Q3 2019 Earnings Call
All participants please stand by your confidence is ready to begin.
Thank you all for joining us this morning, welcome to the human resources third quarter 2019 Conference call. As a reminder, all participants are in listen only mode. At the conference is being recorded after the presentation, there will be an opportunity to ask questions.
Conference call today is being webcast live and available along with the presentation slides and put them. So that I had P.R.E.P.I.V. M. Dot com I'll now turn the call over to Mr. Joseph ups, Nick <unk>, President and CEO . Please go ahead Sir.
Good morning, everyone.
Welcome to our third quarter 2019, operating and financial results call.
Participating on the call me today is our CFO Tom Yes.
First and foremost I again want to thank everyone at Bruce Jackson, Smithers and here in Vancouver.
For their hard work that contributed to another profitable quarter.
On today's call I will comment on our production ramp up and its impact on near term gold production.
I will then turn the call over to Tom comments on our third quarter 2019 financial performance.
I will follow up with comments on longitudinal long hole stoping.
Reserve definition in expansion drilling and exploration efforts. So far this year, both grassroots and drilling at depth below the Bruce Jack mine.
I will close off with a look ahead to the remainder of 2019 and then open the call for your comments.
Before we begin.
Note that our statements contained forward looking information and future oriented financial information based on certain assumptions.
I refer you to the cautionary language included in our news release issued yesterday.
As well as the management discussion and analysis for the same periods.
These are available on our website.
And have been filed on SEDAR.
Please note.
All dollar amounts mentioned on this call or in us dollars unless otherwise noted.
In the third quarter, the Bruce Jack Mine produced 88227 ounces of gold and we sold 90713 ounces.
At an all in sustaining cost of $878 per ounce of gold sold.
We generated $132.7 million in revenue in the quarter, resulting in $34 million in adjusted earnings.
Equivalent the 18 cents per share.
Operations generated a record $77.8 million some cash this quarter.
Our ninth consecutive quarter profit and positive adjusted earnings.
There's continued cash generation allowed us to reduce our debt by $143 million in just nine months.
This includes a $62 million, we paid as a first installment on the repurchase of the offtake agreement.
As planned at the outset, a 2019 the production ramp up is expected to supply the mill at 3800 tonnes per day on a consistent basis by year end.
It was steady state production expected in 2020.
Steady state gold production at Bruce Jack requires the development of stope inventory stopes that are drilled off and available for mining not counting those that are being mine.
As we do not have a stockpile the availability of stopes, representing a great range of grades allows us to blend multiple stopes for consistent production and provides alternative stopes for mining if circumstances require.
In the third quarter mining focused on increasing the greater the or sense of the mill.
Stope dimensions were refined in that in an effort to limit in stock dilution and reduce the amount of lower grade tonnes processed. However, these efforts to optimize grade within the constraints of a limited stope inventory resulted in a reduction of the overall tons available for mining near the end of third quarter.
Bottom line.
We underestimated the time required to develop sufficient stopes to support the ramp up to steady state production.
In addition, because mining progress through mid September .
Operational issues with two stopes prevented expected higher grade tons of ore from being mined this plan.
There was a hang up of a blast of a production so and complications sequencing another stope.
We had to pull more tons from the lower grade stopes that were online to make up for this tenant shortfall.
The combination of limited stope inventory and these operational issues resulted in lower than planned tons grade and ounces in September impacting tons grade and ounces for the full quarter.
Due to limited stope inventory production mining in the fourth quarter is focused on maximizing tons to the mill.
All stopes above cut off grade of approximately five grams per tonne gold will be mined and processed as they become available.
Underground development. This plan to continue to progress at approximately 1000 meters per month through year end with a focus on further opening the mine to improve access for stope development.
Gold production in first nine months of year was 258168 ounces.
Due to limited stope availability.
Gold production in fourth quarter is expected to be in line with third quarter production.
Accordingly.
We've adjusted our full year 2019 production guidance to range between 340000 ounces and 350000 ounces of gold.
An approximate 15% decrease from the midpoint of our prior guidance range of 390000 to 420000 ounces of gold.
All in sustaining costs in the first nine months of the year was $896 per ounce of gold sold.
Our total expenditures on mining milling DNA and sustaining capital are trending below total onstage and cost guidance. However, as a result of lower gold production.
Annual all in sustaining cost guidance proud sold has also been adjusted.
And now ranges from $900 to $950 per ounce of gold sold.
All in sustaining cost guidance for the year includes approximately $25 million for sustaining capital of which approximately $19.6 million has been spent to date.
This slide slide nine.
Because the section view of the value of a kings looking to the north.
The grey area contains our measured and indicated resources.
Blue lines represent our underground development as the end of lease last year and that Green box outlines the current mining higher horizons, where we had been mining over these last two years.
Turning to the next slide slide 10.
The additional development completed in the first nine months of the year is highlighted in orange.
We have private prioritized opening up the mine this year and as you can see we've made significant progress.
We've been opening up our mining horizons to the east and West.
Pushing our ramp down to open a lower mining horizon and pushing our ramp up to open an upper mining horizon.
Theres also been extensive development expanding to the north and south.
Which is not shown here.
Through the rest of the year, our priority remains on opening up the mind to improve our access to reserves to provide us with optionality to better manage mining Bruce Jack.
Turning now to slide 11, this is our mill flowsheet.
All critical modifications and upgrades required to sustain processing at the increased production rate of 3800 tonnes per day are completed.
Earlier this year, a much more efficient concentrate bulk loading system was installed.
To replace the concentrate bagging system.
Concentrate filter press upgrade is now complete as our all process related pump upgrades.
Modifications to the flotation circuit and Falkland systems continue and will be completed during regularly scheduled shutdowns as the final components are delivered.
Despite the production challenges in the third quarter that affected our annual guidance I'd like to point out that we extended our track record of positive adjusted earnings and cash flows again this quarter as we have every quarter since achieving commercial production on July Onest 2017.
Now I'll turn the call over to Tom to review, our financial performance for the third quarter of 2019.
Thank you drill and good morning, everybody.
There are two key takeaway this quarter, our third quarter financial results were significantly better than the second quarter, primarily due to a 13% or $167 per ounce inquiries in the gold price that we sold over 90000 ounces of gold approximately 4700 morals than the second quarter, we have.
Strong financial leverage to increases in the gold price.
Our earnings from mine operations of over $46 million increased 56% and our operating cash flow of over 77 million increased 89% over the second quarter of this year.
During the quarter, we also repurchased 100% of the optical obligation, which was a lot which was the last piece of the original 2015 construction financing package and we made a payment of $62 million. Our first installment at the end of September .
Turning to slide 15 during the quarter, we sold 90000 sometime in the 13 ounces of gold at an average realized price of 1400, $86 Frels versus 85953 ounces of gold and I'll be realized price of 30 $119 trails for the second quarter.
We generated over $132 million in revenues compared to 130 million in the prior quarter of 2019.
While cost per ton meal was $181 in the third quarter and averaged $178 per ton or the first nine months of this year. This was inline with our spending guidance and reflects higher drilling in the increased stope development activity that has occurred throughout the year.
Turning to slide 17, our cost of sales, which includes production cash cost depreciation depletion royalties and selling costs averaged $950 per hour sold for the third quarter versus $970. So the second quarter.
Depreciation and depletion expense has increased in the last two quarters why approximately $40 per outsole I was the result of the updated reserves you reported in April .
Total cash cost per outsole averaged 640, AWS for the third quarter versus $702 for the second quarter of 2018.
Turning so mine operations were $46.6 million for the third quarter versus $29.8 million for the prior core this year deducting our corporate Gionee costs, we generated operating earnings for the quarter of $41.3 million.
There are two significant non operating items on our personnel. The first as interest expense of $8 million for the third quarter versus 8.8 million for the second quarter.
Our effective interest rate decrease in 2018% to 5.5% as a result of the refinancing we completed at the end of 2018, replacing the project construction debt with syndicated bank debt.
The second item is the loss our financial instruments at fair value discount.
This reflects the final adjustment required for the repurchase of the optical obligation.
This adjustment was a loss of 4.4 million versus 3.5 billion for the second quarter.
This is mark to market adjustment has been significant since September of 2015, causing quarterly volatility.
For the repurchase of the optic obligation we will no longer how this impacts going forward.
Third quarter taxes consists of 1.4 million for cash taxes for the BC mineral tax and 21.9 million for deferred taxes.
The deferred taxes included 8.1 million for the repurchase of the optical obligation and another $2.5 million for the revaluation of Canadian denominated BC.
Our tax pools.
Of note, we currently field VC mineral taxes at a minimum rate a 2% not 13% as we draw down our significant tax pools over the next several years.
As well based on the up the life of mine and current gold prices, we do not anticipate any cash taxes for federal and provincial income taxes until 2023.
No earnings were $6.3 million or three cents per share for the third quarter versus $10.4 million or six cents per share for the second quarter, we adjust our earnings for items. We do we do not reflect we believe do not reflect the underlying operations of the company.
These are noncash items, consisting of primarily the loss of financial instruments, a fair value and deferred income taxes.
Adjusted earnings were $34 million or 18 cents per share for the third quarter versus $17 million or nine cents. This year for the second quarter.
Turning to slide 20.
For the third quarter, we generated $77.8 million of cash flow from operations versus 41.2 million for the second quarter and.
And totaled $158.9 million for the first nine month of 2019.
The increase in the average gold price accounts with the majority of the increase over the first half of the year and as Jos mentioned this extends our record a positive cash flow for all nine quarters since start up in mid 2017.
So the strong operating cash flow during the third quarter, we paid 16.7 million on the debt facility.
62.4 million installment to repurchase the offtake obligation $70 million on interest has been a totaled $14.6 million five capex.
We ended the quarter was $16.6 million in cash.
The opting obligation was part of the 2015 construction financing.
And with a week where was the repurchase agreement we will make the final installment of 20 million.
In November .
Our syndicated bank debt totaled $480 million at the beginning of the year.
Tell our Thirtyth developed toll $398.7 million. This consists of a term facility with 216.7 million outstanding representing the another 13 quarterly installments and the balance of 182 on the 200 million dollar revolver.
The facility matures in December of 2022.
In nine months. This year, we have repaid $81 million on our syndicated facility and 62 million dollar on the repurchase of the offtake obligation total debt reduction because $143 million.
Turning to slide 23.
Sorry, I see spending for nine months totaled $231 million.
And with 200.
258100 ounces of gold sold the average cash costs was $675 sprouts and the all in sustaining cost was 896, though as paralysis goal sold.
We expect spending for the fourth quarter to result in total annual spending on the low end of our previous guidance.
We now forecast and spending for the year of between $314 million to $323 million.
Production guys for the year has been revised to between 342 350000 ounces of gold, resulting in an all in sustaining cause ranging between 900 to $950 per ounce of gold sold.
So to sum up in the third quarter or 2019, our financial results were very robust despite lower than planned gold production and sold a significant leverage the gold price.
An increase of $167 barrels in the gold price.
Two quarterly increases and cash flow and operating earnings of 37 million in $17 million respectively.
With additional cash generation during the first nine months of the year, we repaid totaled $143 million and achieved our debt reduction goals set out at the beginning of the year.
For the remainder of 2019, we will continue to January significant cash to fund their scheduled debt repayments.
Now back to usual.
Thanks, Tom.
Turning to slide 25, we completed testing of longitudinal longhole stoping as a mining method to the value of the kings.
Based on our understanding of the geology and controls on gold mineralization longitudinal long hole stoping mining along the direction of mineralization rather than perpendicular to it.
It was tested as a more effective method of mining.
With test opened completed the decision has been made to implement longitudinal long hole stoping as the mining method in areas of the mine were corridors of high grade gold mineralization are defined.
In making the decision to adopt launched tuna long hole stoping to mind, the corridors of high grade gold mineralization at the value of the kings.
We number we assessed the number of things including.
Our ability to drift along the high grade corridors.
Test Oak grade profiles from our long hole drilling to gauge internal dilution.
Geotechnical considerations to ensure the safety of our people.
And our ability to mine along the corridors with our existing mining fleet.
We expect this transition and mining method to reduce the amount of installed waster dilution.
And help us manage grade variability.
We also expect to reduce development costs, as we will be developing an or as opposed to waste.
As a result of incorporating the longitude a long hole stoping in certain areas of the mine. We will release, an updated life of mine plan, along with an updated resource and reserve estimate in the first quarter of next year.
Extensive resource definition and expansion drilling commenced early in 2019.
With the objective to improve reserve definition ahead of mining.
And to expand the current mineral reserve at the value of a kings.
Adding gold ounces to the life of mine.
Turning to slide 27.
This is a section view of the value of the kings looking to the north.
The dark blue lines represent the current underground development.
The Green dashed line represents the current mining horizons.
The grey area in the background represents the existing measured and indicated resource.
The two shaded areas represent a rough outline of infield drilling at the value of the case.
The purple shaded area. The first phase of the drill program, which focused on resource definition at depth below the 1200 meter level is now complete.
The second phase of the drill program in Beijing, which focused on reserves definition westward towards the Bruce Jack fault is now over 95% complete.
A total of 89380 meters of drilling for 1483 holes has been completed to date in these first two phases.
And updated resource estimate is currently underway based on the results from these first two phases of the drill program with an updated reserve estimate to get underway shortly.
An updated life of mine plan, incorporating longitudinal long hole stoping will be completed following the completion of the updated reserve estimate.
We plan to release, the updated resource and reserve estimates and updated life of mine plan in the first quarter of 2020.
Opportunities for expansion are located at depth to the west to the east and to northeast of the currently defined mineral reserve where previous drill programs have indicated the continuation of high grade gold mineralization.
The third and fourth phases of the drill program illustrated in Green in Orange targeting resource expansion at depth and to the east of the current mineral reserve are set to begin shortly and will continue into next year.
Stepping back now.
On Slide 30. This is a wider section view of the Bruce Jack property looking to the north.
With the value of a kings and the top left corner.
In the center of the slide 1000 meters to the east of the value of a kings.
Exploration drilling in 2015 intersected high grade gold below the float on zone.
Mineralization below the fold open zone is the same mineralization, we see it the value of a kings.
You will also see a number of drill holes in the slide meaning beyond the value of kings. Each one of these drill holes has encountered valley became style mineralization.
Outside the existing resource on below.
There are two main takeaways from this slide first.
Reserve potential of the value of the Kings is significant.
We expect to be mining in the valley becomes much longer than our current 14 year mine life.
For the second Keith key takeaway.
Take a look at the drill hole is going down to a significant death.
We have a substantial amount of high grade gold in the valley, the Kings and Weve intercepted high grade Golden the flow Dong zone.
We believe there is a significant gold copper porphyria dep sitting below the Bruce Jack mine, which we are systematically targeting.
Our six whole targeting the source porphyry is underway.
If we're successful and intersect a high grade gold copper porphyry.
We expect to create significant value for our shareholders.
Stepping further out we have over 12000 square kilometers of mineral claims in the Golden triangle in British Columbia.
On slide 31, the Bruce deck minus on the top left corner the property.
2019, grassroots exploration program on the browser claim surrounding the Bruce Jack Mine is now complete.
In total 19942 meters of drilling was completed with four drill rigs.
The drill program focused on further evaluating several distinct areas that have the potential to host SK Creek style Vms deposits and Bruce Jack style high grade Epithermal gold systems.
At the six own approximately 14 kilometers northeast of Bruce Jack mine drill drilling is testing an area in the Escott River formation that host the same store tigger fee as the SK Creek mine.
Vast a's received to date for the six zone.
Drilling intersected high grade silver plus copper mineralization within the overlying milestones.
We encountered 2890 grams per tonne silver and 1.81% copper over 1.5 meters 187.5 meters down hole.
Additional drilling and downhole geophysics were undertaken to locate the core the system and the associated Polymetallic mineralization.
We will be following up on a six in the spring.
We believe the best value for our shareholders along with paying down debt is to invest a portion of our cash flow and exploration of our existing claim package.
Let me conclude with a summary in a look ahead as the remainder of 2019.
We remain on track to achieve a sustainable production rate of 3800 tonnes per day by end of this year with steady state production in 2020.
So gold production did not meet our expectations. This quarter, we posted a solid financial performance in Q3.
We expect another quarter of robust cash flow in Q4 and with repurchase of the offtake agreement. We remain on track to repay $180 million of debt in 2019, surpassing our initial target of $140 million.
We are drilling to expand our reserves with excellent potential to extend our mine life.
We are continuing to systematically explore the porphyry potential adept below the Bruce Jack mine.
Our regional grassroots exploration is still in early phase, but we believe the greatest return would be in discovering another mine on our existing claims.
Finally in the first quarter of next year, we'll have an updated resource and reserve and the new life of mine plan, which will include the results of 90000 meters of infield drilling and longitudinal longhole stoping.
Thank you.
It includes the formal presentation.
I'll now turn the call over to the operator, who will open the lines for your questions.
Operator.
Certainly sir.
We will now begin the question and answer session to join the question Q You May Press Star then one on your telephone keypad, you will hear it till one acknowledging your request if you're using a speakerphone. Please pick up your handset before passing any key.
I would draw your question. Please press Star then too.
We'll pause for a moment as college trying to Q.
The first question comes from Justin Chan of Numis Securities. Please go ahead.
Hi, guys, thanks, very much hosting the call.
My first questions on stope inventory I understand the current focuses on level development.
Could you give us a sense of when that starts to transition just to step development and does that transitional longer to no change that at all in terms of year.
Flexibility of Stope sequenced you need to get more development ahead of.
Or upfront.
And I guess overall, what I'm driving towards is.
And when do you think your sub inventory will give you more flexibility too.
We have at March selective about what goes through the plant.
Okay.
Good morning, Justin.
Well first off on Stopes. We're currently mining from six stopes, we're comfortable with six stopes in in operating that we can service the mill at 3800 tonnes per day on a comfortable basis.
In order to have sufficient inventory, we still feel this as same as last year six six states stopes in inventory of various grades will allow us to.
Keep in mind running and production going at a consistent basis.
Looking ahead I can give you the timing on that right now.
Since we are updating our life of mine plan with longitudinal long hole stoping, which we expect will reduce the amount of development meters required to because we're developing an or so when we get that planned out will be in the first quarter of the year is tracking well.
We will come up with we'll show you a in our results the plan to get up to that inventory level and with timing at that point in time.
Okay. Thanks, a lot Joe and just a follow up on that with with the transition to longitudinal does that.
This is overall development meters, but do you need more access upfront I mean overall the meters go down, but do you need more access to ensure yet.
The stub sequence in place.
Or is that not the case no. It's it we're good with access it's not going to be any different for us and transverse because we're not stepping in on all the stopes were just drifting along the high grade corridors bend long holding them and then setting up our stopes along those corridors. So we don't need to step in for each individual transfer stope, so it shouldn't impact.
Is there.
Okay, great. Thanks, just one more on the mining and then a couple on costs.
I don't recall you had a strong yes, yes, I remember you had a small amount of of material. This year plan for.
Closer to the through Shack fault, so higher grade material.
Is that was is that still the plan for the year has that been mind already can you just give us an update on.
That is and.
Degrades come in as you expected.
And then just on costs I recall that Tom was saying that you expected higher unit costs in the second half that isn't really happened.
Was that just conservatism or is there anything left to come or have any cost been deferred.
And just give us update on that.
Okay, Let me jump in on the first check fault question. So we have not opened up yet at the Bruce Jack fault. We've we've increased our drill density out there. We now have drilling at 50 meter centers for most of the if not all the indicated resource out towards the Bruce Jack fault. We're currently developing over there, but we now have not stay.
Good mining at we'll be getting into that and in 2020, and we'll show you that and in our updated life of mine plan coming out Q1.
Tom, Yes, Hi, Justin six of the question.
You'll note that.
The third quarter cost per unit has been trending up slightly from our.
Prior prior quarters.
We came in at about $181 per ton in the third quarter and we're averaging 100 submitted so you'll see that there's a slight increase in the third quarter and in the fourth quarter, we'll see a maybe a little bit higher.
Thats pick just because of just winter winter months right.
We have a little offset on that in terms of just sorted per unit basis, because we'll be pushing through a little higher volume as we wrap up to the 3800 today level in the fourth quarter.
Okay. Thanks, and just one last one from me on the off take that.
Taking you Tom perhaps could you give us any sense of.
Is there any.
What impact on realized gold prices should for should we expect to have.
Yes.
Yes, so the way we account for that Justin is that that's really treated as a financing vehicle. So the differential between the realized price is really.
A reduction in the offtake obligation, where you are really see the impact is on our cash in that.
Without they off day dual role see our increase in our realized or the actual cash that we we get in from each and every sale.
Okay and is there is there a.
Margin that we can put through our numbers or.
Yes, yes.
How to treat that.
Yes, it depends on gold volatility when when golds performing with fairly limited volatility, it's about 1% of the gold price.
And volatile volatile times that pricing window would skew things higher yes.
Yes slow so far for example in the third quarter.
We we charged $1.3 million.
To the obligation.
If you work that will.
Roughly amounts of about $20 per ounce impact.
This because the volatility.
In the quarter. Thanks.
Okay.
Thanks, very much that's very clear.
Thanks, Thanks, very much for taking the questions.
Thanks, just oil.
The next question comes from Anita Soni FC IBT. Please go ahead.
Good morning, guys. Thanks for taking my question. So my questions are with regards to cost. So when we look at that per ounce sold your year to date, you're at 896, you're guiding to 900 to 950.
Im just trying to understand what if you look at the total cash cost you basically.
Any million dollars to spend.
First as you are sort of 58 60 60 run rate in the prior quarter Im just trying to understand why that costs are going up so much in the fourth quarter.
Yes, so basically.
In the fourth quarter, we're running a little more tons.
Wrapping up the 3800 on a day solely in the whole dollar basis, you'll see a little wrap up there so.
There is probably above.
Six or $7 million of increased cost just for the additional tonnage.
And the rest of it is really.
Sustaining capital and the other items that we have the low the cash cost side.
Alright, and then secondly, just this quarter you delivered I think was 21 on the processing part time and given that you had some processing challenges. This quarter I'm wondering why that number went down by 10 $10 per ounce per tonne unit costs.
Sorry.
So when you when you reported your unit costs.
Processing is $21 a time.
And in the prior quarter I believe it was somewhere closer to $30 a time and I'm just wondering why exactly that that number went down so substantially.
As just higher higher throughput.
Okay.
I think you had higher throughput in the prior quarter. That's it that's where I think the challenges from me to understand that but you can get back to be on that one.
And just moving onto the next year.
Given that you that you've had some challenges delivering grade to the mill. This year I think 10.6 to 10.4 was the average.
That was that in the guidance template for in the guidance and 10.6 in the life of mine plan.
And it looks like we're going to be running closer to nine how confident are you in that 12 gram per tonne material for next year in 13 and 2020 one.
Hey, David Joe Here look at we're going to get that life of mine flatten out and that will help you have with.
Guidance on where we are fair going forward.
Okay. During the quarter. We were we were running well in July September we were in the double digits on grade and as I say, our big issue is stope inventory and the way we manage that our strategy to manage dilution within our stopes is to have still inventory and that allows us to blend stopes multiple grades to hit that grade so.
Nothing's changed on that front that is still our strategy, our and we're still focused on on limiting internal dilution. So as we come up with our updated life of mine plan next year that will help guide you on things and that will also will lay out exactly what we're doing to limit internal dilution and that what we need for stope inventory going forward.
Okay, but I mean this quarter I mean.
Thank you were saying that the the stope inventory that you have with sufficient to deliver and yes. It didn't so I'm just wondering.
I would there be more development require next year.
Don't you feel that you need some more flexibility going into next year.
No no look it up I think I said I unless I'm mistaken was like we didn't have sufficient stope inventory that and our big issue here was we under estimated time required to ramp up sufficient stope inventory thats the bottom line and so we needed longer more time to get to that stope inventory. So we.
Did not have sufficient stope inventory during the quarter. Okay, and then last question on that on.
The issues. This quarter I think you said you had a couple hang up once installed sequencing and one in.
A specific.
Okay.
But the reason was but im just wondering why that specific grade like a high grade stope isn't coming in in Q4 to be delayed until until 2012.
The dope that we had hang up with a blast we're still looking at how we can get at that.
Within our arts things, so we blasted over half the stope is Hong and still there and so we have to see whether we can get back at it or or whether we're going to have to just leave it behind so we're working at that and our engineers are looking at it and we'll see how we get through but it doesn't come we'll hear in mining and generic.
And that it takes a while to get back online and Thats. The big issue there and if I can ask but just one last question what was the in terms of double digit grade what was the great in October can you give us.
No, we're not giving grade going on buying on the current quarter, we don't give our grades until the ended the quarter, but we're tracking we're tracking comfortably with our guidance.
Very much.
The next question comes from avail had beam of Scotia Bank. Please go ahead.
Hi, Good morning, Joe.
Just a couple of questions on me a lot of the questions have been answered.
But just in terms of.
Longitudinal mining in terms of especially as you guys have done.
And you've talked about you know launch undermining will be implemented in certain areas can you give us a sense as to in terms of percentage wise.
How much launched on reminding will be implemented.
10, 15, 20% within what you're going to be mining over the life of mine.
I don't have that number for you are right now I need to get the life of mine plan to yet obese, which will be in the first quarter, but let's just say, where we're opening up the mine below the 10 80 level.
The wet towards the Bruce Jack fault and up above for the 14 10 meter level those areas have not had the transverse infrastructure infrastructure put in place yet. So you could see a significant amount of longitudinal long hole stoping in those areas, which.
So I expect that will be well north of that 15% to 20% amount.
Got it and and and just moving on to the drilling that you guys have done and.
Probable reserve area, what kind of spacing.
There was.
Before and watch after over this infill drilling program.
Okay going going into the drill program, it's going to be in excess of 20 metre drill spacing 20 to 40 meters on the indicated and we're bringing that all down into that 15 meter or less spacing is the target from the drilling.
Okay, and I mean in terms of drills also just to get an idea as to what to expect floor.
For the reserves I mean, I mean, I'm not looking for specifics but.
Do you have a sense of how the drilling went in terms of was asleep. According to expectations in terms of grades in which.
Well until we get the the resource and reserve update I can't really tell you anything there, but I can say, what we saw a fair amount of visible gold and we were were hitting gold, where we expect to hit gold how's that.
Okay sounds good.
I think thats it from me.
And I'll pass it on to other people. Thanks.
Great.
The next question comes from Joseph Reagor of Roth Capital Partners. Please go ahead.
Morning, guys. Thanks for taking the questions.
I guess just kind of following on somebody other questions about the stope inventory.
Going forward, how do you solve that problem is it just a matter of adding additional chefs do you need additional equipment. They just throw more money at it kind of thing like how do we get from not enough soap inventory to enough that you can be flexible.
Joe Good morning, and it's just a question that time, we're developing at a good solid rate thousand meters per month, we just need time to get out ahead.
We don't need more equipment, we have sufficient equipment. We have we have the budget we need we just need time you were underground.
We can only go in any one direction and roughly five meters today. So it takes us a while to get things opened up and that's why we're prioritizing opening up the mine so that when we do get it open up we have access to show a significant number of areas to mine at any given time or not risk constricted. It while we're mining and that will allow us to have access to a number of stores.
Yes.
And allow us to blend the way we need to plan door.
Okay Fair enough and then on the stopes that got hung up on the blast.
Can you give us a rough idea of if you had at leave it behind what that's going to <unk>.
The tons in grade are there or maybe just the contained ounces you think are still stuck in that stope.
Well.
Theres a significant number of ounces.
Wont get into the specifics, we're still we've got our light our scope of the stope and everything else, but I can't give exact numbers, but it's hung up and it's it's not going to impact the life of mine will if there's there's a lot of gold is we have a huge mineralized system. It's just looking at it and whether its way.
Worth putting the extra cost into the into recovering that what's left of that stope, that's hung up or is it better just to backfill what's been blasted out and move along so we're looking at patent now and we're going to do it on a cost benefit basis.
Okay and then.
As far as next year goes.
Based on what you've learned so far this year.
Is it fair to say that the life of mine plan that you guys provided the three your update is under review again for like a new three year plan, that's going to come out in Q1 or.
Should we still take the I think it was roughly 12 grams expected next year is that still gospel or.
Is there some.
Change coming there.
Well look at it is going to be an updated life of mine plan completely. So this is going to be not just three years. It's a life of mine going forward from two to one beginning in 220 onward. So we will have that plan out and so we will have tons grade.
Stope inventory things like that laid out for you all out in Q1.
Okay and then.
When do you think will get guidance then for for next year.
We will have guidance when we have our updated life of mine plan with get it altogether. So look we'll push hard to get that out as early in the quarters, we can but theres a lot of work involved so we're working on it and we'll get it to you as soon as we can.
Okay. Thanks, I'll turn it over.
Thanks, Joe.
The next question comes from Mark Mihaljevic of RBC capital markets. Please go ahead.
Hi, Good morning, everyone. I guess first question can you just give a break down between kind of some of the delta that you've seen on the grades.
This year.
Between how much of that was just.
Deferral of the high grade stopes, how much of it was.
Not getting high grade and some of the area as you were expecting any reconciliation you can provide.
Okay, well what I can tell you is our we're comfortable with our resources reconciling well, it's really a question of dilution and how best to mine Miss and limit dilution and as I've said for the way we do that is through.
Is through having mining multiple stopes at a time since we don't have a grade control program starting his stockpile, we have a great control program. So.
I can't tell you exactly what grades come from which stopes because at any given time six seven stopes or are hitting the crusher and thats all being blended in coming out in the mill. So I can't get into specifics on that but I can say overall, we're comfortable with where our resources reconciling.
Okay and then.
Again, you mentioned higher dilution can you give can you put some numbers around kind of.
Where you're running versus where are you worried budgeted in kind of where you hope to get too.
Well look at our dilution on the periphery of the stopes as is inline with our budgets in order, but a meter around it really it's how we control dilution within stopes and so.
Admit them lout, the amount of low grade tons going to the mill and so.
Can't really give you a number on that but what we do is.
You've been the site. So we we long haul our stopes, we use our grade control program or Longhole drills to give us the estimated grade for rings and that sets up our mining of individual stopes and by having those at significant stope inventory on hand, that's allowed us to keep working with our great as we run out of stope inventory we.
Takeaway that flexibility that we can use to optimize grade and so.
It comes down to we need to control internal dilution and our strategy to do that is to have multiple stopes online and multiple stopes as backup in inventory.
Okay, I guess following up on that I guess, when we had been to say there have been quite a bit start you spend a bit of time on the updated grade control per gram.
You happy with how that's performing again, excluding the constraints from stope inventory, but how does that actually been giving you. The Intel you are hoping for and allowing you in the absence of stopes are still inventory challenges.
Better plan around that internal dilution or are you now happy with this program.
Absolutely the the grade control program than just for everybody sake thats the.
Sampling of the long hole drill cuttings and we now have an RC drill doing the work and getting more on is working very well as reconciling well to the mail. So we're pleased with away the grid controlled programs going.
Okay. That's a good I guess just one last one I guess you mentioned you gone into double digit grades in I guess in July and September I don't if you mid July and August could you mentioned issues in September previously, but can you just give us a sense of how high you've been able to get this and just kind of again give us a sense of in the absence of off.
Challenges, what you're able to deliver.
Well in it so if I if I did say September apologies, Yes July and August we were in double digits. We were in the tens we were pretty close where we wanted to be.
Pretty much Bang on where we wanted to be for those months and.
So on a monthly basis Thats, how we look at our grade because it on a daily basis.
Heads up and down.
Okay, that's a perfect and I think thats. It for me. Thank you.
Thanks Mark.
The next question comes from Steve Emerson of Emerson Investment Group. Please go ahead.
Thank you for taking my call.
I'm, having trouble getting my hands around the to tell that.
Our damaged I guess.
I understand the blast problem basically destroyed.
The stope and makes it at this point.
To expand.
To recover.
And I don't quite understand what happened to the effect on high grade stope.
And to what extent that may be coming on.
Okay, and good morning, Steve so with the black, but the blast hang up where we I haven't said, it's too expensive to recover yet we're looking into it we're going to see what we can do to cover some of that or but essentially when it blasted at home. So it's in place it didn't drop so we could market out and so we have to make sure.
Look at a card so make sure it's safe to go back and drilling and everything else. So that's what we're looking at now and.
What does that mean, when you say hello.
It didn't fall so we blasted at you and I'll use the blast the rocket drops we then get in market out and so on right. So we blasted at didn't drop so had an issue with the with the blast to what we're investigating that still.
It's a safety issue we can't just go in there.
The other stope that was that was the sequencing issue. We haven't we have process that stope now within in in October .
Thats been through the mill, it's just we couldn't get in to the mill during the third quarter.
Excellent so this.
This means you have now a high grade.
So.
That is.
We are in inventory.
In one of those folks here picking all from.
We've actually mocked it out and we're backfilling at shortly so now we've.
That's coming got has been through the mail, we're working through our versus what we have stopes.
And what is your cash as to when you will have other high grade.
So that you're able to take or problem into your mix.
Well no gassing, but we always have.
Hi, grade stopes, and low grade stopes coming online and then we blend them. So it's constant we're looking to open up the mine still and get out to where we have even more higher grade reserves out to the west the Bruce Jack fault and down below at depth, but we still mine high grade stopes as we move along through the through the quarter. It's just the proportion.
Got it thank you very much.
The next question comes from Heiko delay of H.C. Wainwright. Please go ahead.
Hey, Thanks for taking my questions.
And building on a nicole's question a little bit can you just guestimate the cash costs for July August September and also for October I mean, it's the last day of October So I assume yes, some sort of idea I'm not looking for a scientific answer I'm just looking for a guesstimate.
And if you can't disclose it should we just extrapolate the midpoint of guidance with the prior admit talk midpoint Taco Q1 in Q2, and then that sort of our answer.
Well, we heigl.
We've sort of giving you the the whole numbers spending on that AI as C.
This chart that we showed in the presentation, so you'll see that.
No we've got the range of 314 and 323 easily.
You can take the mid range as the best estimate at this point in time.
Okay. So the extra extrapolation works, but the you're not willing to go into more detail is that there's a fair answer.
Well.
Oh, you know as we can give you a guesstimate.
[laughter], Okay fair enough.
And then just Philip philosophically in the mean under saying that the stock is right now back to where it was in July has anything changed in regards to your plans for your balance sheet. I mean, you paid back a decent chunk at debts and I think you're doing a great job taking care of your balance sheet, but I mean, just just is it fair to say that nothing has changed.
In regards to the balance sheet management.
Yes, I'd say, that's a good way to sum it up we're generating a lot of cash flow will continue to generate a lot of cash flow more Kenneth continue to pay down our debt.
Excellent well thank you guys.
Yeah. Thanks. Thanks.
The next question comes from Kevin Mckenzie of Canaccord Genuity. Please go ahead.
Good morning few quick questions here, so as we looked at Q4 it sounds like the the one a high grade so which has been access now.
Has been mind, what's impacting the grades in hours projected grades Inc. In Q4 is is this hung stope or is it more of this.
Stope design optimization or is it sequencing.
What does it look like in Q4.
It's like you say, it's still design optimization, we need.
Good stope inventory to be able to start optimizing our grade using our grade control program, we don't have that inventory and so what we're doing as we're just taking every stope that gets done at opened up and drilled off we start mining at as long as its above our cut off.
Okay, Great and then the other question had was with regards to the long that you know tests toll mining that was done any ideal what the total tons to date have been mind in that program.
Oh Jeez, it's between 15 20, Chris 15% to 20% of art tonnage over the course of the first nine months somewhere in that range.
Great. Thanks, Thats all for me.
Okay. Thanks, guys.
Thank you. This concludes the question answer session I would like to turn the conference back over to Mr. ops, Nick for any closing remarks.
Oh, thanks, everyone for dialing in to our call. This morning.
Appreciate all your comments and questions.
Have a have a good looking ahead have a good weekend. Thanks, everyone Bye bye.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.