Q3 2019 Earnings Call
As a reminder, all participants are in listen only mode and the conference is being recorded.
After the presentation, there will be an opportunity to ask questions to join the question Q You May Press Star then one on your telephone keypad.
Should you need assistance during the conference call you may signal, an operator by pressing star and zero.
I'd now like to turn the conference over to Mic Mcmillan, President and CEO of Detour Gold. Please go ahead.
Thank you and thanks, everyone for joining us here this morning.
Third quarter 2000, unaudited results conference call and a as the Albright assayed will run through the presentation and then we can have a cute I session at the end.
If we look at slot to a bad debt because you know the usual cautionary statements on forward looking information Oh, I believe that to be able to rated Malaysia.
And similarly, the knowledge to investors about no need for its majors old suddenly for people to rated Malaysia.
[noise] intensive a apple just wants to die its myself, the president and say all of the company Jaco crafts out say about.
I believe assisted by Sandy Oh, I head of Investor Relations here.
It's coming onto the the next slide slide five we talk about site D or.
No safety is a reflection of how the business is tracking a it's a reflection of how at workforce is feeling it's a good leading indicator.
63, this year was at best trip on record.
1.17 and year on year that represents a 48% reduction so the graph they sort of showing a rolling.
Reportable right.
The actual a quarterly number was about 1.1 saving so you know we view psyche is critical to a productive workplace.
It's a good leading indicator of employee culture.
The other leading indicator we tend to look at his attrition or employee turnover.
And that's down from.
It's down about 44% year on year. So we were running about 20% per annum last year and we currently sitting at about 11. So again, that's a that's that's a good leading indicator waiting in the right direction on site do you not for a big I've been paid highly productive in harmony North America, we still think there's a bit of work today.
Do but I think its testament to the to the workforce, but saw it.
The we've had such a big reduction year on year.
Going to slide six looking at the <unk>.
Gold production was 100.
Under 138000 ounces.
And obviously a sequentially our quote on quote or that was down from the previous quarter.
And when we did at Q2 earnings call and out then the goal presentation. We were very pleased society to people that we had much better granularity now in terms of what's going to happen in the operations that we knew that we were going to mine through allowed right <unk> portion of the pit and we also I knew that people would be very strong and that's exactly what we're saying sorry, you know we shouldn't.
They were shouldn't be surprised by that time. It was part of the plan. We did say about a 5000 ounce inventory build right at the end of the quota, which actually got pulled right at the start of Q4.
Gold prices, obviously going up so you know average realized gold price was 1436 U.S. dollar.
And all night that every way we talk about dollars in this presentation easy newest dollars unless we specifically noted some tonight.
Cash costs, obviously were very strong south 730, a dollars an ounce and all in sustaining costs were 11 know any item.
No I guess, a you know that was a very good resolving lot of the reduction in ounces produced and also the fact that Q3 is now is that might construction caught up just given the weather up inside and sorry that was a very strong result, a full extensively what will be I wake as quota journey.
You can say the either dike numbers I'll talk about where we are you did idled gold production as of today on the next lot.
But in general it was a pretty strong quarter I think.
If we look at margin.
Are you know people often for sort of forget that they're in business in mining to actually produced a money.
And just like focused very much on how many ounces they producing analysts say you know Greg facts about how many times, they mining and stuff, but at the end of the die we're going to be in business to make them out.
And if you look at that Slide day, we've just had a Q3 is the highest margin on a cashcall spices that the company they have Uh huh.
Are you can say that cumulative cash flow generation on that slide is a you know we've ramped up cash flow generation quite a bit during the course of the year over the last 12 to 15 months.
And again, we've always said that we will run this business.
In orders around it as a business into my cash like the way very focused on margin way very focused on cost.
And so notwithstanding the lower ounces, we had in Q3, we actually had a very good results.
So coming on to slide I guess this is what are the ones that people together.
You know ask questions about going forward I spy disease, given the strong results that were saying so far in Q4, given the plan that we sort of the we knew we were gonna have to deliver on during Q3.
That's given us the confidence to change I gardens range, where we sit six seven weeks out from the end of the.
So the month of October was very strong we actually pull it 60000 ounces, including that in that thought they have announced a inventory build and the like Gol pool with a lot weekly gulp or the end of that month was the biggest California history. The company, it's everything half thousand ounces.
As we sit here today as of end up yesterday.
We produced about 522000 ounces.
And because of the high grades that we're seeing out of the paid one plus brands.
We're actually pouring over 2000 ounces adopt them out.
So that's giving us confidence to bring up the bottom end about Braxton guidance range.
570 to 590000 ounces, we've left the top end of the rise in the same.
We still believe that we will come in some way closer to that top end to the right.
We've also got the confidence now to reduce our all in sustaining costs and cash costs a range. So on the cash cost we brought that down by a $40 an ounce and all the all in sustaining cost we brought that down by $70, an ounce and again, we actually expect the company that towards the battery that I was ranges as well.
Oh.
So I think.
We'd like to take the market has informed as we possibly can.
We have much better granularity as I said earlier.
We feel confident that we can give this a this improved guidance out to the marketplace.
[noise] Guy you want to the operational results how do we arrive at where we arrived that Saudi Rob you know obviously, a grade was lower by mill throughput was how we got 5.6 million tons of all through the mill odd to spot actually having a sizable shot down during the quarter.
The grade as we pass that plan you know, we literally got into the bedded ride material. The last couple of weeks of September of course, you didn't have enough dies in that quarter lift to really say the full benefit of that which has watched heading up now.
Recovery was quite good needs to be it's up year on year I'd game for that as they believe follow the company closely we typically say allow a recovery during the warm up.
Related to water temperature, but actually we haven't really saying that that big drop off in recalibrate, you're in the warmer months out.
That's made a very good result.
Partially due to the few projects capital projects in the mill.
Partially due to better operating practices and possibly due to these blasting. This fragmentation work that's on the why which gives us a more uniform feed into the crashes and therefore, the mill and so our broadseis season is more constant which is better for your meal.
The mining rights with 286000 tonnes per day.
Quite frankly, all I'd like to say, it's more unless I, we continue to more and more than what we need a way of taking a very measured approach in terms of backing off that mining right. If you recall, we popped up a shovel what the in July .
We're seeing very strong block model reconciliation. So again, we don't need to move as many times.
We moved up 26 million tons during the quarter strip ratios full 0.1 to one and again were probably mining it'd be more weiss than what we need at the moment.
Keeping flake occupied.
And we ended the quarter with just under 5 million times on their own stopped Paul sorry.
We're not sure what level and again I would like to you know.
Realize that value that's tied up in that stop all because it's a EUR 100000 ounces sitting in there that we pay most of the gospel I'm not getting the revenue out of.
So reconciliation a year to date roundabout, 21% on ounces relative to what the reserve is telling us that's all through extra tons.
You will now that you know the grade is sort of up and down plus a lot of straight to sandwiches within the realms of accuracy quite frankly.
But lots of extra Toms and what we've seen a is that so we are saying.
Density effect in the resorts way. The there was a flat density use for the resource calculation.
It's probably a bit on the low solid.
We are doing quite a bit more work on that.
We've also got picked up a favorite of all that being slightly lower bright, but still well above caught off right. So it's also were tightening it.
Really the K going forward is to update at resource model and we've got 120000 data coal raise sampling program that historical core underway.
We brought the reverse circulation regain and we're pushing hard to update that resorts biggest because that's the single biggest thing we can do in terms of.
Really amending the mine plan next is understanding what that resources.
It's a great. It's a great result to get an extra 20% answers.
It just makes you'll turn planning a little bit more difficult.
Because we do a plan and then we actually get a lot more time them.
So the said you know why stripping has been accelerated in 29, we do want to back that off.
And we get to say the effective that over the next few years.
So coming on to slide 11.
We've talked from day, one in my tenure about increasing free cash flow when I spoke to investors and and sort of said what are the issues you have with the company.
There was a bit of a delivery issue in terms of lack of delivery in the Pos So I think way where were taking that box.
But also the and Ivy was caught back end loaded and so it's all about delivering free cash flow for for the for the artisan the business.
So this slide incorporates a few previous slides that we put forward about what are we actually doing on that it's a little busy but I'll spend a bit it's all going up.
So if you look at the first law, we've said, we're going to optimize the law in place.
Prioritize castlight rather they ounces.
And reduce their waste stripping by 24, seven accessories and side is a visit the next slide will sort of talk to that so.
Similarly on the bottlenecks, we've had a pretty good look at the operation to see.
How do we actually get more ounces at earlier and increasing the mill throughput is a pretty simple thing on a relative vices.
Contact management, it's probably set aside the though commercial contracts where would not politicial from out of state.
So we are in the process of renegotiating a thought might it's called track them up.
That looks like it will save us U.S. $24 million between now and 2022.
The slides these contracts Bay Reagan renegotiated and they'll be in your slides if supply.
With a significant first nations compounded the net effect for the first on that gives us about 3 million U.S.C. sides.
The commercial team has already negotiated for all of that mill can share levels, and we expect to side of about 4 million U.S. of that.
Per annum as we got to vote.
And on the productivity software hockey unused or are you on the large equipment. So we pop shovel up we would probably POC. Another one off next year I think.
Right I am pleased scopes of work for our contract as a game, it's probably feta side of the we haven't lane Bryant contract management in the Bob.
They say some good results from that we're starting to base my profit shovel availability in utilization.
In fact dispatch system, we're working on.
So in addition to that if you look at all of that that ends up with about 34 million U.S. of savings between now and 2022.
On top of that we previously announced that Weve side around about 4 million U.S. per annum on corporate costs since I started.
So overall I think we're doing a good job and the team's doing a good job in actually looking at what we do saying if there is shape wise to doing smart of wise to do it and try to get out commercial relationships back onto a more normal putting I guess.
So the next slide is a slide 12.
So we we roll this out at the date of the gold presentation, a lot social that everyone's fully across and so we've we've we're going to leave the point here a little bit.
Because of the positive reserve reconciliation and the the mine plan that was Dod last year was based on these Keller cash flows would wait wait looking at discounted cash flows are the white too.
To do a plan because effectively that's what the market uses to value us.
We can still feel the mill and in fact, we can fill the mill at a at a high throughput right.
And reduce about 100 million tons of cumulative Weiss between now and 2022.
And if you look at our cost at say, let's call it straight almost $23 30 Canadian Aton.
You are looking at the base part of $330 million, where the savings that ore mining cost of the deferred.
With the same production profile.
So coming back to the commentary from shareholders and analysts to that but we had no limited free cash flow in the in the need to.
I think we can definitively answer that that is not the case anymore.
Q3 in itself I think answers that Q4 is pretty good as well.
But when they are giving three years' worth of sort of August .
Forecasting what that Weiss move it's gotta look like.
We obviously have done the exercise for the for the for the whole board.
We had the confidence to be able to do this without getting ourselves lifespan of somewhere in the future cheese.
So the next slide.
Teen.
Getting more from a fixed assets. So again, we put this graph out before we bought died at it a little bit.
So again, it's a little BZ, but but those vertical lines, our AD daily mill throughput.
We've got the planned shutdowns all Nancy you can save when we took them the plant down.
The the think Red law I'd is out currency daily.
Limit. So we have a 24 out there that limit of 75000 tonnes a day.
And you can say as you go from left to right in that and if you went back even further to the lifting tell him. It was a lot of a number as well.
On a pretty regular basis. This mill is hitting the 75000 tons of die and there's nothing more frustrating to an operator, the knowing your fixed assets will do more but you have to slow them down because of it doesn't limit.
So we've been doing the work to look at what we should increase that too and the work to model that we're going to apply to we could increase that pivot to 90000 tons to die.
And this mill will probably do in the order of 80 85000 tonnes a day with zero capital projects I read about what the current planted.
There is a bit of work on the wider look it is there a is there a very low capex option to increase that way. He is not completed but we figure 90000 tons of that gives us a little bit of headroom.
So in our minds, we think thats again, not to sort of frame to permitting process.
But 2021 is probably somewhere around about where we think that might be an option for us to stop ramping that mill throughput up.
Finally between now and then we just had two.
We just have top right as best we can you get as many died at 75000 tons with that.
It's all over the next slide slide 14 sized spending what we need to spend.
We are revising had gone down a little bit.
On on the Capex.
And that's a combination all.
Deferring capex, but also not not spending stop if we don't need to spend.
Sam I spend will come in at the bottom end of the guidance range.
You know I think in the POS there's been a view that.
One something got in the budget. They need then you spend it I.
I think the why we look at the businesses will.
Incorporated and the saw it.
Pardon me working closely together to look at do we actually need this in order to deliver these mine plan.
The other advantage of obviously, having a.
Small uptake in the leading schedule.
Is that obviously not known as much game.
We are spreading that are moving schedule out I wrote over a little appear to Todd.
I would have the peaks and troughs.
Which means that you don't need to buy as much flight.
You can actually moved the do it in a more uniform manner, which allows you to.
Hi data on the capital program. Some of these types of the fleet purchasing.
[noise] well I got to the next slot.
Getting more from M. eyeball asset. So this is an area where I'd say were probably at the start of have journey.
Mining costs, our largest cost bucket, obviously, we've got off to the knock on track the explosion is contract.
How does a couple of other contracts thais or the other area way, we've actually renegotiated the tight supply management contract.
And so the biggest opportunities in improving our utilization of the fleet, where you're going to save from the Graffy. So you know, we put up sort of loading tolerant queuing towable Whiting Todd for the truck shovel.
Wait wait might some improvements we're still fall off from based in Clos.
If you look at best in class, the Q tall, it'd be less than half of ALS.
So what does that mean, United the last minute to that truck is sitting they all idling and whiting to get loaded the JV ammonia that right and again and we threw out benchmarking work when we've looked at paid a little are really good and why they much better than us.
This is a key factor the other K factor that we've looked at these does paper with much lower mining cost us typically move a lot more they do it with Roche shovels than the hydraulic shovels.
And we had gradually starting to move that why we do need to really rages ought to be to the pit to really make those rob shovels more efficient.
But that is ripe shovels or some way between.
I said in a quarter of the cost that time, the load relative to the hydraulic shovels. So again, we're going to move we're going to move to a situation, where we moved we'll do it with the ripe shovels.
And that is also taught out without blasting and fragmentation project in the back as Rob shovels are not designed to be dig into that is not properly broken.
And again, if you go back through the history. The company in Ulan Law is why we had a lot of problems or the rug shovels in the stick values and stuff a lot of it can be traced back to.
Actually pull brought blasting practices, we fix that which were well on the wider doing all of a sudden the rock shovels can become a lot more productive.
And then out costs, the top velocity and goes down quite a lot.
So this is more of a sort of a high lot of what we're looking at I wouldn't say, we made a huge improvements yet, but I think over the coming quarters. This is an area where I'm, hoping to be all until tell people that we've actually made some big improvements.
Hi, Guy in the Slide 16 look again this is a bit of historical thing Paypal and looks like to have alluded. This I, we're putting it in there.
Quite frankly.
Less worried about the mining right the Todd to die than I am about the milling right I think thats the critical thing because at the end of the die we.
We have ample order feed mill I want to get more through.
Mining cost gradually starting to come down.
Albeit we are spending that extra money on blasting and fragmentation, which if you go back in the past wasn't really very non.
But I do want to point out the milling cost you'll say they are the milling costs have come down significantly.
And that's a function all.
The blasting effectively is extra costs were spending in mining, but we're not we're saying a big benefit in the milling costs.
I think better maintenance and less breakdowns mean that we're not having to spend a lot of a catch up repays would you realize more expensive.
And we had at the start of the year, a backlog of about 50000 man hours of maintenance items. It in the plant.
As we take that maintenance items off without having to spend the money to do actually catch up anymore. So I think we're probably got another year to catch up once we've caught up that we expect to say milling costs actually continue to come down.
And we expect to see plant availability go up.
[noise] onto the next slide slots everything so low updates or is something that we're now starting to look at.
There is.
There's a large todd age of load ride materials sitting on the make the current pay it's not in the results buys it's not in the locking on plan, it's bulk tonnage <unk> low cost outs.
And.
We know the metallurgy, we know the J take pretty well.
Obviously right next to the mill.
We're seeing looks to be interesting. It is open down plunge there has been a scoping study dot in 20 Irene.
And we will launch into a pre feas study on that in next year as well as doing some drilling on 50 I'd North South.
We've been pretty busy the last six or seven months getting your hands around.
The operation.
Now, we're starting to feel a bit comfort that we've got a runway in front of us and up at a plan.
We're starting to look around say what else we might have around the place and there is this does look fairly interesting to us.
So I look as Jay is something that Paypal quite focused on these days and I think actually we've got a pretty good story to tell him.
We are committed to minimizing our environmental impact we are complying with the judge of England.
The mining and timings of safety initiative, that's on our website, we recycle about 97% of our process water Oh.
I think out environmental teams actually do a very good job with all of asked I held his update.
In terms of that now communities and Paypal, We've got 47 indigenous contracts, which totaled more than 150 million Tonight.
About 21% of at Workforces indigenous.
And in terms of governance, you know we are committed to transparent communication with our stakeholders. So we do have an active board and shareholder engagement process way.
The chair actually goes out and speaks to various shareholders independent of management.
So they can you know they can type deposits without having a filter through management, which I think you the law and the best practice of governance, how these days.
Moving on the next slide I mean, this is album Bloomberg as Jay School, which unfortunately I have an updated 2018, but again you can see coming off a pretty low buys the company has done quite would stop and scores pretty well actually against itself over time, but also on a relative vices against therapies.
So we think we'll start given a bit more information on this hopefully Bloomberg will publish they next they make stopped I, but I think for investors. It's important to know that you know we are focused on on profit.
But we're also pretty heavily focused on that people in anyway issue.
So on the permitting a we've had we've had good progress this year actually the closure plan was updated it was submitted an unapproved after consultation with all of our stakeholders, including all of our first nations partners.
We put surety bonds in place for 94 million Canadian that allow a cost and what we had the previous letters of credit backed by a revolving credit facility.
So that provides increased surety for our stakeholders and increased our liquidity in the process.
Now waste data, obviously has vein you know a topic of discussion to paper, where the company. The company had not submitted the permit application for waste Angel.
We have now submitted that permit application.
We are engaged in consultation with all of the relevant regulatory authorities and with all of our stakeholders, including seven digit as partners and Thats pool of having digit as partners. So we are moving forward on this again all wouldn't prejudge what it is hard line looks like on this.
But I think we are in a very different place away. Historically this company is being in the last year or two.
So it's critical for us to ensure that we maintained our social license we have stepped up how.
Vigilance.
In terms of making sure we we get back on track and without relationships, we maintain that and that explosives contract. I think is is a prime example, where we've gone from a large contract with no theres nations or indigenous component to actually now having an indigenous.
Indigenous component.
So with that I'm going to hand, I wish I must say if I would he can he can talk about the financial numbers.
Thank you make.
The 59.8 million of earnings from mine operations and represents a record for us sort of a quota which is obviously underpinned by the record margin.
Our 49% on a cash cost basis.
The net loss of 12.6 million I will address in the next slide that many relates to them payment of about 20.3 million.
Upon review of the contract that mainly relates to you the maintenance about 79, five trucks and we realized that the actual components, where we're entitled to.
You know for replacement that was historically estimated AAM is a lot lower and therefore, we had to take the write down.
This has no impact on our future cash flow and as we are in the prices in order to renegotiate this contract and you saw the future benefits early on slide 11.
We've also updated the closure plan and after consultation with face nations and government and most of this rehabilitation will happen post the closure of the mine, which means that we can claim any of the tax that is.
Associated with a deduction on on those expenses, which is that the next adjustment that we now.
For the endings reconciliation and again you can see despite the increase sales prices with outperformed on controllable and despite slightly lower production, we generated about 16 million of earnings from cost reductions relative to Q3 2018.
On the cost reductions, we continue to optimize refinery selection and in Q3 and to reduce our working capital cycle. We ended up with any 59 ounces.
Our final inventory I'm at the end of.
Q3, which is obviously increased our cash flow quite a lot as well.
Although we increased about 3 million in high mining cost it was more than offset by 6 million in associate the savings on in the mode.
All in sustaining cost is also coming down is a combination of lower cash costs and the revised guidance on capex spend due to the deferral and cancellations.
Yes, I liking again that the large component of our all in sustaining costs. It relates to the Pmnine between 19, and 2020, and we see that reduced the about $25 an ounce by the end of 2022.
Again strong cash generation in Q3, we generate about 37 million a free cash flow and made cash now 40 40.5 million and our operating cash flow per share of 50 cents compared to 47 cents, we'll keep 328 team.
The net cash balance as of today is about 65 million, which subject to timing of payables, but its indicating that this balance is still going up.
On the financial risk management, and just highlighting that we've got detailed disclosure on all of our hedges in on pages 1920, and 21 in the end DNA.
I just want to point out as well that we did not add any hedges since early July 29 team.
About half of our goal. They just for 2020 is in Canadian dollars and it's got an implied call strike price about $1500 per ounce U.S.U.S.
All right well thanks for that just before I hand over for Q and I know in terms of closing comments.
But were focused on delivering shareholder returns.
We want to continue to deliver safety improvements and have safe production.
I think I think Q3 is probably a pretty good example of that.
Speaker 1: No.
It's important for us to deliver on what we say, we'll do you know for indigenous partners as shareholders, then and now employees.
We want to optimize near term cash flow through that non plant optimization exercise and have a laser like focused on costs.
We want to foster a continuous improvement culture, we want to reward the right behavior, which I guess traditionally possibly hasn't been the case here the company.
We would like to say people do the right thing and we want to reward the people when they do the right thing.
With that I'm happy to handed out of a secure night.
Thank you.
Now begin the question and answer session to join the question Q You May Press Star then one on your telephone keypad.
We'll hear tone acknowledging your request.
You are using a speakerphone please pick up your handset before pressing any keys.
To withdraw your question. Please press Star then to once again. Please press Star then one to join the question queue at this time.
Our first question comes from Mike Parkin National Bank.
Hi, guys. Thanks for taking my questions and congrats on the good quarter.
Look certainly looks encouraging.
Most my questions Kinda center around that a with a permit to push the mill a daily limit up to 90000 tons per day.
Give us a bit of color in terms of timing on nine and is that a provincial or federal permits that you're looking to men.
But that will they have provincial one again, you know you don't want a pretty judge how long a process might take.
We've been working on it for a while so we've had to do the modeling work, which is which is pretty well down.
I wouldn't want to be held to it but I'm guessing it's probably at a 12 month process something like that.
In our minds way thinking 2021, you know is when we start.
Ramping tons up but again it is it is completely subject to.
The vagaries of the Permian permitting process.
Okay.
And then Mena a brief comment in your presentation on the density of the the deposit being just applied on a same density.
But your feelings towards being incorrect and can you give a bit more color on exactly what you mean by that.
Yes, well give you raised the a the technical report you'll see there's a there's just a standard density of 2.9 applaud across the entire resource.
Hi, that's.
Probably okay, but when we actually do the reconciliation now and we look at abstract counts and everything and way and we're doing more work.
On the density, it's probably a bit lot on by some way like four or 5%.
So is that given that's part of the reason why you're getting positive tonnage reconciliation, yes, that's correct. So that that all of that let's call. It 25% year to date that probably accounts for 4% to 5% and then the Abbott let's call. It 20% account you know he is accounted for by either internal Weiss that actually is.
All I just based on the drill spacing that was in there was also a now were much tighter spacing and peripheral and it's probably that peripheral all that is a slightly lower grade stuff.
Okay, that's great.
And then.
On the savings through 2022, you're talking mid 35 million.
Maybe a better question for Jack on you know, what's the split on that in terms of Opex and Capex is like some of the maintenance costs I'm actually like assist sustaining capex item or the bulk of that going to kind of flow through open.
The bulk of it will be under operating cost I'm, obviously with some of the.
The major component replacements on the saving on five trucks.
As small capital component associated with that but I would say, it's probably about a 90% allocation to operating costs.
Okay.
And then in terms of a go forward basis, that's sustainable it's just that youve given that as like a short term kind of target, but it's definitely.
Sounds like it's something that should continue going on for the rest of the life of mine.
Yes. It is it's sitting 2020 do so obviously does all the contracts that we focused on right now I'm, obviously, we still going through that protest but.
That is that the total savings that we expecting over this period.
Right and then on rolling contracts you could.
Hopefully, but potentially kind of maintain that kind of cost structure.
Correct.
And then on the T. me.
But it seems to be positive improvement there.
With this massive positive tonnage reconciliation is there going to be a need for fourth sell to be added to the life of mine plan.
No. It doesn't look like it at the moment, but again I don't have that Atlantic I thought I [laughter] I'm not sitting here, telling you that we're going to get 25% increasing tons for the next 20 years, because I don't have that answer yet.
Doesn't look like it we have excess capacity.
But that's really why they do we need to get that resource like Thats, a critical thing for us to get to getting place.
And what I can't recall on top of my head.
The three sell design I think that factored in west detour tonnage as well I am I correct.
Yes, that's correct.
Okay.
And just one last one in terms of like timing around getting in new life of mine plan is there have you got down a path far enough to kind of give us an estimate of.
When we might expect <unk>.
No our it'll be it'll be sometime next year, but we haven't because again, it's really driven a lot at results and so how quickly we can drill the like crazy and the bottom of the paper the OS acreage.
So kind of.
Uh huh.
I I can't give you the timing right at this point.
Our next question comes from Daniel Mcconvey of Rossport investments.
Good morning, Mick and everyone and congratulations on a great quarter, a great free cash flow and positive cash and debt.
First question on on the stripping on your slide 12, just it looks pretty obvious but I just want to confirm so you're looking at 100 million a less tons moved the next three years, which at $3 roughly a ton Canadian whatever it is maybe that's that's roughly $300 million less than the original plan that is that right yep, Yeah. That's correct.
Okay now in your slide is showing the grade reconciliation on 10, I mean, any just kinda referred to this but you're you have some great.
Balance reconciliations of the line in the last two years.
You are not you, saying, that's not going to continue like that forever, but is there any reason for the next two or three years.
And given where you are in the ore body that you would think that will continue at near those rates are above 10% versus turning the other way.
Well.
I am just all on assigned you is that all I can sit here today and tell you hand in my habit of will continue I'm, not saying why continue but but thats why we need to do and year result.
What I think we're pretty comfortable on is that we're seeing four or 5% more times just from the density.
We're not seeing any reason why that wouldn't continue.
But that <unk> I'm not comfortable to sort of forecast based on historical performance what that will be going forward, we've got pretty good visibility for the next.
Six to nine months AOS Bose.
And moderate visibility for a bit after that but but not enough for me to give you a forecasts he wrought wrought today. So the more short term end of that pull cost in terms of Earth moving shade you'll.
We do have confidence in terms of what the reserve reconciliation looks like because because we have a short term reconciliation, but low.
But a lot of the rest of the reduction in wife's these actually as a result of using discounted cash flows to plan the paid as opposed to on these candidates and the reason why.
You say a bit of a difference next year, but but really it's the following two years with a big differences is that this is a big pit and as we changed the phasing in the pit, we actually need to have new whole roads.
Similarly, with the with the using the shovels more efficiently with Mexico change the bench Hot.
This is not a small operation that you can just make a decision and change it makes quarter. It's it's big.
Yep.
Thank you lowered detour underground can you mine that concurrently with the open pit.
Yeah.
When she gets you the studies assuming it.
He is as you envision it now, possibly as my answer but again, we haven't done the studies.
Correct.
Okay, great. Thank you very much.
Thanks, Dan.
Our next question comes from carry Macquarie of Canaccord Genuity.
Hi, Good morning, guys congrats on another great quarter.
Thank you just had a question on again on the reserves resources clearly are working update the model there, but your your price assumption $1100 Canadian this morning.
You plan to change that and is there decent upside to higher metal prices in terms of the open pit or is it relatively insensitive to metal price assumption.
I will probably will probably run at something like 12, 50, U.S. and 1.2 thoughts today.
Uh huh.
And you know obviously you get you will get a bigger pit at that obviously ER.
Cost of moved around a bit as well. So you know I'm audit costs are a little higher processing costs are lower so.
Net net yeah, you probably get a bigger pit.
But but actually probably the more important thing I think is.
Yes, we are starting to use a variable cut off grades.
So in the current reserves the there's a fixed half a gram a cut off right.
Which actually is above the margin will cut off right and there was a lot of materially in the pit. That's currently classed as weiss that would be above module cut off grades but below 0.5.
So thats the auto pretty important bit of information that.
Of work stream, that's on the wise, what really optimize that kicked off right.
During the order of magnitude that you can talk about that you'd see in terms of ounces.
No no [laughter].
None of this value.
And then right.
We've obviously got a bit of a view that or not I think it's premature for us to talk about that at this point.
Okay Fair and then just given all the moving parts in 2019 on tons moved and [noise].
Is there any guidance you can give into 2020 on the grade specifically as it more or less can be in line with the previous mine plan or any sort of indicative guidance you can get there would be great.
Not at this stage, we're going to come out with probably a three gardens early next year the stage.
Okay fair enough. Thank you.
Yeah, sorry, because there's a lot of work underway at the moment to finish stuff you know when we.
Again coming back to a credibility a point when we come out inside that we're going to do something we want to be very very show that we're going to do that.
Which perhaps hasn't always been in the case for the company.
Great. Thank you.
Our next question comes from John Blight paradigm capital.
Hi, there congrats Nick a whole team on the excellent quarter here or just a good of a follow up on the the permitting to increase the mill throughput or can you give a sense of sort of what's involved there Oh for instance would this require any sort of or view or update us.
Our mental permitting and any public stakeholder consultation to be required.
Yeah, well it pretty all revolves around equality and.
And so that modeling work, that's being Donna and being down that looks that.
You know air quality from crushing dust.
Pluses and stuff and then you've got to then re submit that and yes. There is a they'd be a public consultation process.
It's a process permitting works in Ontario, but it is a process you've gotta go through.
Okay Fair enough and a you mentioned more drilling on a on zones 58, Norris, how would you sort of rank the relative importance of of that's on 50 at North <unk> ER versus say that is the lower detour underground and and west detour.
[laughter] set any sort of budgets or a for zones 58, just to get a sense of how big that is.
We haven't we have actually we put a drop budget op, we haven't approved it yet but.
But it's it's not it's not massive we're not looking at putting a big volume. This year as I think at some point had had sort of been propose a one point.
But now there's a bit of drilling to go in there I think there as you know this it's still open we'd like to sort of get a bit of a better feel in terms of moving the needle from an economics point of view probably lower diesel.
Because it's just bigger would have the potential to move the needle mall, but Conversely, I know you know as hardware you know is reasonably good right. It's small town age it we would flow through the mill and.
Possibly could comment earlier, you know again coming back to that question do you might allow dates or concurrently with a bit a lighter we don't have that answer yet so.
We've been pretty busy Assorting the fund the core business out as we come out of that and we've now got a bit of a bit of a plan.
We've got the resources just to actually tackle both of those things I think going forward.
Thanks, Congrats again.
Thanks.
Once again, if you have a question. Please press Star then one our next question comes from Kerry Smith of Haywood Securities.
Thanks, operator, Mickey it in in October you suggested that the grade was starting to plastic arm is that kind of degree that you expect to see through the rest of this quarter then.
Ah yes, it's it's.
Somewhere in that order like game, the average middle right why be that because there'll be days when you won't be getting enough to fill the mill out of the pit and so we'll be pulling off that stuff off right, but we'll certainly bay.
I I must admit <unk> I can't recall, what the average grade forecast for the quarter is but it's probably not <unk>, maybe close to pointing on fall.
But it's certainly going up you know, it's a strong quarter you can tell from at production.
Quarter to date that it's looking like a pretty strong quarter.
Right, Okay, Great and then.
Maybe I'll just on the payables they were up in the quarter. What is the primary driver for that increase in the payables and he just pushing the panels out or what's going on there.
And it's the same as when we did in it I think we disclose it in in Q2. So you know part of this was you know a lot about payables was down on that prepaid basis is tightly and side you know, we taking that to more market terms. The way. We guide you 30 to 45 days.
Okay, so and so that the payables as he said probably be pretty static now on a go forward basis then.
Yes, I mean, obviously, there's some seasonality in name because if you look you know again, well largest capital spending in Q3, so I'm I'm expecting that none of it becomes slightly down in in Q4, but it moves with you know what that the title outlays on capex as well as Opex.
Okay. Okay.
Thats great. Thank you and make is planned maintenance shutdown in Q4, just remind me in it and experience what how many days that might be.
Yeah, there'll be there'll be a short one there's always there's one every quarter. The June quarter has two and actually the September quarter. The Q3. This year, we actually had it was one but it was over the long run it was our.
Motorcycle die.
So we have a short one planned job about now actually.
Four days I think from memory, but it's not one of the big ones.
Okay. Okay.
And you brightness third rig in from the grade control drilling in the pit that they're going to see me. How far ahead are you now with you in grade control drilling.
In terms of months of production or however, you want to characterize it and what will that third rig allow you to get too.
Well, we're not fire and obviously because that's why we brought next regained a weight we'd have we got pretty good coverage for six months.
We've got I guess you'd call it.
She coverage for the following six to 12 months.
And we would like in a perfect well I'd like to have two years.
Ahead of me.
And again, you know that money that way spending is only amani costs. So we're spending that money upfront and we're not getting the benefit to light appears we don't get any benefit really because we haven't really around the resort spot.
I just want everyone I understand you know when people say a mining costs have gone up there's a couple of specific reasons for that possibly in mildly and.
But on a total business basis.
That's money well spent.
Right. Okay, and then maybe just my last question you'd had some issues for a while went 21st nations groups I guess with a filing of the I guess can we assume that.
Relationship has started amended or how would you characterize it.
Well I look all I would think we could characterize it by saying you know obviously people know there was an election there in early July .
I think it's also fair to say that the company probably didn't live up to its commitments.
And therefore, I'm sort of Oh I'm quite came to make sure that you know who I guess is this two new ladies entail.
And there's a desire I think from both sides for us to have a better working relationship and that we yeah.
I think as evidenced the fact that we got the closure plan a update approved.
Which all of that first nations pod has had to comment on.
The fact that we now have a you know a being invited to submit the wastage all the way states or.
A you know permit application.
And that's either way going through the consultation process. All I think we're in a different placed away. The company has been for the last two years yet.
Right Okay.
Okay. That's great. Thank you very much.
Our next question comes from Tim Paul It's Tw P. investments.
Hi.
Okay can you hear me.
Yep.
Oh, good hi, congratulations guys on the great great quarter.
I'm looking across the board looks like your.
Total cash costs, a went down from your guidance last quarter I'll go down to $730.
Your all in sustaining costs, great wouldn't 11, 98, which is on the lower end of your guidance in your free cash flow I'm not mistaken basically quadrupled from 7.3 million to 37.5 million.
So my question is that you guys are in great shape movement in in the right direction, you've got tremendous cash cash position hundred 44 million data it looks like about 100 million in data I'm not mistaken how.
Folks see the future looking over the next year or two.
In terms of maximizing your stock price.
And I, receiving any interest if I were out.
A major gold company I'd be sending that loved though it's right now.
Have you received any interest and what type of price. If you did receive interest somebody interested in buying a company what type of price would be attractive.
Given the environment, we're in now where it appears we might be in a.
A bull market pickles.
Thank you.
Sure I'll take that one or just to clarify we've actually got 44 million of net net cash. So yeah. We got 100 million of debt, but we've got 144 million or we had at the end of Q3 today, we get a 164 million side.
So we net cash just it just to clarify that.
In terms of what are we doing to get our stock price as well I think it comes back to.
Ah deliberate on what we say we're gonna do.
Which again historically company, probably hasn't had the best a reputation for its all about.
I haven't played out in spite of in the lots of shareholders about why why don't I buy more of the Jay is what are they buy any of the shares.
Is that <unk> the free cash flow was always coming two or three years out and every year that was another two or three that so.
You know we from day, one when I turned up here. We said we were going around the business has a business and we're going to generate free cash so I would sustainably over the long term there's no point.
Stopping Weiss movement in the low looks bright per quarter or two and then and then you you run out of all.
In terms of your other question on all name and I saw it so actually in terms of the stock price I think if we do what we side, we're going to do and and we deliver on what we say and we actually optimize the business and we get our contracts right and.
Oh, we might we might money for shareholders.
I think the shape Ross little GAAP, or so quite frankly, Oh I'm on the right along we educate people about the company. There's obviously people know let's call. It the all day till we like to follow on.
Is that view.
Do that I think the share price looks offers so.
In terms of your other question.
<unk>, it's not appropriate to be discussing that sort of stuff on a conference call I'm you know like inside to play believes that.
You know were opened all opportunities to create value for shareholders.
Not on think we can comment any further.
Okay.
Okay, great quarter.
Thank you. Thank you.
This concludes the question and answer session I would like to turn the conference over to Mr. Macmillan for any closing remarks.
Well, thanks, everyone for dialing in and we look forward to speaking to a two you again after our Q4, which at this stage looks like building a pretty strong quarter. Thank you.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.