Q3 2019 Earnings Call
Greetings and welcome to the sudden tell that gold at 2019 third quarter results conference call and webcast. During the presentation. All participants will be no listen only mode. Afterwards, we will conduct a question did not yourself.
And at that time, if you have a question piece, but the one probably about a four on your telephone if at any time during the conference you need to each an operator, Please press star zero.
As a reminder, this conference is being recorded Wednesday October Thirtyth 2019, I would now like to turn the conference over to John Pearson, Vice President Investor Relations. Please go ahead.
Thank you Kelly I'd like to welcome everyone to Centerra Gold's 2019 third quarter conference call.
Summary, slide.
Our available on comparable web site.
Which will accompany each speaker's remarks on today's call is open to all members of the investment community and media and following the formal remarks. The operator, we'll give the instructions for asking a question and then we will open the phone line to question [laughter]. Please note that all figures are in U.S. dollars unless.
Otherwise noted.
Joining me on the call today, It's Scott Perry, President and Chief Executive Officer, There and Millman, Chief Financial Officer, and use a frame and our general counsel.
Gord read our chief operating officer isn't able to join US today, but Scott will address any operational question.
I'd like to a caution everyone that certain statements made on this call today, maybe forward looking statements and as such our subject to known and unknown risks, which may cause actual results to differ from those expressed or implied also certain measures we will discuss today our non-GAAP .
Measures and I refer you to our description of non-GAAP measures in the combined news release and Mdna for more detailed discussion of the material assumptions risks and uncertainties. Please refer to our news release and Mdna issued this morning before the market opened along with our unaudited financial.
And that the note.
And our other filings, which are all can be found on SEDAR and the company's website. So now I'll turn the call over to Scott.
Thank you John and good morning, everyone and thank you for joining our call I'm just referencing slide five at the accompanying presentation deck that John mentioned is available on our website.
Just some of the key highlights during the quarter in other ways, we'd like to settle for safety. During the Q3 period, we had a number of safety milestones. This and Terra you can see some of those listed here are the offset property in the Mt. Milligan property, we achieved 1 million hours of lost time incident free operation I come to a very significant milestone once we achieve one year of last time.
And then free operations letting that includes all of our employees and contractors and then lastly, then daqo. We've now achieved six years without a lost time injury. He's a significant milestones I want to commend all our employees and management Oh careful about employees and management and we continue to demonstrate what milestones like these that we can operate in an environment of zero.
What are the key catalyst during the quarter was that we closed the strategic agreement the government Pakistan. So they all encompassing dispute resolution agreement that really paves the way for Uh Huh.
Much improved operating environment moving forward or this is a significant catalyst I'm pleased to close this and you would've seen that weve no with the settlement payments and what have you that's being reflected enough financial statement as well as our county.
With regards to accept a upset continues to advance very well I can see here in the third bullet point Manila, 79% completion, we estimate that we need to be at 85% completions that goal and we continue to reaffirm guidance that we're expecting up that's gold production in January 2020 them very important asset for us and terror in terms of <unk>.
Gross strategy moving forward as they make their way into 2020, it'll be a third operating assets, we expect it to be a low cost quartile. That's it that's been a very favorably complement what is already an existing low cost part faults and Tara.
The operational results the full bullet point here is very strong quarter. We produced 206000 ounces of gold and 21.2 million pounds of copper local operations are generating strong that metal output than the previous Q2 period, given that strong productivity level seen in the following bullet point quarter spot.
And with a correspondent in a low all in sustaining costs a cost of production from some of the on all in sustaining costs metric during the quarter was $666 per ounce. That's obviously made for a very high margin. Obviously this problem production you see that's resonating some of that accounting earnings and free cash flow results.
Second bullet point, just with regards Matt no again.
I would have seen enough financial statements that would reduce the carrying value of Mt. Milligan to 523 million Boes U.S. following an impairment charge of $231 million, just a little bit of color here during the quarter. When now another sort of annual budgeting in life of mine planning cycle during the quarter, we visited all outside as part of that planning process.
On a positive note I want to know that the preliminary budgets in 2020 validated management's expectations. This winter is well positioned to move into a high free cash flow generation period of Golar operations expected to produce meaningful cash, but I think we've demonstrated that today, but mount Milligan income tollway collectively operations.
Generated adjusted free cash flow up $249 million U.S., so you'd say period.
However, as part of that budget planning process at the Mt. Milligan mine the preliminary budget, while still generating meaningful cash fund 2020. It does indicate that the unitary cost to operate the mine will continue at similar levels that we've experienced here in 2019.
Under accounting standards. This new information triggered an impairment assessment to be performed on the Mt. Milligan mine.
The financial assessment performed by up on a same resulted in the recording of an impairment of $231 million U.S., reducing the carrying value of the Mt Milligan property to $523 million U.S.
Darren Millman out Chief financial Officer, who will get into a bit more detail once we move into the financial highlights.
You can see a in terms of the earnings result here on slide five.
We reported a net loss following that impairment adjustment of $165 million U.S.. If we in terms of our adjusted earnings whereby we are adjusting out the impairment as well as the an aspect of the cookies Republic settlements see reporting adjusted earnings of 75 million owes us or 26 cents per share.
Some of the cash flow performance of the company you can see that illustrate here in the two bullet points on a company wide basis, we reported adjusted free cash flow $10 million, which includes 42 million $42 million of adjusted free cash flow from comfortable and a positive 31, new windows the pulp in free cash flow from Mt. Milligan during the quarter.
The result in terms of treasury position that balance sheet see here in the second last bullet point reported cash reserves at $81 million U.S. and total liquidity of $655 million Us I think it's important to note that this is a strong liquidity position. So when you take this into account with the profitable production that we're expecting for Mapthree operations as we move it move into.
2020, we think's and Terry can always advocate. This is a a fully funded internal business plan.
Just on the last bullet point, just given the very strong operating momentum that we think continuing to see over the years you today period at comfortable because actually increase that gold production guidance by 3% on on the midpoint and you can see would now guiding for gold production.
748000 ounces and since the midpoint of the increase range.
Sitting on the next slide on slide six just in terms of some of the key financial highlights.
You can see what a chartering a top left the typical sort of waterfall chart. We would just looking to graphically illustrated companywide cash flow statement you can see the first green increment here. This is the positive free cash flow on adjusted basis that we've generated from come torn Mount Milligan for the it's a period, it's significant $249 million U.S. and then as you look.
The the Red decrements to the right I see how that cash flow has been deployed within the business. So what some of the key items Tonight is in the yesterday period, we've paid down $90 million with debt on our revolving line of credit facility this facility or as being paid down to zero that remains entirely a volatile to the company moving forward and that's what really.
On the Tim that strong liquidity from a balance sheet perspective.
As I mentioned earlier during the quarter we.
Closed the strategic agreement to the government Acos, then I'm terms the payments associated with that agreement that was $63 million.
Going payment during the quarter and just lastly, you can see in terms offset this is that project in Turkey, which were continuing to advance assess golkar in January just in terms of some of the capital cost funding requirements that represented $58 million us during the quarter.
Spoken to liquidity in the top right here just in terms of this range.
We've got the entire corporate credit facility evolved to the company as well as cash reserves are now and construction facility on the OXXO purchase in Turkey, and essentially there is that total liquidity of 655 million helps us.
And the bottom left is what you Michael a debt continuity chart you can see in terms of the gross debt outstanding which is illustrated by the Red column shot.
The remaining balance of materiality is really the drawn balance on the offset construction facility. Just lastly in the bottom right is out publicly retained earnings profile in terms of the column charts here. The segment illustrated in Blue I think we're continuing to demonstrate that year over year.
Notwithstanding the prevailing gold price environment, and where we might be in that cycle. We continue to generate positive after tax earnings I think that's really reflects the quality asset base.
And the low cost profile the high margin that too.
Just maybe over the next slide on slide seven.
Just a environmental social governance update for the quarter and see some of the bullet points here in the lips spoken to some of the key safety milestones. We've had very good momentum. This year very good track record in terms of safety.
Comes out all injury frequency rate.
Year to date period, Rat 0.28, which corresponds with 0.47 in the prior year corresponding period, you'll see that illustrated in the chart.
Bottom right hand corner on.
On the third bullet point here, just in terms about social license and ensuring continuous business operations and that we've had I been continuously operating if you will for consecutive 75 month period.
Thats an excellent results the company focal point, just in terms of being responsible miners and.
Brian Middle stood again, we had no reportable environmental incidents during the quarter.
I'm asked which is the opposite protect in Turkey during the quarter, we completed a audit.
Which demonstrated full compliance with the European Bank for reconstruction and development as well as the International Finance Corporation quite a principles.
Clean on it and we were pleased to see that second last bullet point here. Some of you may be aware that the world Gold Council recently rolled out we'll introduce they're responsible goal money principles centera as a member of the Wilco counseling and the signatory. So the response will go money principles, we actually put forward, we actually had come to the pilot.
Project. These responsible gum coal mining principles and we completed a soft audit during the quarter and we're pleased to see that there was no magic on non compliance is identified and then just lastly.
During the quarter, we commenced a environmental social governance issues assessment. This is a key part of that 2020 sustainability strategy and reporting process and really the objective of this was to help as identify and prioritize the most important environmental social governance issues as some terribly focusing on moving forward.
Speaking on slide eight thats on offset our construction projects in Turkey.
In your remarks, we as a management team, we're very excited to transition into 2020, because that will be increasingly showcasing a portfolio three lower cost quartile.
Profitable positive free cash flow operation I think obviously, it's going to be a key component of that strategy. Moving forward is key in terms of that diversification and what we're really pleased about is to see the progress that we've been demonstrating this year.
Thanks, very well positioned to be delivered under budget and on time and seven in terms of first gold production, which we've reaffirmed today, we're expecting in January 2020.
I can see some of the key infrastructure installations.
One of the key thing I would highlight probably of the the middle image for quite a tougher.
Pit mining is well underway as of today with now mind, just up to 600000 tons of all which weve stockpiled and is available on ready for crushing and processing as and when we get ready to shortly commission the hot commissioning the the infrastructure.
With that sort of some introductory remarks, and im not going to pass the call. If it's a darn known and out Chief Financial Officer.
Thanks, Scott and good morning, everyone for those on the call I'll be speaking to slide 10.
During the quarter Centera recorded 380, I mean in revenue. This consisted of 297 needs in gold sales 41 million from copper concentrate sales and 50 million per member lived in a business units to 50% consolidated revenue increased compared to the prior year period, we driven by 34% more.
Ounces sold 160000 ounces were sold at comfortable at 34% increase and at Mt. Milligan. There was 55935 ounce of gold so a 19% increase and 21.9 million pounds of copper, so representing a 61% increase compared to the prior period.
These increases driven by 34% in more tonnes processed during the quarter with 19% high higher copper head grades process offset by 35% decrease in go head grades process.
The key to the strong financial numbers with the consistent operational performance at Mt. Milligans during the quarter with mill throughput averaging in excess of 55000 tons per calendar day and in excess of 60000 tons per operating day. The molybdenum business unit also had a 12% increase in molybdenum sales.
Consolidated cash provided by operations was 31.9 need.
Adjusted consolidated cash provided by operating cash flow was 95 million, 50% to 152% increase in comparison to the prior year after adjusting for the Cheggs Republic settlement payment.
During the quarter Cogenerate 74 million in adjusted cash flow from operations with Mount Milligan generating 37 million in cash.
Net loss of 165 million was recorded in the quarter. This includes to 231 median payment recorded an additional 10 million cost recorded associated with Craig is for public settlement.
Adjusting for the impairment any additional pegs Republic settlement. The adjusted earnings for the period was 75 mean for 26 cents per share.
So little bit more detail around the impairment.
As mentioned by Scott to preliminary budget were presented in late September Mount Milligan team, indicating.
Independent costs will continue at current levels in the new to.
Specifically related to water sourcing mill maintenance and labor.
The budgeting process looked initially at the periods 2020 to 2022 also suggesting lower gold recoveries were expected based on read at recent data analysis to be clear there was not a cost escalation from current levels simply indicating existing cost levels. We continue at similar levels.
Yes.
The impairment analysis was a financial analysis required on the accounting standards. It was not a detailed technical analysis and we used to best available information to us relying on the existing cost audits and limited technical information.
The assessment in effect has removed marginal ounces from the loss of mine plant under these financial analysis.
Client different cost assumptions in this case at current levels and financial assumptions, we delivered a fair value range in which we recorded impairment charge.
In addition to cost inputs. This assessment is based on key financial assumptions. The company used a gold price of 13 15, the short term and 1300 in the long term.
A couple of price range of $2 60 to $2 80 per pound in the short term at long term, but $3 per pound.
A discount right up 8% and an NAV multiple of 1.13 after taking into account the underlying.
The fact that we've done a financial analysis at this point in time as opposed to a technical analysis.
A changing any of these assumptions will have a material impact on the value prescribed to the Mt. Milligan mine.
As this is a financial analysis as opposed to a technical analysis. We concluded these processing conventions where appropriate.
And at similar levels to the 2018 publish reserves used question Tara.
The final outcome was to decrease to carrying value in the financial statements from 753 million to 523 million, 30% write down in value.
As a result this assessment the company has begun a comprehensive technical review of the Mt Milligan mine.
The objective of publishing and updated.
The three one or one technical report in the coming months.
It should include ongoing studies to optimize optimize the economics of the mine and incorporate the results.
Drilling program undertaken in 2019.
Based upon the work performed in connection with the Hammett test the company's expectation that Mt. Milligans mineral reserves and resources will be materially reduce to be clear. The model used for impairment test is not a 43, one on one technical report and it does not include the associate detailed engineering, Rob its management.
Best estimates at this point in time.
These specific purpose.
Just moving over to slide 11.
On a more positive note. We have favorably result, revised controller sales guidance up to 610000 ounces gold sold and on a consolidated level. We're now going to a range of 745 to 785000 ounces of gold to be sold for the year.
We are reaffirming Mount Milligan production guidance with up to 175 ounce of gold.
Targeted to be reduced and so.
While we increased gold production.
The gold production that got it come to up to 590 590 590.
509000 ounces of gold.
Since our year to date has produced 588802 ounces of gold 452000 ounces contour and 137 cents thousand ounce of gold at Mt. Milligan.
In Q4 2019, both mines have scheduled maintenance plant, which we have incorporated into our guidance numbers.
From a cost perspective, Centera has had another strong quarter recording an all in sustaining costs of $660 per ounce contour recording an all in sustaining costs of $626 per ounce, whilst Mount Milligan recording an all in sustaining costs of $557 per ounce.
As mentioned earlier during the during the during the quarter Mount Milligan throughput averaged an excess of 55000 tonne per calendar day and in excess of 60000 tons per operating day.
During the quarter Santerre recorded 32, Muni cash provided by operations or 11 cents per share and adjusting for the 63 million dose settlement payment adjusted cash provided by operations was 95 million of 32 cents per share.
During the during the quarter. The company was up to use cash reserves and cash flow from a contour on that Milligan mines to pay the come towards settlement with no increase in debt recorded on the quarter.
With that I'll pass it back to Scott.
Okay. Thank you Darren.
It's going to move on to slide 13, just wanted to touch on.
Items for the full year.
Slide on slide 13 were largely speaking to production and all in sustaining costs. One of the favorable highlights that I mentioned was the increase in production guidance are comfortable you can see that illustrated in the second round table as we mentioned of NAV increased guidance.
Control by approximately 3% on the midpoint are now guiding for production as high as 590000 ounces.
Calendar year 2019, so obviously really reflect the very strong operating momentum Sina control and we always obviously expecting that continue in terms of all in sustaining cost guidance in the middle section this table.
Reaffirming that the company wide guidance of 713 to $743 for out continues to be expected.
For the full year I.
Let's move on to slide 14, just in terms of capital expenditure guidance.
You can see here on the company wide basis Weve.
Reduced.
Gross capital guidance by 15 million as illustrated in the Middle section of the table are now guiding for growth capital of $160 million us.
This is primarily attributable to lower capital expenditures offset.
What that Intel's as we've identified certain construction activity that won't be required. This shift in terms of positioning the operation for fiscal so some of those capital items going to carry over into 2020 now the key items on highlight is the capitalized stripping guidance that come to see averages that by $15 million you at this is a so.
This decrease is.
Associated with just re sequencing and re phasing in terms of the mine the mine operations.
Moving on to my last slide on Slide 15.
Just kind of wrap up.
Presentation and prepared remarks, if you will.
Illustrating here as the world industry cost to the all in sustaining cost metric and I think as the something that differentiates and Terra Centerra Gold's in the company wide basis I think it shows we are low cost producer, we do have a high margin as illustrated this chubb companies portfolio, it's a lower cost portal portfolios things as well.
I was going to position the company well in terms ongoing profitability and positive free cash flow generation and as I've mentioned number tons. What we're really excited about as offset which is out project in Turkey. There on the lift we're getting ready to pour out the first gold production here in January this is positioned to potentially be lowest cost producing asset it's going to.
Very favorably underpin a growing diversified portfolio as we make our way into 2020 are expecting in a meaningful cash flow generation from us in tears asset base moving forward.
With that operator.
To pass the call over to you and we can move into the question answer session. Please.
Thank you Sir if you like to Register next question. Please press the one followed by the for your telephone you will hear Wesley told prop technology request. If your question has been answered you would like to withdraw your registration. Please press. The one followed by this maybe once again, it's a one for if you will like to register for all question.
First question comes from Fahad Tariq with Credit Suisse. You May proceed with your question.
Hi, good morning, Thanks for taking my question.
On the Mt. Milligan impairment can you talk a bit about.
Maybe just but unit costs aside for a second can you talk about the throughput and why there's expectations for lower mill throughput because it sounds like at least for this past few quarters.
Water availability was getting better throughput was trending higher.
Q3 about 55000 tonnes per day.
Just trying to get a sense of what is the difference between the trend we're seeing now in throughput versus what your what's being described in the short to medium term as maybe lower or challenge throughput things.
Okay. Thank you for your question.
For the last six months I think we've been we've demonstrated that we've been operating the Mt. Milligan mill facility at approximately 55000 tonnes per day or better and issue. If you. If you to go back to last year Thats kind of what we were guiding that we would like the investment community Nanoss community to be assuming some mount Milligan on a go forward basis and our rationale for that was in the POS we have no.
Being able to demonstrate that we can operate the mill consistently at 60000 tons per calendar day, and so what we've always been putting forward is the guidance is at 55000 tons the calendar day and with continuous improvement in the passing of time, we will look to ratchet it up but thats not a focus or an objective for 2019.
If you look at Q2 Q3, Q3 was very good quarter in terms of mill throughput productivity. We averaged just under 56000 tonne per calendar day on an operating day basis, we were operating at 60000.
Right.
The reality is if we look at our budgeting process than what we're expecting for next year, we're expecting a similar level of mill productivity terms, what we saw here in Q3 period and the reality is when you look at our past life of mine expectations that level of mill productivity is lower than what we have been expecting previously and you can imagine that together with the high.
Unitary cost that were seeing him and on a short to medium term basis.
What really resulted in us conducting that that impairment assessment.
Our next question comes from Dalton Pro Rata with Canaccord Genuity you May proceed your question.
Hey, good morning, guys. So back on Milligan here no surprise.
It sounds like you would expect a unit cost to come down in recoveries to go up.
What's changed going forward.
I think the big focus at Mt. Milligan This year has been on throughput.
We've added a lot of resources in terms of addressing that particularly in terms of human resources.
The mill itself in terms of maintenance has been a big focus on mechanical availability at in terms that objective has been successful. We've now demonstrated that were largely achieving the mechanical availability that we were hoping to achieve and obviously you see that in terms of the throughput productivity results that we've been operating out here.
Over the last two quarters.
Consistently demonstrating that we can operate the mill now in excess of 65000 tons per calendar day, sometimes adding those results as it's been successful, but obviously when you add those resources that comes with higher costs and the focus for US moving forward now looking to optimize the unitary cost at Mt. Milligan.
Darren and I mentioned now opening remarks, we're now budget planning process right now and when we look at what the indicative budgeted for next year, we're not expecting to see a reduction in those current unitary cost moving forward here on a short to medium term basis.
Again.
That being the case that caused us to reflect on what is the life of mine profile versus our previous.
Lots of my expectations.
Talking about human resources here, there's also ancillary increasing cost in terms of our water sourcing costs.
But that would be to the to the key items that were seeing that driving those those high unitary cost again I want to just reiterate as Darren mentioned, we're not expecting an escalation in the current cost structure, but the current cost structure moving forward that is higher than what we were previously expected sometimes what.
On expectations mine continues to be profitable thing, we demonstrated that here in Q3.
The low all in sustaining cost of $557 Brown mine to generate $31.3 million, a positive free cash flow, but in reality that level of profitability and sort of cash flow generation that is lower than what we were expecting on a lifetime basis.
Understood and then if I can just touch on something Darren mentioned in his prepared remarks. So this statement you've made around a material decrease in reserves and resources. That's based on the impairment tests that you did as you guys actually engine reengineer the life of mine plan and optimized.
Could we see a reasonable probability that the actual reduction could be far better than what the impairment test suggests.
I think maybe up maybe I should take that question Dalton.
Darren did reiterate a number of times that this is we have not per pad a comprehensive technical Lamont assessment as an a 43 one to one that is something that is currently underway and one of the keeping tonight. The Darren mentioned is that as part of doing that comprehensive technical study, we will be looking to incorporate.
A lot of the drilling program, that's being carried out into the investment that would be making here. This year at Mt. Milligan. So we will be looking to incorporate that also we will also be looking to incorporate a number of.
No opportunities in terms of value add opportunities looking at optimizing the mine plan as best possible. None none of those items that I just mentioned have actually been reflected in the accounting impairment evaluation that said that featured in these financial statement.
Right, so that it could actually come in a bit better.
All right, but I can't I can add that all I can say is that there is a number of value add opportunities there will be looking to incorporate.
As well as we looking to incorporate initiatives drilling program.
Okay, great and maybe I can just throwing out on couture there.
Your mill had great year to date, Martin said considerably above what you find so far.
How long do you expect that to continue can you talk a little bit about the stockpiles that are making up that difference and when do you expect that to reverse.
Yes, that's definitely being a contributing factor to the strong production that you've seen it comes on this year and we saw that last year as well whereby the the head grades will the grades were presenting to the mill and has been reconciling favorably to the underlying block model, which is a sense obviously the the reserve.
We've seen that take place for the last nine months.
But it's hard for me to represents you that's going that's indicative of the go forward I can make that representation, but that has been.
A lot of positive grade reconciliation and where we see that simply typically on the higher grade will the medium grade.
All classifications that we're presenting to the mill as we've mentioned now.
Mdna now right up we're into the high grade ore associated with COVID-19, essentially.
One month earlier than what we originally projecting and that's obviously, what's underpinning the strong production that you're seeing that at control.
Okay, great. Thanks, guys. That's all for me.
Our next question comes from Bryce Adams with CBC you May proceed with your question.
Hi, good morning got it thanks.
Just on the water update from Mt Milligan.
We go back to Q2.
The water was flagged as a potential risk for.
One ball mill coming offline in Q1, it looks like its corrected here with the Q3 reporting.
What's changed relative to Q2 is that just simply the rainy period in July and August .
Can you talk to.
How much how much rain was received compared to the usual run that.
Yep.
Thanks and question Brian .
Yes, so as we mentioned in now Mdna now disclosure.
The month of July and August has been it's been very wet and rainy months and we've actually received a lot more precipitation rainfall than what we were originally expecting and now water projection model from some three three months ago.
Thanks, Ironically, its actually continuing here in the month of October month today. The guides are estimating that we've received three times as much rain for what we Wouldnt historically expect from a seasonality inspected.
Thats been a very welcome Boon for US. That's that's that's really helped us out right now occurring around 1.2 1.3 million sorry, let me rephrase that recurring up to 1.3 cubic.
Sorry, 1.3 million cubic meters of water intensive water that on surface and the significance of that is this time last year, we had less than half of that amount of water inventory. So just that alone puts us in a quite a robust position moving forward, but I think the other thing we we spoke about as we've had a lot of successes.
Ground water drilling program.
Programs being successful in we've identified a number of sort of ground water sources, all underground water acro file.
We're going to look to tap into and commission that have very good flow rates and we're actually.
In sort of the very advanced stages right now of permitting those ground water sources, and then looking to making sure that the the infrastructure in place and looking to commission those and we're hopeful that we'll have those commissioned here in Q4, so the heavy rainfall together with the success on the ground water. So.
Losses. This obviously puts us in a much better position in terms of out.
Water inventory that will be carrying into the Q1 of 2020 and I think in terms of management's best that.
Best estimates.
We think now that our previous disclosure, where we were flagging that it could be a production risk in Q1, we're not seeing that anymore.
That's reflective as well in terms of out budgeting and planning processes underway right now.
No going obviously, we spoke to it earlier that preparing their budgets for next year and as anyone budgets and our that we're currently working on and that is Mount Milligan operating at full capacity, which again the targeted 55000 tons per calendar day for the entire calendar year.
Got it sounds like a bit of continues its unfortunate being overshadowed by the impairment.
Correct on the impairment.
Lower than expected gold recoveries as Billy mentioned, a couple of times, 67% for the quarter 66 grew to 70% Q1.
Can I ask what was the expectation how much lower this and what your expectation was.
I don't have the numbers in front of me, but from memory I think it's approximately 200 basis points, a 2%, but I'd like to validate that we view.
Up to the coal, but again as part of this assessment that we're doing on the.
The carrying value of Mt. Milligan, one of the things we didn't do as we looked at a sort of.
A recovery regression analysis and as you can appreciate as different all classifications on different lithology in terms of the the reserves and the results of that Mount Milligan and each different mythology has different metallurgical characteristics and together that recovery regression analysis.
We had to make projections moving forward over the life of mine period, and I think as myself and Darren has spoken to by and large moved doing that carrying value assessment, we pretty much took out current unitary cost structure as well as our current experience with the goal recovery efficiency right and that's largely what weve modeled moving forward.
Thanks, John mentioned.
The 2020 to 2022 period.
Modeling lower recoveries in that period was in one of the drivers for the impairment.
The expected recoveries. So those three years would be in line with the current results 60, 667% you would carry those that for the next three years.
A cause we can't get that specific.
For us because again it depends on what is the composition of the mills eight in terms of the different apologies, but generally speaking when we run a recovery regression analysis could looking at our past experience, we have recovery efficiency right and Thats what were modeling on a go forward basis, but obviously, what when noting here is that overall level of gold recovery.
Free is lower than our previous expectations.
Okay.
The recoveries I will vary with the ore types and.
Would it be linked.
The head grade as well how the home.
Does to move together.
There is a correlation there as well yes.
This chapter in the impairments section called beyond lots of mine.
Included value for.
And then not currently resources.
Outside of.
Good morning plan, how material or those ounces to the overall.
Test in the in the in the valuation.
Yes.
Yes.
Just trying to im trying to think about the definition of material, but I would say they definitely play a role in terms of contributing to the underlying underlying carrying value.
That we've assessed but I would put forward that the predominant all the inordinate amount of the $530 million carrying value is associated with the the reserves that we are modeling and a lot from on portfolio moving forward. So they play a contributing Roe but.
No not a role of significance if you will.
Okay.
Well those ounces would they be subject to the NAV multiplier as well or would they get through at a one times multiple.
No thats subject to the net multiplier as well.
With regards to the capital expenditure estimates if you get a chance just pulled down our investor relations presentation deck that we usually use on sort of ordinary routine marketing, but in terms of commit.
Going sort of organic growth considerations as well as ongoing sort of diversification opportunities to the company.
As you would have heard in my representations, we think that project is proceeding and advancing very well.
Like that project to be under budget and delivered on time in terms of we're expecting so scope reduction here in a little less than three month, it's going to make for a fantastic 2020 in terms of showcasing a more diversified growing portfolio.
In terms of the market's focus on car versus future.
And just I'm not in a position to answer that.
Obviously with today's results and I think it's a great set of results operationally in see both mines the performing very strong in terms of generating more production what they did in the prior quarter.
Did it at a lower cost.
Both mines of profitable again, we generated.
Positive free cash flow on an adjusted basis.
I think operationally as a very good quarter, but obviously this reduction in the carrying value at Mt. Milligan that was something that was not expected and I think you can see the machinations that's having in terms of today's results.
Thank you.
Our next question comes from Brian Macarthur with Raymond James You May proceed with your question.
Hi, good morning, So I want to go back to embrace this point again, Jeff. So if I understand this correctly you've got to 1.13 multiplier on your end Abbey. So really the Navy you have for the assets now is like whatever 462 million not 520.
3 million is that correct.
Your math would be correct, yes.
So was there a multiplier on the value before you wrote this down as well what I'm getting no I'm kind of margin or at some not so interest multiple them trying to figure out the actual real delta in value that you're implying was there a 1.1 300 that previous value as well.
No one in there's like a bigger delta here.
The previous valuation, which was underpinned by our purchase price accounting when we did the Thompson Creek acquisition back in October 2016, we are utilizing a multiple of one.
Just looking at Darren CFO I believe that would mean disclosure on that back in most likely the Q4 2016 financial statement.
Yes.
And would there have been a.
Like.
As Brian you brought up the extra ounces that aren't in the NPV was there another value there for.
Ounces that weren't any any being that 752 or is that over and above as well.
No I think that was.
Some additional value for resources that were not being modeled in the life of mine plan back then but Brian please.
Pull up those financial statements and just how to look at that disclosure I don't have that in front me right now so largely going from memory, but this should be some good disclosure on the.
Yes, no and I'm not trying impression I totally understand this is not a technical study I'm just really trying to figure what the real Delta is from where we were.
Where we are now from where we are before maybe I'll ask another question too can you talk about.
One of the reasons cost some changes the water costs.
So going forward, we have water for the next three years I assume we assume in the forecast going forward, we have similar water costs going post 2021, now and we're making all these new financial.
For cash.
Yes, once you moved past, what we deem to be the medium term, we do see a decrease in water sourcing costs, yes.
And maybe just a final question on this and it's all kind of trying to just get them and I realize it's still preliminary.
You talked about the timing on chemists and greenstone John's question, maybe being pushed back a little bit is that just.
As any of that related to the factor maybe less free I mean, you're obviously still gonna have very good cash flow in the next two years, but obviously, it's maybe less than what you thought before is that coming into your thinking on the delays of that or is there anything changed in the developing those projects.
No absolutely not that's not what is influencing.
The timing if you will about when you may able to make a construction decision on either of those organic growth opportunities I'm glad you highlighted Brian Mount Milligan continues to generate positive free cash flow I think in the year today period, we've generated $50 million positive free cash flow combined with comfortable.
To generate around $249 million of positive free cash flow. So from a liquidity perspective, we think we're on a very strong position.
The reality when it when it comes to potential timing of green signing commence being considered.
Moving those projects forward.
What we as a management team and our board of directors. We've been just laser eye focused on Turkey. We think it's incredibly important that we deliver that project on time on budget as it is without guiding that we're going to delivered under budget, but we want to ensure that we severance that credibility that the broader than Terra management team can delay.
These projects on time on budget, it's important to establish that credibility in that that confidence if you will which should hopefully translate into the evaluation around mess or greenstein or any other organic growth opportunities within some tara.
So that really is the underlying rationale.
Perfect. Thanks, very much that's very clear.
Thanks.
Mr. Pearson I will now turn the call back over to you. Please continue with your presentation for closing remarks.
Thank you Kelly.
Thank you for your attendance today in the end the questions.
At this point in time, we'll just conclude the conference call. Thank you.
That does conclude the conference call for today. Please. Thank you for your participation and we ask that you. Please disconnect your lines.