Q3 2019 Earnings Call
Good morning, My name is Sylvia and I will be a conference operator today at this time I would like to welcome everyone to some muscles Q3 2019 results conference call.
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Mr., John John You made I'll begin conference.
I think really good morning.
[laughter] Senior management team joining me today for the coal.
Is there more president Chief <unk>, President and Chief Executive Officer.
You mean.
Financial Officer, <unk>, Vice President exploration.
Ladies Shane Vice President Engineering and construction.
Well yourself Vice president of mining operations.
Like remind listeners that somebody might actually be discussed during today's call may contain forward looking statements forward. Looking statements include but are not limited to items such as their expectations regarding the market pretty simple timetable mining operation expenses capital expenditures guidance and reserves in reserve estimates.
Such statements are given isn't needed this conference call and involve risks and uncertainties.
Remember.
Okay were made in preparing to Steven and actual results could differ materially accordingly.
Not place undue reliance on forward looking statements for additional information with respect to forward looking statements risk [laughter] fills our 2018 anyone DNA is updated and other filings made with a secure Canadian securities regulatory authorities and available under website, that's kinda before [noise].
Oh disclaims any obligation to update or revise any forward looking statements, except as required by law makers.
It makes a cautionary Steven folse chemical spokes people, who may address you. During this call today, all dollar amounts are pretty U.S. doors, unless otherwise stated.
With that said I will turn the call would have been what does it move where the presentation portion of the coal phone like culinary.
And one.
Thank you John and good morning, everyone. Thank you for joining semaphore third quarter 2019 results conference call.
We did or in some excellent results in the quarter that poor unfortunately overshadowed somewhat by the worn off before failure.
I'm happy to report that the processing plant has restarted and we are adding to the master file I agree or from the C. you open pit.
As was always contemplated well would be probably seem to see open pit I agree or in the fourth quarter, which will have a significant positive in fact, I'm encouraged allowing us to meet the full year guidance that's meant.
In addition to you the underground development continued on timing on budget during the quarter. We continue to expand reaching full production of 2000 tons were they in the first quarter off 2020.
[noise] delivered another quarter of strong operational and financial results contributing more than 55000 ounces at an all in sustaining costs a for $497 correct.
Combined with men are we on a quarterly production almost 70000 ounces at an all in sustaining cost seven other than six aircraft.
Consolidated operating cash flow was a respectable 50 million for 15 cents per share. We recorded a net income of 9 million and earnings of three cents per share after a noncash deferred tax expense of 11 million for the boom.
Excluding the deferred tax expense our earnings per share would have been a six cents per share for the period.
The third order continued momentum in exploration there, but I said to know we receive additional white intercept above average grade confirming that this many the nature of the bend to know me now nature.
And to proximal also signed this will result in the third quarter, returning consistently higher grade for goodwill.
Further we received two interesting drill results in the newer area [laughter] 700 meters east of the main spend two zones, the turning to 75 and six me the reach both.
About six graphic Donna and will be followed up in the fourth quarter.
The team is busy working away on a combined resource statement afford to consolidate to spend two area, including the Karen casual portion for the year end resource statement.
We anticipate this 2019 combined fan to resourcing won't be well receive and our 2020 Ben to resource goal of 2.5 to 3 million ounces continues to be well within reach.
Exploration at our existing operations continued to progress.
Well, we have three rigs currently drilling.
The program was completed in the third quarter, although assays remain outstanding.
The remainder of the program, we're continuing to fourth quarter exploring nurse surface. Please just north of the existing fits.
I know we received some interesting results from an area we COFINA.
Drilling covered a strike plan of 250 meters and eat section, we drilled returns mineralization.
So remains open along strike and that's depth and follow up drilling of these areas will be sign in the fourth quarter.
If I can continue to progress well in third quarter were released the being on the nothing that's showing an after tax NPV a $400 million.
Fortunately it exists to improved economics to increase resource and additional cost savings in the mining operation and design.
Finally, I'm pleased to report that we made a 2 million dollar investment income that go back over these are in Maui, and we believe them to be highly prospective isn't definitely is consistent with our existing strategic creating a sustainable development pipeline. In addition to extending mine life of our existing operation.
Operator, I would like to open up the lands for Q any session.
Thank you ladies and gentlemen, if you do have a question. Please press star followed by one and you touched on phones. You will then here Athree Tony problems acknowledging your request and should you wish to would drop your question simply press star followed by too and we do ask that if you're using your speakerphone. Please lists the handset before.
Pressing any keats [laughter] and your first question will be from a base hobby at Scotiabank. Please go ahead [noise].
Hi, good morning, everyone.
Just a couple of questions from me I'm just in terms of fuel.
You know high grade coming in in Q4.
What kind of led grades are you expecting Budweiser coming in in Q4, and what's the current stock by looking like.
ER on in terms of great work, we're expecting in the quarter is 3.9 grams about 3.9.
And we're expecting to be able to process through another 50000 ton.
It doesn't Duncan.
Okay, perfect and and just in terms just moving to bungle.
Obviously agreed seems to be hung in there pretty nicely above the two cents we're done.
And in terms off I'm going into Q4 should we expect similar grades always that's still kind of tapering down close to six drives button.
For Q4.
Yeah, you should expect a there's lower grade a we're expecting that throughput to be <unk> as well. So since I have two foot will probably not.
And I thought that kinda six favour. So you should expect something more like in the 5.5 Grand Prix time for that isn't any guarded and and in terms of the issues that you guys had passed in the past regarding that were to mills and all that I mean is that is that past and and and you don't going forward should we should we see stable.
Throughput going forward.
Yeah, we had like.
And then shutdowns during third quarter related to the Magnegas Decliners. This is a this is so now.
So its operating well since we started back or living in it.
However.
All in there the beginning of the fourth quarter, beginning Oct, we've changed the lighter than in the Sag Mills and that's been that's been a challenge since the beginning of the operation there was something some jamming between lift there as.
Yes, the change the that the liners and those new.
Met so design I've been installed and in that begin helped over and I can tell you that the jamming between lifters has been so.
Perfect. Okay, and then just switching gears to exploration.
Obviously lots of Ah you know targets that you guys have been I'm, you know really seeing some good results from in terms of bundle.
Is there any specific you know target that Richard just gonna focused on right now or or looking to expand.
[noise] actually what we're doing right now as.
We are compiler results of the previous scaling and getting ready for resource calculation, but Meanwhile, what we're doing is exploring some more grassroots targets all over both the carrying castle in Vancouver, and that's what we're gonna be focusing on for the Q4.
Okay perfect.
Guys. Thanks for taking my questions I leave it dead and let others jump on thanks.
Right.
Thank you next question will be some bright spots.
<unk>. Please go ahead.
Morning, Thanks for taking the questions just going to follow on from a device way left off on boom. Good that's throughput Savage around 3100 today I was one if you could talk to the outlook for throughput at <unk> blue going into next year.
The next year so its a.
It's a vis vis a early to talk about next year, we are at the budget process, but what we're expecting a in Q4 years to reach the average of 4000 times because they are the I assume the highest throughput for the for the year in terms of quarter.
So.
I cannot see why wouldn't be lower next year can weekend will reach a bit more that's so that's still.
To be confirmed but I can I I'm pretty sure you can at least expect 4000 done today.
Okay, and just to be sure that 4000 tonnes. A day is for an operating day on a calendar <unk> on your availability Fools errand 3700.
Hi, good that's possible I think it's more like in.
Where you were usually using 92% in a availability so on for Doug, Yes, that's about that that's.
Okay. So from Q4 onwards, we should bit nameplate.
Yes.
The 6.25 grams per ton in Q3 quick question on on that so on that number how did that reconcile to your block model.
I.
These results are two assistance, we pretty much of the same since the beginning of the year. A reconciliation is it is a is.
Confirming that model.
It's been I think year to date, it was slightly positive one or 2% range that.
Yeah.
In fact, it's still remains positive.
Which is a bit higher grade is also a bit higher were about 3%.
We're still seeing the same tendency in Q3 as we saw the first six months it here.
The good problem to have.
One quick question on the C underground as of end of September you've already opened up four of the <unk> levels.
Given that and that you're accelerating the plan for 2020 into the Q4 period.
What are your expectations for development or in Q4 from the C underground and would you put that through the process plant in Q4.
Yes, so we expect to complete by the end of December close to 8100 meters and development, which includes the 5600 meters.
Element requires to attain the first production level or in that there's 2500 meters of additional most of it is associated with full preparation a that we're taking a bit offence as well and preparing the second mining phase right now the bottleneck in the fourth quarter is completing the vertical raises.
To permit translation circuit, and as well as a security issues with the escape waste, we Oh and the first production stalled a mid December and will be lapping that production with the eight mining faces all four stores within Q1 13 full ramp up production in 2000 tonnes per day.
[noise] within Q1 2020.
Okay. So around two and a half kilometers of all development will be completed by year end, a heat up properly.
Yeah, we're averaging about a 20 meters for a day, we will be a competing at the end of October were at 6005 or 400, we will be doing about two 2000 kilometers total was by design by the end of year.
And that development <unk> would be would you would send that to the plant.
But it's not all development or a lot of fit is a additional development to prepare the second mining faces. Some of it is a sofa preparation as well and there is a portion of that which are the 400 meters will be the development or required.
Okay. So we'll see something in Q4, but not a not so much.
Not specifically, we did put nothing in our budget or in our forecast.
Right.
Okay.
And maybe maybe one more on that actually there's a bullet Oh I hate. It says construction on the contract is surface infrastructure was completed it is that is what does that relate to is that a workshop.
Basically all infrastructure, we had some temporary infrastructure to.
Quickly commenced work on the underground. So we went ahead with <unk> a administration building maintenance workshop.
A dry for the workers. We also have gensets ventilation raises so basically all the permanent infrastructure needed to the reach full production has been pretty much all completed.
Sounds like the projects gone very well that's it for me thanks very much like it.
Thank you.
Once again, ladies and gentlemen, if you do have any questions. Please press star followed by one and you touched on something and your next question will be from Lawson Winder Bank of America. Please go ahead.
[laughter] Hi, guys. Good morning, maybe just a couple of questions on the undergo again, but this time on costs, what were your mining costs and processing costs and in the corner.
[noise] Oh, the mining cost for scientists to daughter 35.
[noise] per ton in Iraq.
The plan is 32, daughter and the time.
And we as onsite DNA as a daughter button.
[laughter], great now that $32 per ton I mean, if I, if I remember correctly I think that's a little bit above your budget or are you guys budgeting something like 27 to $29 range.
It was a minute 28.
28.
20, okay.
That's for the full year.
But it's a time <unk> relationship.
Yeah, so depending if you if we have more times like like what we're expecting in the fourth quarter everything that is fixed on a per ton basis of course is decreasing exactly yes no of course.
And then just in terms of rock hardness and in Q4, I mean, so far this year you've been mining from the from the west side of the pad, which I mean, obviously as much harder or <unk>.
What do you expect to continue mining from the west side of the.
<unk> in Q4, or you can we see some softer or start to come in.
Yes, as the plan is for the rest of this year and next year as well, we will continue focusing mining within the west a fit of the onboard the positive we have different sectors in the west fit a right now we're in sectors. One in five which is a bit more into south, but it's very similar in terms of Oh, They Uh huh.
There is picks up the hardness, yeah, well, there's maybe a bit are there, but it's not like the easiest way south or yeah, it's very close.
Okay.
[laughter] [laughter] sorry.
We have no outside no satellites itself really left.
Yes, [laughter], Okay. That's very helpful. And then just on the the throughput levels have you guys hit the named <unk> nameplate capacity yet to date in Q4.
[noise], yes, I would not say all depending on the on the availability, but I would say most of phase we are on on on a on the target.
But you know we reached the targets before its to maintain its on a four month that that's it for the challenging, especially when we had the that's jamming and between the lets there. So you have to do some watch out of this I guess, then that the two but drop but we can we even reached more than that but but.
Our our what we're planning to do is just try to have a stable throughput.
Nameplate.
This is this is a our goal for now.
And then and then just to be clear is the plan to exit 2019 at 4200 tonnes per day nameplate is that isn't the idea or is it to average that for the quarter.
We're looking to averaged 4000.
Yeah, what I'm, saying is on different days you could reach 4200.
4300, yes, but all that.
Uh huh.
Okay.
Thank you for that and then just yes, there was a pretty significant build in a working capital in the quarter So accounts payable.
Accounts receivable inventories all sort of went in in a different direction is that something that we can see unwind in Q4.
I would say.
Probably one of the.
Biggest increases the stockpile that's a food.
So most of its it's been it's been completed there is still some to come in the fourth quarter, we're still looking to stockpile like a.
250000 time on the stockpiles in the fourth quarter after that I would say, it's worth pretty much done that was it wasn't my lack we added the theater. The study you know to reach that cater to document to get to those six six grams.
We had we had to stockpile that that's a that kind of science. So that was the flat even if you didn't say study so there's a.
So almost Uh huh.
Okay. So.
We expect just a little bit of a build in the quarter, but I would just be from inventory as opposed to accounts payable receivables would that be sir.
Yeah accounts payable I would say, it's fairly stable it may change from one quarter to quarter, but but it's really a question of timing.
Yeah.
Accounts receivable, yeah, you should see some decrease in the fourth quarter. Okay. There's a there's a question that timing as well that in there.
As opposed to stockpile.
Okay. That's a that's very helpful. And then I'm just gonna water situation at that doesn't go.
How is the rainy season with respect to the.
Water storage facility was it filled to sufficient level to get you through two next year's rainy season, and what is that exact level and I think the capacity was 2 million cubic meters is that correct. Thank you.
Yeah, I'm well aware full capacity right now the rainy season was great. This year, we had over 800 millimeters of rain. So everything is full so we have.
And two of water and all the reservoir as a full.
Okay, well, that's fantastic news and then maybe just one final question from me from.
More of a corporate strategic point of view so at the Investor Day, I think you guys had talked a little bit about targeting targeting yearend 2019 for a decision on shareholder returns just curious I mean, there's a timeline get impacted at all by what happened with the Warner North pit wall or.
Are you guys still targeting that timeline. Thank you.
I think.
That timeline is the timeline of course.
Well failure of course created the special situation that will be will be taken into consideration, but but we noted at some point a you know we always said we will be waiting till.
The underground is a development is completed.
We know what we asked is that to reimburse, but at some point without peer review, what our and our eyes.
Cash flow going forward and this isn't that should be taken at some point.
So the timing is assigning the entity.
Okay, that's great thanks very much.
Thank you.
Thank you as a reminder, ladies and gentlemen, if you do have any questions. Please press star followed by [noise].
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Thank you I'd like to take this opportunity remind listeners that our third quarter 2018 in DNA and financial statements are available on our website for on SEDAR.
A webcast of this conference call will also be available for replay at our website for a period of 30 days. Thank you and have a good day.
Thank you ladies and gentlemen, just doesn't do you conclude your conference call for today. Once again, thank you for attending and at this time, we do actually would you. Please disconnect your lines enjoy the rest of your day.
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