibi in northern Ontario and northern Quebec. There, we operate 5 mines that reflect almost 2/3 of our production, and they're all within 300 km of one another. We believe that regional consolidation creates a competitive advantage. By having those mines in close physical proximity to one another, we gain a competitive cost advantage. In the Abitibi, we are the employer of choice. Our employee turnover rates are less than half of the industry average, which keeps our costs down. We have long-standing supplier relationships that, you know, we've developed over decades. We've been operating in this region for over 60 years.
In many cases, we helped our suppliers initially set up their business. We're also the largest mining company in Canada, which means we benefit from economies of scale just given our purchasing volumes. Lastly, we're able to benefit from tremendous synergies associated with that physical proximity. We can share people, technical resources, parts, supplies, and even equipment between those five operations. It gives us a tangible competitive advantage that we see in our cost structure. Our costs are CAD 300-400 an ounce below the industry average, it's because of this regional approach. The results really speak for themselves. We go back over the last 20 years. 2005, Agnico was producing 240,000 ounces a year from one mine, the LaRonde mine in northern Quebec.
Fast-forward to 2025, producing 14 times that amount of gold, just shy of 3.5 million ounces from 10 operations. That's great gross gold production growth. However, what's most important is production per share, and over that period, we've increased production per share by a factor of 3. Very few of our peers can say that. What that means is that we're delivering more exposure per share to investors, and that's really why they're investing in gold equities in the first place. Obviously, with the increase in the gold price, our EBITDA per share over that period has increased by a factor of 18. It's reflected in our share price.
If you look back again over the last 20 years, our compound annual growth rate in the share price is approximately 13%, double the XAU and significantly outperforming the S&P. Very strong historical performance over the past two decades, and we expect that to continue. I'll briefly touch on our 1st quarter results. As I mentioned, a very strong operational start to the year. We produced about 830,000 ounces in Q1, which was actually ahead of our budget, and we were below budget with respect to costs. A record realized gold price in the quarter of $4,881 an ounce, the highest we've ever experienced, driving significant increase in financial results and earnings. We had record EBITDA for the quarter, record earnings per share.
By controlling costs, we're effectively able to pass on the benefit of higher gold prices to investors by directly returning capital through our share buyback and dividend, and by indirectly improving the company through the strengthening of our balance sheet. We repaid CAD 1 billion of debt in 2025, amassed a CAD 2.9 billion net cash position at the end of March. The balance sheet is in the strongest position in the company's history. We've got the financial flexibility and strength to be able to execute on our long-term strategic plan. We did have a very significant cash tax payment in the first quarter, CAD 1.3 billion related to 2025 and half a billion related to the first quarter of 2026, which drove our free cash flow slightly lower.
We were about CAD 730 million for the quarter. We returned 51% of that to shareholders through the dividend and the share buyback. We bought back CAD 150 million of stock, paid a CAD 225 million dividend. In subsequent quarters, we expect our cash taxes to normalize at around half a billion a quarter, which means free cash flow will be closer to CAD 1 billion to CAD 1.5 billion per quarter, and we'll be doing 2 to 3 times what we did on the share buyback in Q1.
Significant growth in indirect shareholder returns expected through the remainder of this year. With respect to our recently announced Finnish consolidation, effectively what we're doing here is looking to combine the acquisition of Rupert Resources and their Ikkari project with Aurion Resources and the Fingold Joint Venture, consolidating again this 2,500 square kilometer package of land in what we believe again is the most highly prospective area in Europe. We've been operating in Finland for 20 years. We operate the Kittilä mine, produces about 210,000 ounces a year. We started in Finland 20 years ago, acquiring Kittilä when it had 3 million ounces. We now have 10 million ounces of reserves and resources in front of us, and over that 20-year period, we've produced 4 million ounces.
We've created significant value in Finland over the past several decades, and we see the potential to really double down on that with this proposed acquisition. Over the next 18 months, we will be drill testing the property boundaries and the depth extent of this land package and looking to move forward, freezing the scope of the Ikkari project and start the permitting process. We see potential production by 2034 of up to 300,000 ounces a year from Ikkari, which when combined with Kittilä, will give us 500,000 ounces of annual production in Finland. With that very prospective land package, we expect to be able to improve on that and add mine life for decades to come.
Now I'll end on just an overview of our organic growth pipeline. We like to say the company's in the strongest position in its history, certainly is from a financial perspective with virtually no debt and almost CAD 3 billion of net cash and growing, but also with respect to our development pipeline. We have what we call our key value drivers. These five projects collectively represent 1.5 million ounces of potential annual production growth. These are relatively low-risk projects. They're expansions of existing mines or new construction in regions where we know how to operate, where we've built mines in the past. I'll start with Detour Lake. Detour is currently the largest gold mine in Canada. It's producing 700,000 ounces a year.
We are looking to go underground to access higher grades and ultimately ramp up production by 2030 to approximately 1 million ounces a year. At 1 million ounces a year, Detour will be one of the top five or six largest gold mines in the world, and I'd argue one of the most profitable. At current spot gold prices at 1 million ounces a year, Detour will generate CAD 3 billion a year of after-tax annual free cash flow. This is a unicorn in our industry, a massive operation that will generate significant annual production and will do so for decades and decades. At Canadian Malartic, we are transitioning from what's the second largest gold mine in Canada, an open pit mine that has historically processed 60,000 tons per day of relatively low grade, 1 gram per ton material.
We're transitioning to an underground mine at a third of the volume, but three times the grade. Our production stays about the same at 550 to 600,000 ounces a year, but we're opening up 40,000 tons per day of excess mill capacity. We have a plan through the addition of a second shaft and the development of 2 satellite deposits to fill the majority of that mill and get production from Canadian Malartic up to 1 million ounces a year as well. Between Detour and Canadian Malartic, 2 million ounces of annualized production. Again, long life assets that are gonna go for decades. Upper Beaver is located just down the street, about 14 kilometers away from our Macassa mine in Kirkland Lake.
It's currently considered an advanced exploration project, but we're looking to make a construction and move forward decision on that next year. That will add up to 210,000 ounces a year, again, right in our backyard, starting in 2030, 2031. Our Hope Bay project in the northernmost part of Nunavut, we're actually planning to announce a construction decision on that next week. We're gonna have investors and federal government officials at site to for that announcement. This will be our fourth mine that we will have built in Nunavut. Has the potential to produce north of 400,000 ounces a year for over a decade. With the exploration potential that we see there, we think it'll be going for decades and decades.
When you combine that with our other operations, Meliadine and Meadowbank in Nunavut, we see the potential to get production from Nunavut as a territory to north of 1 million ounces a year. We're looking forward to that next week. Lastly, we have a 50/50 joint venture with Teck Resources on the San Nicolas project. It's located in central Zacatecas. We're updating the feasibility study on that project and looking to move it forward ultimately, pending permitting. We're very excited about this platform. Again, 1.5 billion ounces of total annual production growth potential here. This excludes the proposed acquisition of Rupert and its Ikkari deposit.
It excludes other projects in our portfolio, such as Hammond Reef, which is a potential development project in northern Ontario that we see having the potential to add up to 300,000 ounces a year. We have tremendous growth. We've got the balance sheet and financial strength to be able to execute on this in any gold price environment, we're looking forward to delivering value per share as we have in the past and in the decades ahead. With that, come join you, Lawson.
Please do. Thank you very much, Jamie. That was a fantastic presentation, very comprehensive. But I mean, I think where I'd like to start is on your capital allocation framework. You've indicated on recent calls that you have the ability to do it all, meaning, invest in high IRR growth projects, consider repaying at least 40% of free cash flow and continuing to build a balance sheet. If you could rank those in terms of priority, how would you do that? What could possibly lead you to change that set of priorities?
Yeah, it's a good question. I mean, I think, and I have said that many times, in the current gold price environment, we can do everything. I think our number 1 priority would be to continue to invest in our organic growth pipeline. I mean, these projects are projects that we were looking at at $1,800 gold and, you know, had 15% approximate IRR at $1,800 gold. With Hope Bay being the one exception, it was slightly lower. You know, at current gold prices, these projects have a 30%-60% rate of return. We are looking to do everything we can to aggressively move them forward and bring that production growth into reality. I would say that would be priority number 1.
Priority number 2, again, in this price environment, would be returning capital to our shareholders. We've significantly delevered the balance sheet over the past several years. You know, we've gone from a net debt position a few years ago to, you know, CAD 2.9 billion of net cash at the end of Q1. I anticipate we'll be close to CAD 5 billion of net cash at the end of this year. You know, excess cash beyond that, we're returning to shareholders. Our target this year is 40% of free cash flow.
Based on current gold prices, that will represent a return of at least CAD 2.1 billion to shareholders this year, which is 50% higher than what we did last year. When we look forward into 2027, with the balance sheet that strong, we won't have a need to, you know, further add cash to the balance sheet, which means the percentage of our free cash flow which is returned to our shareholders could increase substantially.
That's exciting. Follow-up question on that would be, between buybacks and the dividend, why emphasize buybacks? I mean, is there room for the dividend to potentially increase as well?
Agnico has paid a dividend for 43 years, and it's had to cut it once, and we don't want to have to cut it again. The idea behind the dividend is that it's sustainable even in a much lower gold price environment, and we use the share buyback as a tool that we can flex depending on obviously the gold price and our corresponding profitability. That's the way we look at it. I think, you know, we will continue to increase the dividend. It went from CAD 800 million a year to CAD 900 million a year, so 12.5% increase this year, and there's scope for it to increase, but, you know, not by 50%. I think it'll be marginal, sustainable increases over time such that, again, even in a much lower gold price environment, we'd be able to afford it and not have to look at cutting it.
What about the concept of a special dividend?
I think that's something that's certainly not out of the question. Again, when you look forward to 2027, current production levels and gold prices, we're generating CAD 8 billion a year of operating cash flow. We're spending this year, if you factor in proposed spending associated with Hope Bay, maybe CAD 3 billion in capital, so that leaves CAD 5 billion of free cash flow left over. That's gonna be similar in 2027 and, you know, that could be returned through the dividend. I mentioned we're gonna keep that on a relatively modest through the share buyback or through a special dividend, and we'll evaluate it based on, you know, the gold price at the time.
Okay, great. I would like to move the conversation back to Finland. Thank you for touching on that. Great overview of that transaction. Effectively, what you've done is Finland's become a single asset, part of the portfolio for you guys to a consolidated district play. What should be watching over the next 12 to 24 months for investors to get some confidence, certainty, and a more clear picture in terms of what that's ultimately gonna become in the long term?
Sure. We're very happy with what we got. You know, with the Ikkari deposit, we see having the potential again to be developed into a 300,000 ounce a year mine that when combined with Kittilä will represent 500,000 ounces of annual production in Finland. In terms of next steps or, you know, catalysts along the way, we have already closed the acquisition of B2Gold's 70% interest in the Fingold Joint Venture. That's complete. We're looking to close the Aurelian Resources and Rupert Resources transactions in either late Q2 or early Q3. Guy, our Head of Exploration, who's here in the room, he's basically started drilling already.
We'll be spending CAD 20 million a year over the next 3 years on further drill testing the property boundaries where the previous operators couldn't, it didn't make sense for them to drill. We'll look to optimize the layout of the proposed project. We'll figure out what makes the most sense. We now, having all 3 of those properties together, we can unconstrain the open pit and maximize the value out of that pit. By the end of 2027, I think we'll be releasing an updated study that will show, you know, what we're going to permit and what we're ultimately planning on doing.
Perfect. You also emphasized the need for external M&A to compete with internal projects. I think it would be really helpful if you could just characterize the framework for what the bar is on M&A and how you think of that more specifically.
Yeah, I think, you know, similar to what Natasha said in behalf of Newmont, the bar is pretty high because we have a number of very high return organic growth projects already. Any, you know, external M&A opportunity would have to compete for capital with the projects that, you know, we already have, which, you know, I've mentioned many of them are 30% to 50% to 60% IRR, you know, high, very high return projects. I think, you know, we'll continue with the Agnico strategy, which is, you know, focusing on regions where we currently operate.
We'll, you know, look for opportunities to add value, but the reality is, we're in a very fortunate position of not having to do anything because we have that growth. We've got, you know, minimum 20%-30% growth starting in 2030. We've got Ikkari and projects like Hammond Reef on top of that. We can afford to be very patient and very selective.
Okay. When you talked about your growth, I was thinking very impressive for a company of your size. There's five assets, potentially a sixth with Hammond Reef, and potentially more that haven't been surfaced yet. When you think about the current bench strength at Agnico, do you guys feel you have the resources necessary to drive that growth? Are there any limitations that you worry about internally?
No, it's a great question. One of the things that I think differentiates Agnico is that we build our own mines. We have a 240 person strong construction team, and we oversee any expansions or new construction. We will use contractors and consultants, but we manage them rather than, you know, handing them the project to build and then, you know, the keys thrown back at us at the end of it. That team is busy right now, but if you look at a lot of what we're doing, a lot of our growth is coming from, is being managed by the mine site operations teams themselves.
For example, at Detour, you know, we're basically ramping underground to get some higher grade, but we have an operating team there that's overseeing that project. Similarly at Canadian Malartic. I would say, again, the execution risk associated with a lot of our development pipeline is relatively low risk. We have the capacity in Finland. You know, we had a, we have a team there that had the excess capacity to be able to run with that project development without it being a drain at all on, you know, our corporate resources, our team that's working and focused on Nunavut, Northern Ontario, and Northern Quebec.
We're in great shape now. I think we could do, you know, Hammond Reef and Ikkari. Beyond that, we could potentially, you know, become a bit stretched because we do wanna maintain control and make sure that when we say we're gonna do something, we can do it, and we can get our construction development projects completed on time and on budget.
The 20%-30%, I don't think that included Hammond Reef. I think there's some other options within the portfolio that might not have been considered within that 20%-30%.
Correct.
How would you frame the blue-sky upside potential for growth over the next decade?
The blue-sky potential, I think is significant. You know, you look at our 5 key value driver projects. They collectively represent 1.5 million ounces of annualized production growth. You've got Hammond Reef, which could produce 300,000 ounces a year by, you know, 2032-2033, and you've got Ikkari, which could produce 300,000 ounces a year by 2034-2035. You know, you add that all together, you're north of 2 million ounces, but that's not all going to be incremental. We will have depletion at some of our existing mines. Meadowbank, for example, which was scheduled to be closed this year, we see the potential to extend well beyond 2030, but at a lower rate of production.
Production's gonna drop from 500,000 ounces a year down to closer to 200,000 ounces a year. Similarly, at Goldex and perhaps some of our other operations, we could see a production decline. You know, I'm not gonna say that's incremental production, but could we be, you know, well north of 4.5 million ounces, assuming all those projects go as planned in a decade? Absolutely, it's possible.
Folks, if anybody has a question, if you put up your hand, we'd be happy to address it. Perhaps while you're all thinking about that, I might touch on Hope Bay.
Sure.
We're expecting an update on that, next week, and you're also hosting a group of investors and analysts to site next week as well. I'll be there as well. Thank you for including me. How do you think about protecting the returns on an asset like that? I mean, actually in our model, I mean, the returns on spot are well north of 50%. There's a lot of execution risk. Of course, there's deals with prices. There's cost pressures in the current macro environment. How do you think about protecting that?
I think the best way for us to have certainty on, you know, the return that we're gonna generate from an investment like that is through detailed engineering. We have purposely waited to announce construction of this project until we got to, you know, about 60% of detailed engineering. Our experience building 3 mines in Nunavut, you know, has dictated that that's how you make sure you have a really good grasp of the capital and construction cost and can, you know, give yourself a the best possible chance of getting a project completed on time and on budget. That's been the focus is getting that level of detailed engineering up to 60%. Again, you know, we've built 3 mines in Nunavut.
We have a lot of experience. The first one was a bit of a challenge. The second and third ones were done, you know, on time and on budget. We have the logistics and procurement expertise to be able to get things done properly up there, and we're confident in being able to do so. Obviously, diesel headwinds currently, you know, that's a factor across all of our operations, not only our construction projects. You know, the one thing I'd point out is we're fortunate in that we're only generating our own power in Nunavut.
Across the rest of our operations, in majority of our production comes from Ontario and Quebec, where we're on the grid, and it's nuclear hydroelectric power. Our diesel consumption per ounce of production is about 100 liters. Most of our peers are at 140 or 150, which means we're less sensitive and exposed to higher diesel prices.
Look, it doesn't look like there's any questions in the audience. Before things wrap up here, I really wanted to ask about Detour Lake. You highlighted it as one of the major producers taking you to 1 million ounces at that particular asset, becoming one of the largest gold-producing mines in the world. Nevertheless, I mean, based on what we've heard recently, particularly in Q1 results, there's clearly a lot of optionality, both with the underground and other potential expansion scenarios. How do you think about the potential for that mine to continue growing beyond 1 million ounces?
That's something that we're studying internally now. I mean, we have a plan to ramp up Detour to 1 million ounces by 2030. At that ramped up million ounce per year rate, we're processing 29 million tons a year of ore. It's a massive mine, but we're permitted to 32.8 million tons a year. We're evaluating internally the economics around expanding the mill and potentially processing more earlier. Just given the fact that we have a multi-decade mine life there, it may make sense to bring some of that production forward and maximize value, which could increase production to north of 1 million ounces a year. That study is still in the early stages, and we'll likely provide an update on that next year.
Fantastic. I think that's a great place to leave it. Thank you for being here, Jamie.
Thanks, Lawson.
We're gonna be sitting down now.
Oh, okay. Okay, perfect. Yeah, yeah, that works well.
Oh.
Okay, folks, we're back on time. We got a little bit ahead of schedule there, we do wanna keep this moving along. Welcome back. We are continuing with our gold theme today with AngloGold Ashanti. It's a pleasure for me to welcome Alberto Calderon, who's Executive Director and CEO of AngloGold, who is one of the largest gold producers with operations spanning some of the industry's most important jurisdictions. Under Alberto's leadership, AngloGold has transformed into a much more streamlined organization, very focused on free cash flow. Alberto, first of all, welcome. Thank you for being here.
Thank you. Thank you for having me. Thank you for having us.
I wanted to start off with a question about capital allocation and free cash flow, since you are generating significant amounts of it at current gold prices. You're clearly prioritizing capital discipline. How are you thinking about the balance between your organic growth pipeline, returning capital, pursuing M&A? What would cause you to shift those priorities from where they sit today?
Let me probably separate between M&A or medium, large M&A, which you would do at this stage with shares, where the gold price is and the rest. I think this is not only us, but for many companies, we're at the high gold prices, we are in the privileged situation where we don't have to choose. We're not capital constrained. I think for AngloGold, our constraint is more by the capacity to execute well. If you take where we start in our capital allocation framework, we have obviously all the operating, the sustaining CapEx. We are growing sustaining CapEx this year, maybe by CAD 150 million, mostly for growth. I'll talk about it more. We're very focused right now in growth in the next three years. We're able to fund that.
We are able to fund the growth CapEx. The growth CapEx is growing by about CAD 350 million, and it is not only the Nevada projects, but also projects we can talk later again, the five growth projects that we have in the next three years. The restriction there is just capacity of execution. They are all very, very high IRRs. When we looked at at the beginning of the year, we said, "Okay, what's gonna happen in the next three years?" We said, "Oh, well, we have a payment of CAD 700 million in 2028." We said, "Well, why don't we sell some debt management?" We basically paid back CAD 666 million, and are basically debt-free for this decade.
Even when you have all of that, we still, if the first quarter CAD 1.2 billion replicates, that's CAD 4.8 billion of free cash flow, we give 50% in dividends, CAD 2.4 billion. You look at the numbers, we still have cash that we would return in some way or other to the shareholders. That's where the buyback came and the idea. We can comfortably say we can do a CAD 2 billion.
W e haven't specified the time. We haven't asked the permission to the shareholders. The plan is to have a CAD 2 billion It's gonna be obviously more than a year, but in a specified time that we will, when we ask the go to the AGM. That's it. We will probably repeat what we did last year, that we end up returning of the free cash flow much more than 50% in one way or in another. At the same time, we're funding significant growth in the next 3 years.
How does the size of your balance sheet factor in that decision? Put another way, is there a point after which you have so much net cash that you would actually accelerate the capital returns that you're currently.
Well, that is what we're doing now. These conference, by the way, They're so efficient. We met, I was telling you, 16 shareholders yesterday, large.
That's great.
We, obviously, we hear it's every 3 months, we're doing this every 4 months. Many said, "Okay, tell us just how much It's fine if you accumulate cash, but give us some number and then return the rest." We have said, "Okay, we're gonna keep CAD 1 billion of net cash positive by the end of this year, but the rest we will find a way to return it." That's what we've done. We, as I said, in the capital, we'll keep CAD 1 billion. We bought that CAD 660, and we still are gonna return over and above the 50%. Again, several, many CAD 100 millions more.
That is the right thing to do. This sector in the past hasn't done that, I think, very well. Again, I've heard these long gold shareholders saying, "Come on, we wait for the good times. You promise you'll deliver, and then you don't." I think that that balance is a fair balance. I repeat, we're funding very high IRR projects, and we're limited by the capacity of execution. Doing more of that would be, I would say, almost reckless.
No, understood. That's very clear. Your statements are taken very well by at the investment community here. It's very clear you're focused on the internal organic growth opportunities. Nevertheless, I mean, one way to potentially alleviate some of those constraints would be through M&A. How do you think about M&A and competing against the internal options?
They don't compete because I've said it a long time. I think I've done or tried to do M&A for since I joined probably BHP in 2005 or 2006. We did some, we didn't do others. It's very hard to do M&A for the following reason. You got to pay a premium and then add value to your shareholders. We are very disciplined in NAV. We have models of the company that we're, like, say, doing a deal with our own NAV. After paying a premium, we have to add value. We have to demonstrate that to the board. We have to articulate that to the shareholders. The good thing is we bought four assets. One very significant at the time, Sentimen was about 70% of our shares. It would be like a CAD 9 billion transaction today.
It wasn't small. It was the right decision then. We have added, even if the gold prices had stayed flat. Of course, the gold price goes up. Better being lucky than good, somebody said. Yes, we're gonna pay it in at 2 years and a half. That's not the point. The point, it was the right decision with the information we had available at the time. The synergies that we thought we were gonna get, the Full Asset Potential implementation, the corporate reduction cost that was about CAD 35 million, all in all, about 200 per year improvements. That's what made adding value at the gold price that was then. We also bought Corvus. That was CAD 500 million when we were worth 7. It wasn't billion. It wasn't like a minor.
All of them, we have demonstrated that we add value after paying a premium. That's gonna be the same thing. There is a BD team that is looking at opportunities. Can we pay a premium and add value and probably increase our tier 1 assets in developed jurisdictions? That will be fine. We can't, it's also fine.
Flip side of that is managing your portfolio on the divestiture side, and you guys have been effective doing that as well too. When you look at and think about the potential to sell assets, how do you balance that versus the temptation to just hold them for the free cash flow in these strong gold price environments?
That is a good question. Let me probably start with something conceptual, which is what is too big a size for a company? All companies are different. How we manage is very heavy on data, facts, numbers. We go with the team, the CFO, the COO every month over each asset in a lot of detail. We have now 9 operating assets. You can do it with 12. You can't do it with 15 or 16. You have to change the model, the model becomes one where you have CEOs, then you have a group. Much more complicated. We don't believe that is the way to go. Whatever we do, we will always then be disciplined to go down to 10, 11 or 12. That's as a starting point.
If we want to keep the operating model, we do it like that. After that, selling we have sold, as you say, we sold Cerro Vanguardia, we sold Oropesa, we sold Gramalote, we sold La Colosa, simplifying the portfolio. We tried others, in these markets, at these prices, it's very difficult to get in cash what you think they are valued. Take, for example, we had this It's a great asset.
They were able to extend its life. It was in Argentina. Suddenly silver goes up. That asset is generating in the first quarter $3,000 of free cash flow per ounce. I'm sorry, again, It's just we can't Nobody can pay us that money. They could pay us in shares, we don't want shares of smaller companies. The conclusion for me in the current market, it's difficult to sell, and you could only buy with shares. It's a simple conclusion, but that's where we are.
Yep, understood.
For operating assets now. We will simplify. If we buy something, we will simplify.
Turning to Nevada. The other project, relatively quickly, it's evolved from a discovery into a fully scoped 500,000 ounce per year project, well-defined reserve, well-defined development plan. To what extent should investors view this as just the base case of this asset?
You're exactly right. It is a starting case, not the base. That's where we started. The rules of the ECC tells you that you can only talk about numbers if you have reserves. We start with 4.9 million reserves and what we put out. We know that we have 20 of resource. You can't drill all that much because it is obviously you don't need it. You're not gonna drill something that you're gonna need in 12 years. We put out the economics with 4.9 million. At, let's say, at CAD 3,500 gold, you have IRRs of 25%. We know we're gonna add 1.4 this year. We know we're gonna add about five or six million with the same CapEx, which is CAD 3.6 billion.
The truth is, this is going to be worth about 30% of the value of the company in the next decade. It is a massive project. We see it as multi-decade. 2 years after production, it will be around at 800,000 ounces because the grades are very high. It should be at 600 for many decades. We know that there's about 20 or 22 discovered, but there's maybe another 10 million. It is taking reserves of 21 million, 600,000 per year. CAD 1,000 of all-in sustaining cost. Another way to calculate it is there's obviously the royalty companies, Franco-Nevada, Paul, I think that they're very diligent in what they do. They paid equivalent of value for Merlin of CAD 14 billion. If you ask ChatGPT, it'll tell you. It's about CAD 14 billion.
That's what somebody put money on it and think that they can make money.
Yeah.
I believe he did a great deal. We're very, very excited by Nevada.
That says a lot. When you think about the timeline to the enormous value creation that you're describing here, what are the key risks that you need to focus on mitigating to make sure that happens?
In Nevada.
In general?
In Nevada.
Look, it's the timing. In the short run, it has been the environmental, like everywhere, license to operate. I have to say, the government, again, is very supportive, very helpful. Initially, it was difficult because there was nobody left in government in the BLM. Now they started it, they put out the draft EIS out, which is good. For North Bullfrog, we expect to have the record of decision by the end of this year. Hence, we will be able to be in production by the end of 2027, beginning of 2028. We are also seeking the fast track, I don't know, one, whatever, fast track for Merlin. If that is the case, we could be in production by around 2031.
What we hear, all the meetings, both at federal and state level are very good. It's a great jurisdiction to be in Nevada. Something could happen. There could be opposition, we're not in 31 by 33. It's the delays around the environmental permits. The rest, the big project, Merlin, is a simple project. It's like we've done it, we have it in data, 7.2 million tons per annum, mill 5.5 million tons per annum, heap leach, high pressure grinders. We're very familiar for that. There's no technology thing. It's oxides. We don't deal, fortunately, for decades with autoclaves, 2 autoclaves, double refractory. What we hear from other companies in the area, triple refractory plus whatever. No. Ours is, at this stage, we're lucky. It's just oxides and simple.
You talked about the tremendous growth, five projects delivering that growth. Could you just walk us through what those projects are, and then what are the timelines and gating events that ultimately deliver that growth?
One of the things we've been delivering every year on guidance, on volume, on costs. The question that we asked ourselves about 8 months ago is, we're very conservative on price. We're prepared for any price. What happens if the gold price stays high? High means above $3,500 for 3 years. That was the question, which we, because our models, we value projects at $2,000. Said, what happens if that happens? Could we? There is another mantra with this that the most expensive ounce of gold is the one you do not have. Can we do something to accelerate growth in this period? Nobody knows where the gold price is gonna be in 2031.
It is not unreasonable to assume that the gold price will stay above trend for at least 3 years. That's the assumption. If it doesn't, it doesn't matter. We said, "Okay, can we accelerate?" That's where we landed on saying 5 projects. We've said we'd give much more detail, but it's gonna be between, we think, in 5 of our assets, which is Obuasi, Geita, Sukari, Siguiri, and Cuiabá. We can add, let's say, midpoint about 400,000 ounces within 3 years with very low CapEx. That's what you're starting to see. Why you start seeing sustaining CapEx growing now in 2026. You're seeing stripping, you're seeing Geita, for example. We want to take reserve life from 8 to 10 years, and so on and so forth.
It's very relatively low CapEx, and that's where we are very focused on. That's the It may be relatively short-term focus, but that's what we are planning. I think that that is We don't know of other companies like, of our size that have that level of growth, 10%-15% in that short space of time. We think that's gonna be We plan in the third quarter to give details to the market. It's not just a promise. This is what you expect in 2028. This is what you expect in 2029. This is what it's gonna cost. This is what we're gonna do. That's the promise in Q3 will come.
Is that within Investor Day?
No. I think we just like every quarter to have a little surprise, that's the surprise for Q3.
I wanna give folks in the audience a chance to ask a question. We have one at the back, and if there are any more, please raise your hand. We'd be happy to take it.
Can you go through the impact of changes in the rand on your income statement in terms of revenues, diesel costs, labor, all of these kind of things?
We are, I was looking at the CFO if I need her help, but I don't think so. We are now a New York-listed company. We've primarily listed U.S. dollars, U.S. company, headquartered in Denver. rand, we have a small office is the only thing we have left. Corporate office, I've always said chartered accountants, again, South Africans are among the best in the world. We're happy to have maybe, I think, 300 people, but very little exposure to the rand now.
Any other questions? Okay, if not, maybe what I'm gonna do is dig in a little bit on some of the projects that are driving that growth. I'd like to start with Obuasi and ask about the jurisdiction. Ghana increasingly is a more challenging jurisdiction. There's higher royalty regimes, there's artisanal miner issues, there's greater regulatory scrutiny. Does that impact how you think about allocating capital to Ghana and actually using that as a base for your growth?
Let me answer. Usually, at many investors, I said, "Where do you think in the past 12 months we had the most, let's say, difficult issue or erosion of value?" Where would you think? You would say Ghana, it would be probably right to say. It's Australia, actually. Nobody talks. I'm Australian. I love Australia. That's where we have suddenly this. We've had to really, after the thing with Rio Tinto, there's now this compensation you have to give in for natives, aboriginal native land, and it's a significant erosion. I'm not going to say. That, in terms of impact on Tropicana and Sunrise, it's bigger than the impact on Ghana. Let me start by saying it can come from anywhere. Ghana, initially, they had a big increase in royalties. We have a very good relationship with the government.
We do things, obviously. We sent a letter, we say what we think, but privately. They listened. Actually, they listened because they reduced the COVID Levy. If you take a long run price of gold, which is not, hopefully it is CAD 4,400, they reduced by half the impact of the royalties, which is also not well known. It's still, I think, a mistake for them because, as you say, for us, it only impacts Iduapriem. We have a stability agreement in Obuasi. We have land tenure secured until we're in 2030s. We're only in Iduapriem, which is small, and it's not significant. For greenfield explorations, they put themselves out of the market. What I like going to all the countries in Africa. I come from a developing country. I see how, what Tanzania is doing.
I think what Guinea is doing. I see how they're progressing. We're comfortable working over there. The problem they will have is that all those other countries are much more competitive, and they will attract much more greenfield explorations than they. I think that's the big problem for Ghana. For us, we're happy. We have great relationships, and we were that much impacted.
Fantastic. On Geita, 8-year mine life, as you mentioned, which is on the shorter side for the big global gold miners, with the potential to expand it to 10. really, like, let's talk blue sky for that asset. What is the real long-term potential in terms of mine life for Geita?
One of the things we've made great progress is in mine planning, internal mine planning. That's always in companies. That's the last thing you do. It's probably the most important thing you can do. We had this a week ago, all the planners for a week in Denver. The landscape for Geita is incredible. We call it H2. H2 in the next 5 years is 93% without blue sky, so it's on reserves and resource. Blue sky is only 7%. That H2 horizon has Geita in 2040 at 600,000 ounces. The thing, it's a magnificent ore body. That's the thing about tier 1 ore bodies, like Obuasi, like Geita, like Kibali, like Sukari, like Oyaba. Like, they have this way to expand life for decades. Geita is an extraordinary asset.
The market, I would say that 8 years for half underground is not short, the market wanted more. That's fine. We're taking it to 10, as you say. 10, you need to have that 10 sustaining it at 600,000 ounces, you're gonna need much more. When you see Geita, you will see sustaining CapEx going on significantly. You'll see, we're investing a lot in communities because you, we need that land. Geita is just an extraordinary asset. Yep, that's what it is, H2. 2040, it's still going on strong.
One of the themes of Q1 results and this conference, unfortunately, has been cost pressures, energy, currency, royalties, consumables. Within the portfolio, where do you see the opportunity to meaningfully manage your cost structure?
I start by repeating the story I said at the end of the conference call on Friday, which is for us, it's an issue of the bear and the friends and who runs the fastest, I think we are outrunning inflation faster than anybody else. That is what matters. We can't be greedy. All of us in the gold space, gold is, like, unusually high. What we have to do is to make sure that what is temporary stays temporary, that we track things well, and that we are able to compensate. For us, that's a long story to say, look at Q1 cash costs versus Q1 2026. 2025 to 2026, you say, "Okay, they grew by 14%." You say, "Oh, my God, 14%, that is a problem." 10% of that increase was royalties. I love royalties costs.
It's the only cost we love because obviously it's tied to high gold prices. That's fine. If gold prices stay, it's fair. Yeah, we have a state take of about 50%. That is fine. The other 6% was increase in inflation and in exchange rate. We were able to compensate this quarter by 2%. That's my Full Asset Potential. That's what I mean by outrunning. We have done for the past 4 years. Take. Again, this is at high level numbers. In 2021, our cash costs were CAD 1,000. If you take a composite of the top 3, 4 companies, the composite then was CAD 700. We were 50% higher. You fast-forward to today, what has happened since 2021? Inflation has gone up by 30%, royalties have gone up by 20%.
We have gone up by 30, which means that we have been able to offset by 20% the non-controllables by Full Asset Potential. If you look at most of the other companies, they went from CAD 700 to CAD 1,300. They haven't been able to compensate. That's our obsession is on that, is cash cost control. We wanna grow, we're happy spending more, but we don't want higher cash cost, higher than what, obviously, than what we cannot control.
Fantastic. Thank you for that commentary. Folks, thank you for being here today, and Alberto, thank you very much for being here today.
Thank you.