Q3 2019 Earnings Call

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Please be advised that today's conference is being recorded I would now like to hand, the conference over to marketing presenters Vice President of Investor Relations.

Please go ahead Sir.

Thanks, very much operator, and good afternoon, everyone. That's good afternoon, everyone in North America, where actually good morning for US we're doing the call.

Our new offices in Melbourne today.

With me are many members of the currently gold management team.

Presenting will include 20, macoute, our president and Chief Executive Officer.

David source, our Chief Financial Officer.

Yeah, No Wonder Vice President Australian operations.

Sure, our vice President Technical services.

Eric how well our senior vice president of expiration.

For the older our director of expiration for Australia as I mentioned, there's several other members of management team and around the slot.

They will be providing comments on results for the third quarter and first nine months to 2019.

After the presentation, we'll open the call the questions.

Slide deck.

I'll be referring to is on the webcast. It also is posted to our website at www Kale gold Dot com.

Before we get started I'd like to draw your attention to the forward looking statements line, which is slide two on the debt.

Our remarks and answers to questions may and likely will contain forward looking information about future events and the company's future performance. Please refer to the detailed cautionary note on the slide as well as the forward looking information set out in the news release announcing our third quarter results.

Also during today's call will be making reference to non I ever us matters.

Reconciliation of these measures is available within the third quarter and first nine months of 2019, Mdna, which is posted on our website as well as theater.

Finally, please note that all figures discussed today will be in U.S. doors, unless otherwise stated.

With that I'd like to turn the call over to Tony Macoute, Our President and Chief Executive Officer.

Okay. Thanks, Mark in.

Everyone being on the call.

As stated in our release today, the company had a very solid third quarter and leaving the company continues to deliver industry leading result.

Before before we started the presentation to explain the performance in the quarter. Because this particular time technology people look or can make all.

Including the families our suppliers service providers communities that supporters, we get to talk about our accomplishments and they are the ones that make things out and for US. So thank you very much and I look forward to a continued safe.

Working in Q4 need to finish the year.

Turning to slide three.

The company reported record record results in Q3 2019.

In production unit cost earnings and cash flow.

Production for the quarter was 248000 ounces.

Cash costs of $287 announced an all in sustaining cost were $562 Brown.

Earnings per share for the quarter was 84 cents.

Operating cash flow in the quarter was 317 million or at all or 33 cents per share before changes in working capital.

And very importantly, we added $146 million cash.

We currently funding our growth.

Looking at year to date on slide four results for the first nine months of 2019 were very strong also.

Production is just said 600 700000 ounces year to date.

Costs are tracking well in our industry, leading with cash costs of $290 Brown and all in sustaining caused by the ground.

I appreciate every year to date is $1.86.

Cash flow sits at a 330 million and on a year to date basis, we've increased our CAD $280 million or 85%.

At the end of September Thirtyth, 2019 totaled $615 million and continues to grow in Q4.

Turning now to slide five.

So I mean, what happened in the quarter, our two I agree low cost might perform performed very well.

Foster built continues to deliver it's an exceptional results had record production of 158000 ounces driven by continued improvements in any average head grade as well as higher tonnage prepared from previous quarters.

Oh, and we'll get more into the details of this later.

And also had a strong quarter in Q3.

Gross tons processed increased 18% from Q2 and Grace improved in both Q3 last year and last quarter.

Possibility to cap it continues to demonstrate that they are exceptional mines and significant growth ahead of them.

Now turning onto guidance light on slide six.

You know and looking at her guidance, we continue to target 952 million ounces of consolidated production for the year.

We have reduced production guidance for old complex. However, we expect both boss milling capacity, how strong final words of year, which will allow us to endear comfortably in our guidance range looking at all we announced in early October that we're reviewing purchase future went up I won't complex.

Royalties and with that both that limit our willingness to invest here I.

We need to resolve those issues and do a lot more drilling at all three lines.

As mentioned, we are looking at that Uh huh.

The best way to proceed here.

Looking at some of our other guidance, where the revise our capital expenditure guidance speedy Appleby will be higher largely due to additional development at Boston billing accounts it to support growth.

Which was included in which included adding equipment enhancing infrastructure at the mine.

Gross capital expenditure guidance has increase also nobody relates to the advance expensive expenditures as the number four shaft project out Macassa basically what would happen here as we've taken over from the general contractors on site newly announced all performing pretty self perform the open up the shaft ourselves and I was a result, we had that we purchased thinking wattenberg.

Related equipment from the contractor.

And we had purchases now as opposed to spread ienova over the life of the project that on a rental basis.

We don't expect it to having any impact on on the point that capital congressmen endorsed schedule, especially before.

Also a exploration guidance is higher and never even heard relates to the progress in northern territory. We have started to test processing at you reach Mel unexpected brings over 10000 ounces. This quarter. This will not be commercial production. It is fair to say, however that we are making good progress towards the restart decision Indian Pete.

Turning to slide seven with strong financial results and a growing cast with cash position. We are continuing to increase the amount of capital. We returned to shareholders, we announced today, saying increases common share dividend six cents per share affected the Q4 2019 dividend payment.

This will be the 50, increasing the dividend since it was introduced in March 2017.

Higher dividend payments support a reference to generate strong returns for shareholders. We continue to have considerable success with our share price also a whole bunch over 70% year to date in 2019.

With that I'll turn the call overcome our CFO , Dave sorry, Thanks, Toni Good morning, everyone. As Tony mentioned, we had record earnings in Q3 2019 net earnings totaled 176.6 million or 84 cents per share earnings increase over 200% from 55.9 million in Q3 2018.

Were 69% higher than the previous quarter.

For the most significant factor driving earnings growth was increased revenue driven by higher sales an increase in the gold price. We also had a foreign exchange gain of 13.7 million pre tax in the quarter, which reflects a weakening of the Aussie dollar to the U.S. dollar. In addition, we had lower expense exploration cost compared.

Q3, 2018, and this is because we're capital like more of our exploration costs than we did in Uh huh.

If you look at our AFFO per share or earnings quarter over quarter pools Q2.

50 cents, a share and close the third quarter at 84 cents a share.

The sales volume a positive variance of 19 cents a share was the main factor driving that increase as long as had 14 cents to share improvement in old friend.

And six cents a share any foreign exchange gain.

Turning to revenue, we achieved significant revenue growth against both prior period revenue of 381 million increased 71% from Q3, 2018, and 36% from the previous quarter. The most significant factor driving revenue growth was the large increase in sales in Q3.

Total gold sales were 256000 ounces up 39 and 21%.

From Q3, 2018 and last quarter, respectively.

We also benefited from a higher average realized gold price in in Q3. The average price was $1482 per hour. This was up $278 per ounce from last year's third quarter and $162 per Alstom Q2 2019.

You can see on slide 10 contributions to revenue growth of volumes and price for the changes from last year's third quarter and Q2. This year both had a significant had significant factor in driving revenue higher.

[laughter].

Turning to EBITDA Q3, 2019, EBITDA totaled 296.4 million more than double the level in Q3, 2018, and 60% higher than last quarter as key driver of growth in EBITDA was the increase in net earnings depletion and depreciation costs were higher reflecting increased.

Production volumes.

Turning to the year to date review, our net earnings were 390 million or $1.96 cents per share that was 134% higher than 167 million or 84 cents share for the first nine months of last year.

Revenue growth of 52% was a key driver of the increase in year to date profitability year over year again that was a function of both higher sales and gold prices.

We also benefited from improved unit costs and lower Expensed exploration costs with small contributions also from.

That's fine that's income and other income.

These factors were only partially offset by higher depletion that accretion cod depreciation costs and increased corporate gionee, reflecting our continued growth.

The next slide looks like growth in our cash during Q3 2019, we use our cash position by 146 million during the quarter. There are few things on this slide that I want to point out.

Our operating margin really drove the growth in cash accommodation of record sales higher gold prices and improve unit costs were key factors contributing to the higher margin.

As you can see on slide.

Her team the various uses of cash we had.

Not surprisingly the most significant as our capital expenditures.

What's the slide really highlights of the fact that were funding all of our growth and fill rapidly building our cash position.

With that I'll turn the call over to in Holland, Vice President of Austrian operations.

Thanks, I've, starting with slide 14, I just wanted to bought some coming from across the board possible.

Yep ration had a strong headline result with production of just over 158000 ounces there is new quarterly record.

This was built on exceptional bright influence the quarter of 41.8 grams per tonne weve tons milled and recovery essentially alliances claim.

The great influence is driven by swung production during the quarter.

The image on the right hand side of the slide shows a long section a lot in the sources mind.

There are 11 stopes in total non for the quarter on this lump ore body of a nine different levels combined with development. The contribution from spawn was approximately 59% of the tons containing 94% of the ounces produced I've a key too.

[laughter] the strong production results translated through exceptional unit cost improvements operating cash costs of $115 grants and all in sustaining costs of 200, adding onto those grants and earnings from operations for the quarter came in at a $199.5 million.

You bet continues at festival with sustaining capital of $23.8 million and growth capital of $11.3 million for the quarter.

The growth capital was focused on that free mining projects, unless not right, hi, Scott and modern water treatment on the pipeline and moderate treatment.

On track to be completed the she then lashed out Brad to be completed in Q1 next year.

Turning to slide 15 on the projection for the remainder of the.

We expect to be in line with current guidance of 570 to 610000 ounces of gold produced an operating cash cost of 130 to $150 grants.

We expect tonnage milled in Q4 to be similar to the previous quarter with a further increasing production driven by hock right. As we continue to advance the studying sequence of Swan you did the Hawaii right areas of the results.

Moving to the northern territory on Slide 16, we continue way I worked across a range of projects in the northern territory.

The most advanced diseases to Latin deposit immediately adjacent to the caused by mine, where we continue to drill and developed to assess the mineralization.

The image to the right hand side of the slide show Us the development and trial mining in Latin and cause mine that occurred during Q3.

We have also commenced trawl processing early October and expect to produce over 10000 ounces of gold for the quarter, we should be credited against the capital expenditure.

Important Tonight died that ambition for the northern territory is a large multi mine operation feeding a central mill.

To that end that we've continued work in a range of other areas during the quarter, which truthfulness describe a little lighter.

With that I'll pass over to Natasha that's the discuss the 90 operations.

Thanks, Dan Good morning, everyone as Tony mentioned has a strong quarter in Q3 production from the mine with 53000 ounces, which was 15% higher than in Q3, 2018, and 20% higher than the previous quarter.

Year to date, we produced 185000 houses. So we are well positioned to achieve the items of 240 51 50000 ounces this year okay.

Tons processed in Q3 increased 18% quarter over quarter, averaging about 930 tons per day. So you may recall that in Q2, I times were impacted by excess water in the mine related to this thing went up this is what limited lifting capacity in the second quarter.

That's the average grade on Q3, that's a good 23.3 grams per tonne.

Yeah, we see continued success a with a solid performance in Nashville to around 57 level on the heels nine conflict.

And now looking at comp, we continue to be well positioned relative to our guidance operating cash cost them castle before in $25 bounce for the quarter and averaged 309 seven for the yeah. This is the guidance of 400 to $425 Brown so for the.

As for all in sustaining cost the improved in Q3 to $689 from 788 in Q2 improvement reflected <unk> non cash cost from as low as with a reduction in sustaining capital expenditure.

Capital expenditures were about 3 million lower in Q3, and this was a function of timing for capital development and mobile and thank you Chris.

So with that I'll turn the call over the air Kalliel, a senior vice president of exploration.

Thanks, a tushar and good morning, everyone pertain to today's presentation I'll start with slide 18.

And with exploration, Canada, and then pass over to Chrysler for some comments on Australia.

Regarding the program for Canada, I believe it's fair to say that the work has been strongly focused on Macau and working on building up resources to support the new number four show on its completion.

Slide again as though when you show in one of the May work areas on the 53 level at the mine along with locations of recent drilling.

[laughter].

As indicated.

There were approximately 200, new whole Gil during the quarter and with both of these being designed to test east West and death attention adept empty complex Andy validated break although we're told Braga. We did release some initial results earlier in the quarter and by all accounts, we consider these very positive.

Turning to my next slide which has never 19.

We now see some more detail on drilling which was down to the west side of the level and testing both the westward extension of the S&P and the amount we made to break.

Someone on the slide as long section view.

The area looking across the two zones to the north and display new intercept for each so lets color coding.

Key results from the SNC, our color coded in blue.

And as indicated include some very significant assays in almost every Joel.

Rich.

And with some of the.

Most important will be located up to about 235 meters west in the current resort.

Key results for the Melvin needed or color coded and paint and again include multiple high grade intercepts, it's both confirmed and slightly extend the previous defined zone to the web additions it Bob your own also noticing some other very important observations about the amalgamated.

And with one of these being that a lot of the intercepts that seem to get occurring with deeply different structures, which trend parallel to the melody. They made a great rather than a shallower and more parallel to the FMC.

Many of the start many of the values are also located within a broad zone of alteration, which contains porphyry an increase all bye.

Also important isn't that much of this structure remains uncosted outside to read the result, so leaving a lot of upside for the future.

Now turning onto the next life, which isn't number 20, let's see some additional details for the east side of the level and as indicated the drilling here also and as they indicate the very.

Good result, with it several cases join multiple zones and high grade out a key parts of this from my perspective is that some of the best death is again looking it up 250 meters east of the current resort so what areas with very little Julie.

Demonstrating that the zone is still open to the east for further expansion.

[noise] considering the Bob we believe.

We are extremely encouraged by Oh.

The result, and continued and especially the future potential to continue expanding the spot.

And now we're working on.

Additional opportunities to accelerate and optimize this process.

As part of this we've already increased number deals on the level by too. So we now have six and looking at new opportunities to even expand the amount of development as we go forward to create new platforms.

So all in all things are looking good and appealing.

I commented about the future so with that I'll now pass onto Treichler, our director of expiration frustrating.

Yeah, Thanks, Eric and good morning.

I, probably just drilling in Australia. The quota is playing focused on drilling at fossil and in an old territory.

That's possible uptight underground rates and seek surface drill rigs ethane operational growth projects of the corridor.

Drilling is continued extensional drilling on the allow a thing it's called system covering the dam plans projections of the law Phoenix mineral resources.

Drill results seem to guide significant quantities of sulfide mineralization.

Turning to death.

And we expect to see significant expansion of inferred mineral resources any sign for into your model upsides.

Continuity of mineralization is now being established over approximately 900 meters down plunge from the swarm mineral reserves walk.

An infield drilling is on the white immediately down plunge of the swarmed mineral reserves after the establishment of a hanging will feel platform in the quarter.

In the while planning system. We have also continue John's type drilling into the I've been up punch extensions of the cygnet structure, which lost sub parallel and approximately 110 made is well to the swann.

Drilling into the structure is returning some encouraging results to died including multiple occurrences of visible gold in sulfide mineralization.

We fully expect to see expansion of mineral resources on the structure without into the model upsides based on the drilling we found a tighter today.

Area drilling continue to focus on the dam punch extensions of the Harry I Mineral reserve block.

And is now this foreign continuity of mineralization approximately 500 made its down plunge off the Harry mineral reserves.

Extensional drilling from the 200 made exploration create established to target Andy calling out sits at that also commenced during the month.

At the end of the quota to halls, and possibly the projected position of the Harriet structured debt, which I'd like last quarter, signing and so forth mineralization.

Further out plunge drilling to sections on the patiently multi anticline at the slide coinciding some visible belden sulfide mineralization.

There's a lot more drilling applauding the sun to is trying to fool assessment of the anticoagulant target and drilling will continue on these for their mind or the.

Surface drilling with six rigs at Robinson target continued to returning charging results was drill holes returning saltwater and this will gold bearing mineralized intercepts.

Okay here inside of mineralization.

That's going to fall into the plan is in assembly direction.

To attempt of approximately 600 latest blas surface.

In addition, exploratory step out drilling between fossil and relevance hill as domains to better understand the geological frying wood and mineral resource growth potential in the site.

Initial results indicate that sulfide mineralization exists the distance of approximately 1.9 kilometers south along the start of the existing Robin silver mineral resources.

In the northern territory.

Three underground into service rigs have been in operation at three main target areas.

Underground drilling is being focused on the infill and extension drilling Atlanta, which it's a return encouraging results, including several appearances of visible go.

The drilling for the remainder of the is focused on infield doing price resource confidence ahead of morning.

The system remains open at depth and extensional drilling campaigns will continue into 2020 .

Surface drilling at Union rights and <expletive> Craig continue to were turned positive results.

And demonstrate the growth potential with the mineral lost systems, Ivan along strike in that too.

We are confident that with further drilling will we will be able to establish significant mineral resources in close proximity to the union rates mill.

Drilling will continue on these targets for the mind or the.

In addition, the meeting for the prospect take on a union erase is underway as we work towards commencing this development the 2020.

I'll now hand over to tiny demand at the present machine.

Hey, Thanks, Thanks try and thanks, everyone.

Now turning to slide 23, we do this summer.

<unk>.

But you see for a quarter and then what you see from Bergen. My goal. We had record results in Q3 2019, and we ended the first month versus nine months in 2019 also well positioned position to achieve our two production and unit cost guidance.

Our our earnings so far in 2000 aren't 19 are very strong go you position us as the industry leader.

We are generating substantial amounts of cash flow and are building our financial strength.

We use that financial strength to invest in our assets and also to return value to shareholders, we're increasing our dividend for the time to six cents per share starting in Q4 this year.

Yes, there are saw continues to perform well being up close to 70%. So far in 2019, and we're looking to it or to a very strong finish the year with another solid quarter expected in Q4, we expect to continue to have catalyst also to the other catalyst to drive shareholder value, including experts of exploration results and updated plans for 2020.

Over the next Wow. So thanks again for participating in today's call will be happy to take any questions.

Thank you at this time, if he would like to ask a question. Please press star one on your telephone handset.

Our first question comes from Cosmos Chiu from Sea RBC. Please go ahead. Your line is open.

Thank you thanks, Tony David year, Natasha, Eric Troy, then of course Mark.

Maybe first off on foster, though here, even as you mentioned you know Q4 grades will likely be once again better a quarter over quarter I don't know how much you can tell us at this point in time, but are these higher grades that we've seen in Q3 in Q4 sustainable into 2020.

Yeah. Thanks Cosmos.

I guess from our perspective would be.

I'm really happy with the performance on.

The results model for 'em full postponed due to the high.

Inline with expectations will maybe well maybe on average and little bit us, we do expect to see a little high bride in Q4 as with them as we have four Shannon.

At this stage for 2020.

I wouldn't want to be giving any sort of thing numbers.

Well I think it's safe to say that we're seeing results that look like.

What weve.

Previously put out an app have gone well seeing.

At this stage any significant deviation from that.

Sure.

And I guess, a again at foster the or around foster failure. Good I notice in the Mdna that are some exploration tenements.

Expired earlier on in 2019, and now Alpha public bidding.

Yeah, Oh, I believe 353 night I guess my question is twofold number one was there anything that you could have done in terms of Spendings and whatnot Dakota allowed you to keep those tenants and number two you know since youre the previous operators over those tenements.

Do you have inside track to renewing and getting those tenements back.

Yeah. Thanks, Thanks Cosmos.

In terms of retaining the tenants or no. There was nothing that we could have done in terms of extension. This was in line, we that the systems and processes that but given.

The.

The regime in inventory.

What what's happened in late October is is there was a gram relates a now by the Victorian government.

Includes cold loss between 350 to 500 square kilometers each one of those lock skis essentially the X L 353 non.

From an perspective, we're interested in the potential although Florida is both lots. We certainly believe we're well placed to to participate in in that it will be it'll be a a relatively lengthy process in terms of evaluation.

But.

We believe we're reasonably well placed on particularly so.

He can be side for the block that surrounds the mine lives given its continue with the nine Sharon.

And we would see that is one of the effect is that we've gotten the selection crisis <unk>.

Yeah, I guess I asked those questions because I I notice in your technical report I guess, you know there's other tenants that could right now could expire and your 2020 too. So I guess when that happens much like D. O 4937 Yankee Creek for example, so I guess.

Come 2022, you'll have to go through the same process potentially as you yeah, you're currently undergoing for yield 3539.

So that's correct correct Cosmos I guess, the onboard I'd really like to stress, though is the.

The mine waste expansion that it could was and was approved early this year. We had a minor nice went from seven eight square kilometers to 28 square kilometers that really for after Q is the loss of mine as we see it currently.

And for and pool without putting any exact now arent surpassed 20 years into the future. These these at these adjacent exploration licenses are important to us because we clearly see the potential but they're not critical to that lots of mine plan.

For sure and I'm happy you brought that up as well again, because you know I mean, I know that the deposit plan just didn't go to the south and if I want to do an extension in terms of where the mining tenement is going into you know those exploration tenements by then it could be fairly deep right. So I guess, taking a step back as you mentioned what is the truth one exploration.

Potential and some of this exploration ground.

So that the expression potential is is high.

But I, but coming back to the mining license.

We see multiple lines of mineralization not just not just the lawn and just sat.

Beyond.

But was the full amount on lease battery into the extension.

We see most for example, we see more shallow mineralization that brought until each Troy has spoken about.

Plus we see other lines as well.

And in what and what they want to hold size that we're looking at again.

Aggressive exploration program in 2020 that that might be just focused upon the extension of Phoenix and Harrier, we'll be looking at testing. These other systems as well <unk> yep.

And.

Sorry, I comment because we're going to be this frozen of exploration Larry our ground license is going back ended there. It's a normal process. It throughout the country, it's happening too so all mining companies and to give you Dave throughout the year just happened to be exacerbated because it happened to us at Boston builder.

And on the other side you know it hasn't having someone come analyst come in and do some exploration and come up with discovery. There you know that that's not something that we look at one of the being negatively what happens yeah of course.

Maybe switching gears a little bit here in terms of mikasa. Good I noticed that you've taken over 100 general contractor with a shaft sinking you know was that always the plan and I guess the second part of my question. As you know you mentioned Tony that it's not going to impact on cost, it's all going to impact on schedule, which is great, but I thought.

If you're switching over to your own sort of shops thinking I would've thought if you cut out a contractor costs there could be potential positive impact on cost.

Well so when your answer your first question no. It was never are intended to be yet beginning we awarded a contract that let me add <unk> contracture comment it just as we progress through through the project. We just felt that would be badly.

In our best interest to taken overdo, it ourselves and for the most part that is accrued at doing the work with the same crude that we would have been working there for the contractor and people we have working for us and prior to this Gilbert beyond as for example is live chat leader decent numerous shops throughout a candidate.

North America and he was one of us on the shaft for us I add but make sure attendance west. So we got lot of mcmonagle capable people here and in terms of how that affects the costs into schedules going forward, there's lot of moving parts, but again, we see no upsets and we see some opportunities as we go for.

And on Tony I guess, you're not to give us an update here. So the horses in place to galleries in place you're not right now you're doing full face sinking up the shaft.

Yes were actually down below well with our reaction probably just hit 700 seat.

Were 110th of the way down the final completion things are things their retirement, nor the site, they're starting to get on getting onto the cycle. These moves and well just getting battened down now ready for winter So mhm feasible.

Good stuff.

It's Tony on team does all the questions I have.

Okay.

Thank you. Our next question comes from Mike Parkin from National Bank. Your line is open.

Hi, guys. Thanks for taking my call.

Just a couple of questions, we'll I'll start with one just following up on the exploration licenses Foster Bill if you look at slide 21 of the presentation.

The purple area of the Robbins Hills that mineralization not.

You know looks like it's going to north as I get impacted by the border of the mining license and the exploration license.

Yeah, Thanks, Thanks, Mike and quantify the.

It is it would help.

With the previous modeling, but but the mommy's extension that we.

Let me go a little such as an old in newly granted early this year so that.

That concludes that extension potentially to the no.

Okay. Good there okay.

Then just kind of housekeeping items on the accounts payable that's been ticking up since early 2018, a quarter over quarter consistently.

Where should we kind of expect.

Go going forward as I could make that starts to level off is there any potential reversal.

Yeah look we thanks a question we we have a year 2013 was a year, where we had a lot of projects will to foster fill that mcafee.

And so we have no yes, that's the reason for it would be uptick I suspect that.

As we moved into next year and loved the project that we had at possible. For example are going to be completed by the end of the year. Early Q1 next year, we should see that will come back down to sort of the normal run rate for what you would et cetera.

Yeah, so getting on to that over a year over year, we've increased our production from you know from 2017 to 2019 right.

600000 ounces of sponsor a million we've increased our exploration expenditures from 40 million to now well over 120 or not.

Hundred 30 million and other cost and capital development sustaining capex. This after growth capex. So they'd all lead to an increase in accounts payable that working capital.

Yeah, No natural language it would rise with that.

And then within northern territory spends a you've spent a bit 32 million on it that was capitalized.

In Q3 quite a bit of activity. It seems like with third quarter should that be kind of coming down in the fourth quarter now that the bulk sample seems to be done.

Yes, thanks, Thanks, Mike So.

Let me be activity, that's a carry use.

I mean lots of drilling as maestro indicated before but we're also really importantly underground development.

And so for US we've been developing Weve three development groups and really testing. The what are your notwithstanding that so very much we would consider that trial mining fives.

We've commenced trial processing, so we would we would expect.

Expenditure to remain pretty similar.

We will have the advantage of.

Having some of that gold production credited back against capital.

Because not commercial production in advance all of our decision to go into commercial production site Sacramento and we are working throughout 2020 budgets as we speak.

Yes, we were pretty optimistic weve with what we see but with both had nice and approval commitment for commercial production this year.

Right and then in terms of the level of development you've done seven kilometers.

Great and.

Is there kind of a target completion amount before you make a full go ahead.

Start construction decision whenever you want to call it.

We would expect to make a decision.

Bought into the year, we'll thereabouts really for the commercial production I mean, we're pretty optimistic with what we see TV, we have 10 mill.

We.

We are hurrying up slightly but we but we're pretty we're pretty comfortable and see what we see but must stress we haven't meda, we haven't medical to measure decision.

Okay.

And then.

Foster Bill.

And getting good.

Exploration update to the Macassa I haven't seen anything from Fox real for awhile, what's the thinking in terms of an update on that front.

Oh.

Yeah, Mark with building.

Drilling in three nine areas in the Phoenix Harrier and relevant skill areas and we expect mineral resource growth analyze areas.

Which is why do you get more complete sets of data before releasing results, but but anticipate.

But there will be needs fly when they're drilling projects before the end of the.

Okay, Great look forward to thanks for taking my questions.

Thank you. Our next question comes from Craig Stanley from <unk> Capital. Your line is open.

Thank you and thank you for taking my questions I'm just a few quick ones for me first off is that 2.75% victorious state royalty is that going ahead, and if so what 2020.

Yeah, Thanks, right in Holland.

So.

As it stands now it's the royalties going ahead.

There is work so so from but from a an individual company stance plus how industry body.

Most council that lots of discussions with the government.

On various.

Essential modifications to the to the royalty and those discussions continue.

There is some potential for some some changes, but but from our point of view.

Yeah, we see the likelihood as it goes ahead on January 1st effectively at that sort of right.

Okay, a swag was 59% at the times.

That's pretty much you guys getting that sort of the upper limit of how much you can line over there.

Pretty much into that 50% of the reserves. So that's a bad the wrought sort of a number clearly is because of the dried. It's it's a it's the highest priority area to be a to be mining from but that's that's pretty much the limit.

Okay the amalgamated break.

Mineralization that you guys been hitting more that you look at it.

Looking more like the SNC or is it more like all four capitalization.

It has.

Probably a lot of similarities to some of the mineralization that SNC, even the mineralization in SMC can vary depending on whether its hosted in or free or in the volcanic.

But oh.

Generally it's looking more like what you're seeing the volcanic tough there.

Goals with the carbonate their site alteration and there's some porphyry infusion nearby.

So it's irrelevant I would say probably a very similar to some parts of the S&P.

Thanks, and last question for me.

Our exploration license that surrounds possible that 353 nights.

Are you able to give any indication of how much it might cost us money are we talking hundreds of thousands of dollars millions tens of millions.

Yes, no it's not a function of Oh about cost to review.

Essentially there's a there's a licensing regime, where you would I be a certain amount for the licensed by area, but but that speaks.

It's really around the competitive part of the price is really around.

What a company brings to the title in terms of they.

Washington store right, so they they social safety environmental performance.

The technical ability they financial capacity.

And their ability to develop.

Resources from that area. So ultimately returning value to the site. So that so that's it's really on those sort of time.

Area is that the assessment process is now.

Perfect. Thanks very much.

Yeah that makes sense. Thank you.

Thank you. Our next question comes from John Tumazos from John Tumazos is very independent research.

Your line is open.

Thank you for taking my question.

Pinching myself twice on talk into a company with a 36% ROI.

I'm talking to a company that hasn't blown the money. Thank you.

[laughter].

As it relates to.

Reserves that are currently about 6 million ounces are sick sure life.

As you increase output in northern territories, and with some macaos shops.

There's a chance to production rises faster than the reserves, where the reserve life.

Falls, a little bit stays the same doesn't go up a lot.

Some investors don't understand the high grades.

And.

Underground mine reserves that are proven out like a big porphyry.

Would choose slowed down the production.

To sort of keep in line with reserves or would you buy and stock because people don't understand the outlook.

Well I think John you know that you did valid points, but in reality is you know we got to we mine as effectively as we can at our operations and we explored aggressively because we know we see the opportunity to continue to grow value, but the leave ounces Sydney.

Ground, you know, it's not that might be in our DNA.

Yeah, We got we got our operating plants and we're going to we are working to two to two that they can sneak in a great value today for our shareholders. You know there's lot of ways. We create value one is by cutting costs and earnings and and local LOE costs and earnings and high revenues than certainly, but we also create value for shareholders with the diamond drill.

Bit discovering new deposits and and extending reserves and resources and the recent highs and lows overtime, but may not fundamentally we were working on how we maximized value on time.

So we might want to just be comfortable was a short reserve life if the miners.

I get a the ground faster than you can document things at 43, one on one.

Yes, its underground coal mining.

Remember years ago working off of oil on back in 90, 95, 96, where the chief geologist gains Media's all upset with the engineered we produced 170000 ounces that happened mediums and put them into reserve statement. Since then that mine produced over 3 million ounces of gold so.

It's the nature of underground coal mining and lot of these areas. We are we do have gotten drilled all we do recognize the importance of of building up the resource in the reserves to really get some comfort to the shareholders and that's why we are very aggressive explore in terms of our drilling so.

We're gonna go to that.

Yeah, So had a question.

I'm a little confused to business the discussion about claims expiring around foster go and other companies picking them up.

Well I'm, an extremely complicated sophisticated brilliant milling process.

Mining many techniques for the courts versus the refractory ore and.

Bio, reaching and is onshore drilling or kind of a deep in places.

Is there a big rush to stay claims all around you for people, who don't have any idea how the mill the or.

Hi, Thanks, Thanks, John I mean is clearly there's a lot of.

There's a lot of interest in the area given the high grade nature of the discoveries in the and the production that's it could well. Thank you. Your point you Mike is in the really valid one.

Does anyone pipes that that materials going to be tend to be milled and my left of this most of the mill site.

Yeah from now and we don't have anything to fee it from others discovery anything in the them in the area.

Joining me today, our benefit I think.

So these books are gonna do high risk Wildcatting.

And if they had some it does take induced throw to you for royalty.

That could be an outcome.

Thank you.

Thank you. Our next question comes from Stephen Butler from GMP Securities. Your line is open.

Oh, Thanks, operator, guys great quarter, David a quick question for you. Obviously, you guys printed a heck of lot of EBITDA, but you didn't print tell or pay a lot of taxes, maybe could you explain a your tax situation in the quarter you paid such a minimal level of cash taxes will that catch up to where it's a timing thing or explain that.

Sure sure. Thanks for the question. It is and this is something to think about for the year for 2019 and really it.

Really based on the fact that our installments for 2019 taxable income were very low because in 2018, our taxable income after utilizing the losses was very low so our installments are sort of artificially low compared to what our actual tax obligation is for 2019. So we will start and filed their 2018.

Toxic earns a in Australia recently, and so we will start.

Making higher installments on what we all.

Beginning in November so you could see.

Somewhere in neighborhood of 12 to 16 million on a monthly basis right up through the.

The first half of next year with a large catch up payment at the end of June once we file our taxes during the next year.

Okay. So there is it's effectively age.

Is it a 12 month lag or effect of a six month lag is that sort of what you're saying.

More and more or less a 12 month lag or listen to almost like okay.

Not that and Troy.

Coming back to you and you know the.

Slide 21, which are you show themselves race long section views.

That that development drift, that's been driven above the Phoenix and signals zone with those of several drill basis with indicative Oh.

Drill holes off some is that as this is planned drilling or drilling that's been it already undertaken I would assume it's still planned drilling.

Yes, Stephen so that a that field development easing and we currently have full drill rigs positioning that element targeting those dampens extensions of the of the supplementing our reserves.

Drilling is in progress.

And the results from nice drilling from that drilling will be incorporated the Navy model uptight.

Okay got it understand thanks for much guys.

Thank you and our final question comes from Ovais Habib from Scotiabank. Your line is open.

Hi, guys. Thanks for taking my question just a couple of.

Questions from me most of the stuff has been answered on on even on the Harrier.

Obviously, you guys have been developing into heavier.

When do you guys start expecting to see.

Or kind of coming out when I'm basically heading towards is you know how should we kind of look at 2020 in terms of.

Ill wrap up in and throughput is if some of that material coming in 2020.

Hi, Thanks, Thanks advice.

So its I tunes is without without providing a detailed numbers.

We'd expect.

Fusion from harissa to still be quite modest in 2020, and then increasing beyond that 0.1 of the key drivers for that is the completion of the key infrastructure projects.

Question on right with associated parent right et cetera. So the volume increase which is which is that additional contribution from from hereon diesel ease a little but beyond that really so.

I would expect pretty soon of expect that would see pretty similar volumes in a in 2020 to what we've seen machine.

Okay got it and just just moving on to cause more as well.

You know obviously you guys are looking to make some sort of decision by the end of the year on on commercial production, but can you give us kind of just what should we expect over the next couple of months just in terms of updates from you guys.

Is there is there any kind of once you do make a decision of the mine plan expected to be released or how should we look at this.

Yeah, I mean, what would what we'd expect to to do is.

Is the potential for some time expression drew results to be to be released we'll we'll see way that that stands.

But but in terms of framing or guidance the 2020.

Then clearly from out I mean, we want to be talking about production levels and and in cost metrics.

In terms of what we're looking for he is a vitamins it's clearly yeah.

In operation of of significant Scott or at least a pathway to that and that sort of plus 100000 ounce per annum production profile. We've we've costs matrix that might same stores and and the ability to generate cash lifestyle. So they that they the criteria that we can floor.

And we wouldn't start out an internal processes around so that now.

Okay. Okay.

That's perfect and that's a that's it for me thanks that thanks for taking my questions.

Thank you very much that concludes the questions I'll turn the call back over to Mark.

For closing comments.

Thanks, very much again, everybody, who took time to participate in the call as you heard we had a record third quarter and very encouraging we expect a very strong finish to 2019 regenerating industry, leading earnings for building our financial strength.

Very good progress with our projects and have a lot of exciting things going on from an expiration standpoint, I. We expect to continue to have a lot to say and look forward to updating the market again in the weeks and months ahead. So thanks again enjoy the rest of your day.

Thank you very much ladies and gentlemen. This concludes our conference you may now disconnect.