Q4 2019 Earnings Call
Greetings and welcome to indefinitely wins fifth fourth quarter full year 2019 results webcast at this time all participant seven anything I mean I look at brief question about secession will follow the formal presentation. If anyone should require afraid to assist in its truly Nicholson piece Chris.
So is it on your telephone keypad.
I might get this conference is being looked at it is like my pleasure to introduce your host Mr. Sebastian Goodman. Please see often Gov <unk> mining corporation. Thank him if that did not see so she made again.
Thank you operator.
Good morning, everyone and thank you for joining our Q4 2019 and who your results presentation. My name is the best in the month the true I'm the CEO of in determining and it's a pleasure to be talking to you once again.
Please note today's call is covered by our disclaimer notice on forward looking statements.
The format for todays call will be our use your quarterly format I will provide an overview then Luis will review our financial performance, followed by Mark who will discuss the operations and I will conclude before opening today's presentation up for questions.
Exploration Patrick is also with US here today and available to answer any exploration questions you may have.
Beginning with our usual four months I'm pleased to showed that we have achieved strong results across all four of our strategic pillars. In 2019. Most importantly, 2019 marks our success were transition from a bit of intense capital investments to a cash flow generation phase in nature to we generated our first positive net cash flows into the investment phase.
And were able to reduce on that that by hundred inserts $2 million by year end. This is an incredibly exciting milestone for the company and I would love deeper into the details of the following slides.
Another key achieve monies aastrom operational performance, which for the seventh consecutive years, so endeavor achieve its production and all in sustaining cost guidance. This is a significant accomplishment and I want to take a moment to commend our entire operating team most notably we benefited significantly from the stuff that you TCR mine following its commissioning in Q1 the mine was.
Completed on budget and ahead of schedule and we are looking forward to seem to results of a full year production this year.
Exploration continued to be a strong focus for us as we look to build optionality throughout our portfolio. We saw over 300000 meters drilled it across the group in 2019 and discovered 2.1 million ounces of M&A resources.
Turning now to the next page the health and safety of our teams remain on number one priority.
Yeah, I recall remains well below the industry averages you can see here.
However, we are very sad to report.
Since that ocular last week about Karma mine and employee died following an accident involving a heavy mining vehicle.
Despite immediate emergency medical care efforts to revive the employee were unsuccessful.
We are undertaking a comprehensive investigation to understand why is treated you occurred so that we can work to prevent similar incidents from happening again.
Mark will come back to this end the call my overview section.
As I mentioned, a moment ago and never enjoyed another strong year from an operational standpoint successfully meeting our guidance for the seventh consecutive year on the graph here you can see the production from continuing operations in Blue and the grey shaded area represents production from discontinued operations.
Overall production from continuing operation has increased by 6% in 2019 or over 2018, many things to DTC I'd project startup in late Q1.
Looking ahead to 2020, we expect to see further increase as we benefit from it food you every tcl and higher grade carry palm discovery at one day coming into production in the second half of the year.
Turning now to slide seven you will see more details on our audience sustaining cost Oh, we have seen a continued decrease since 2013 heating 800, an $18 grounds in southern 19, and meeting our guidance for the Sevens hearing the Roe.
In 2019, we benefited from the easiest United stuff that which had audience is tending coaster in the low 600 dollar per on French installed and made it 2020, we expect that you see to remained low at 845 to $895 barrels.
This translated to a strong increases in the oil in margin you can see just how marked a this increase was in the Chaucer displayed here as we added $62 million from out 2018 figure does interesting to note that we have generated two time to 2.8 times already in margin in age to bear versus H, one a substantial increase.
Yes, thanks to a stronger gold price in DTC I production.
Turning to slide nine this illustrate the strong cash flow generated in 2019 really showing the increase in maturity of our portfolio. The main factor underpinning. This is our successful transition from a construction phase two production phase and as shown here Q3 was really the Castro inflection point for us.
We had finished building it in Q1, but we still had some cash outflow in Q2 due to upsize of the plant and accounts payable.
This change in Q3, when we made $52 million and then later $80 million in Q4, so totaled $132 million for the second half of the year.
On this next slide we show how we can pay on free cash flow yield against peers in our sector before I comment on our own performance I would like to commend the industry for long time. This industry has shown negative free cash flow yields and this has been the key challenge in attracting generalist investors.
Today, a number of gold companies are now starting to focus on return on capital employed and cash flow and with many of them starting to generate healthy yields in time. This will benefit the sector has award.
In our case is graphics demonstrate both the work achieved on the portfolio and the rerating potential of our stock.
Because of the large capex spend in the first half of the your ups doesn't mines in free cash flow yield was 1% based on 2020 consensus estimates were now trading at a 30% yield amongst the highest within our peer group.
This remains a tough market and companies our nominee rewarded only after the deliver understandable given the prudent nature of investors as such we are confident that as we continue to demonstrate strong cash flow. This performance you start to be reflected into our share price.
Now we have reached a state of positive cash flow point and this has translated into a strong net debt reduction which was expected given the quick paybacks of our projects.
The bottom of the graph illustrates the cumulative capex for the business and what has been incurred in each period, most of which have been steadily decreasing as we completed DTC I'd project.
We decreased from a picking that up $660 million at the end of Q2 to $528 million by year end.
Youre of a year, we finished at the lower net debt and have significantly better. It all net debt to EBITDA ratio will decrease from a peak of almost three times in Q1 to 1.48 times at year end. This is expected to further decrease to be below one times by year end.
As you see on this next slide we show how this is ultimately translated into return on capital employed a key target for US is to achieve a 20% return on capital employed and we can see that when we annualize h. too which is a more than fair representation of what the group can generate it stands at 14%. We expect this tickets continue to increase in 2020.
Based on a greater production within the group.
Turning to slide 13, now I would like to discuss exploration, which remains a large focus for us and has been successful the key priorities for us are twofold, firstly to extend mine lives at our flagship assets. When then EG, we've been successful with the carry discoveries and it looked like discoveries respectively, most of which are being converted into reserves.
Look like at IGI was converted into reserves two weeks ago and that one day, we expect reserves on county, West and carry center to be converted in Q2.
In the hot and we've been working on increasing optionality within the portfolio menu. We said it grow as it has grown from zero to 1.2 million answers have indicated resources in less than 18 months is.
In addition, we're starting to drill the other greenfield areas, such as Guinea, which looks promising.
On Slide 14, we have a reminder, about five your exploration targets that we set for ourselves at the end of 2016, you objective was to find 10 to 15 million on sort of indicated resources at a cost of less than $20 films, we felt that increasing our budget was easy, but we needed to show accountability just out of the operations are accountable for their production.
Then audience sustaining cost and projects, so capex and timeline, we felt that exploration also needed to be a comfortable.
We are pleased to show that since late 2016, the team is tracking well against these targets and we have already found 6.3 million ounces at a cost of less than $12 barrels.
The goal has been to find high grade they put this on displaced lower quality production. Therefore, we haven't shared this is the case for all major discoveries over the last three years, what is even more remarkable is the time from discovery to production as you can see on the chart here, which is exceptionally quick in the mining industry.
Looking at the various examples becca to what 80 Watson for less than $10 pound $10 per arms and has been put into production was in two years, we see assuming a story will look like and carry pump because its high grade we're eager to start mining there.
Mining people would have ask us what the secret for growing fast I guess I'm not supposed to give it away, but here goes first it is a question of exploration mentality, we want exploration to produce therefore, we don't onto waste time, announcers, which will never get mine ore being mined in the extend use we test many targets and once we are confident enough on the discovery.
It is full steam ahead because of allows presence in West Africa, we can redeploy our human capital based on our strategic needs. For example, when we made the type of discovery. It was all hands on deck to read over 1000 holes in the year and we go straight to indicated statues bypassing the inferred category altogether.
This means that when we haven't made in indicated resource. We then just need to do engendering work to have reserves I swear permitting as soon as we have a strong conviction we start the process.
Of course, having the right team at land package is the first fundamental step so the formula doesn't need copyrights.
Here on slide 16, we want to show how we're planning to extend the mine life at Hyundai in order to achieve our goal.
End of 250000 loans grew year over 10 years.
For illustrative purposes, we showing that we need to feel the grey areas you've seen the chart on the right hand side in total this adds to 1.1 million onto the reserves. The good news is that we have already added 710000 ounces with the CARICOM discovery, meaning we need approximately an additional 400000 loans to convert to reserves and achieve our target of this.
Another figure we have already identified above 1 million ounces of indicated resources that county, West Anti center, and we expect to convert this into reserves within Q2.
This has happened we'll update our mine plans and published technical reports.
On slide 17, we show disseminate situation for IGI. We also have similar objectives, and then need to fill the gap and achieve 10 years of flat 250000 also production per year.
In order to reach this target, we need to add half a million ounces of reserves.
And we are well underway to achieving that.
Look like where we are well we announced reserves two weeks ago has already added 400000 loans again, we will be publishing updated technical reports in Q2, two should these new reserves and that the plant is running at 5 million tons per annum compared to the previous 4 million tons for Adam in the study.
On the next page you see a snapshot of the two projects that we have in the pipeline kalla and physical although our main focus is to remembers that as I mentioned at the beginning we also seeking to build optionality in the portfolio and this is being done through these two assets.
As you recall, we bought Kelowna about two years ago, and while I'm pleased that Canada is competing with Citigroup for capital allocation the ideas to Edmonds most projects studies this year.
Fit accrual we target to peak for Q2 of this year and further exploration to continue to grow the resource oncology that we expect to complete an updated feasibility study in Q3.
It is to being a good position by year end to combat most projects side by side.
Before I conclude this for section I'd like to just take a moment to reflect on the turnaround we've achieved over the past four years, there's been a very busy an exciting journey, we have invested almost a billion dollar into the business and in turn we've been to flagships mines and discovered 6.3 million ounces. So far in addition to this we have divested three noncore assets and acquired too.
Centered is how to work we are no ideally positioned to benefit from the stronger gold price environment.
Looking forward to 2020, our key focus is to deleverage the company continue to extend the mine lives of our flagship assets and Bill Botti Optionality as we've just described this is all in the aim of delivering stronger shareholder returns.
While we are therefore very proud of our turnaround over the past few years. This hasn't yet been translated into strong shareholder returns when looking at our share price.
As shown on the left here over the past over the last three years, we've been trading in line with the index was frustrating we have managed to identify and address the key risk to the business.
Looking at the right hand side. We've detailed these key risks that are just overhangs are being the construction risk and its associated balance sheet risk over the past few years, we've gone from one construction to the next and in doing so we increased the over a risk of the business because we took on debt without demonstrating to the market our ability to generate cash.
Today, we believe this risk is largely eliminated as both mines built are performing well and our net debt quickly declining to healthy level.
The other Q overhang has been mine lives, which we believe has also been addressed with each new then having plus 10 years.
Moreover, the reserves addition, being added have made us even more attractive from a peanut perspective.
Given our growth objectives, and because we have seen as a natural consolidator in West Africa. There seems to have been an M&A overhang. Despite us proving time and time again that we are disciplined when looking at external growth.
I just described we've been working hard over the past four years, and we will keep up the good work to increase shareholder returns thanks to our strong cash flow.
With this I will now I'll hand, the presentation to with and walk you will walk you through our financials.
Thank you Sebastiane.
On my first slide I thought it would be interesting to provide you with a snapshot of how the business has performed given our time constraint I will only comment on the full year numbers in the upcoming slide on this slide out. However, you have the key highlights for the quarter over quarter comparison, the key takeaway for the is that adjusted EBITDA and operating cash.
Cash flow were up 34, and 20% respectively. Most of this performance was weighted in the second half of the following the coming on line of the CIO project.
Let's turn to slide 23, where we have provided a breakdown of the major elements used to derive at all in margin in the tables, we have shown both the nominal amount as well as the dollars per ounce impact as shown in the right and five Collins.
The all in sustaining margin came in at $400 bounce up $56 over 2018, given the increase gold sales and stronger gold price in nominal terms, we were up 22% for the year.
For reference we have provided additional insight for each of the main line items on the slide.
On the next slide we start from the all in March and as shown on the previous slide and work our way to the net cash inflow for the game over.
Overall, we had 66 million dollar inflow for the here and ask the question mentioned Weve a cash negative during the first half were strong inflows during the second.
Diving into a bit more detail I'd like to anticipate any questions. You may have they for focusing on the two main variances.
Starting with working capital movement, it swung to an inflow of $38 million during the quarter and we have provided details on quoting movements in our news release and this strong reduction contributed favorably to our cash inflows for the quarter, bringing the full year, two net outflow of $14 million.
The second line item relates to higher taxes paid it increased compared to the previous year, mainly due to $39 million in tax payments made at Hyundai, which comprised of 27 million for each 2018 income tax payment and 12 million Fourtwenty 19, provisional income tax payments. This should now normalize.
At one day, we should be only making be making regular provisional tax payments.
I would also like to point out that AG down now becomes liability pay income tax or 2019 as the tax holiday in that in 2018. This has contributed to the higher tax expense in 2019.
Moving onto the next slide thanks to the cash generated in the second half of the year. The company's liquidity remained strong and we are in a healthy financial position with $310 million of available funding.
Current leverage ratio as Seth mentioned stands at 1.48 times, which has a sharp decrease over the 1.97 times at the end of December 2018, and our peak of nearly three times at midyear last year.
We now intend to the next slide which outlines the breakdown of earnings and the adjusted EPS.
Adjusted earnings increased by 40% in 2019 amounting to $74 million or 67 cents per share.
All the adjustments made to derive our adjusted EPS figure having explained on this slide titled adjustments might amounted to $237 million.
The call my impairment was mainly as a result of a reduction in reserves, which mark will elaborate on further in his section.
It is worth pointing out that the Nick in payment impact is $105 million as we have credited our income tax expense with $22 million, representing the reversal of a deferred tax liability associated with the amount of mineral property and paid.
I realized that we only published our Indian Iron financial the three hours ago Anixter luck to digest the team and I would be happy to address any specific questions in the queue in isolation or in the coming days.
Moving onto slide 27.
You can see that on a quarterly basis. The adjusted EPS has steadily increased over the past four quarters.
My final slide is the starting point for future discussion and reporting as a group. Our objective is to achieve a return in excess of 20% on our capital employed and this slide provides a summary of the return being provided across our portfolio of assets as a supplement to comments made earlier by Sebastien in.
In his presentation.
Looking at the Pie chart. It is interesting to note that nearly 20% of our capital employed is related to projects and exploration.
While this is currently not generating I return it is expected to provide returns in the future.
And if we were to exclude the cleanup project and other exploration projects as well as adjusting for some corporate assets. The return for producing assets would be approximately 14% for for the 2019 full yeah.
Further I understand the rationale behind these numbers I have provided brighthouse pass it with projections for 2020 that completes the financial review I'll now hand over to Mark to give us an uptake by mine.
Thanks, Larry.
Before looking at the operational results a lot to folks on the evolution of air resources and reserves.
Looking first at changes in resources measured mine depletion resources increased by 1.2 million ounces and as you see on the bottom right chart. Most of the increase was at our flagship Hyundai mine based on the carry western carries into discoveries plus additions that Eric starting Ferrochrome project.
These more than offset the decline in resources that come in at Bell.
On slide 31, we can say the incremental increase in reserves reserves amounted to 7.9 million ounces at year end remaining relatively flat year on year massive Mon deflation.
As you say on the bottom rot shot reserves increased advice our flagship mines.
This was due to the CARICOM discovery, Hyundai and the Laplaca discovery at IGI.
Act bear results declined in line with morning deflation.
At comma reserves decrease as we updated the resource model for TG, one and rebrand Pete optimizations by some life of mine unit cost geotechnical and recovery rate assumptions.
Given comments like tried nature, the updated resource models and reserves, a better expected to be more robust and maximize profitability.
Just bought the reduction in reserves there is still the potential to further extend mine life as we will continue to assess near pit extensions at JG, one can north in particular.
Given the current Hyatt gold price Karma also offers optionality to reevaluate the sulfide resources, but at the current pits.
This order a car sale plan and as such would be evaluated alongside other internal growth opportunities.
Now moving to our operational performance.
On the next slide we have an overview of production by mine.
Starting with the bridge on the top left with the exclusion of temperature, which was sold at the end of 2018 production from continuing operations amounted to 612000 ounces.
As you say from the waterfall chart the benefited from the issue so ill start up.
On the bottom of the slide we've provided in thoughts per mine inclusive of 2020 garden.
Starting off with the if im on slide 33 production decreased slightly in the past quarter has processed grades and recoveries were partially offset by increased plant throughput.
The main thing Tonight is that during the quarter, we successfully completed the processing plant upgrade to 5 million tons per annum.
The process cried decreased as low grade stockpiles, we used to supplement mill feed while the recovery rates decreased due to increased volumes of to play a fresh ore processed.
Turning to the next slide on a full year basis, it performed very well hitting the top end of garden.
In 2020, it is expected to produce up to 255000 ounces at an all in sustaining cost of up to $675 per ounce.
The plant trade is expected to be sourced from the back to two and deploy pits, while continuing to be supplemented with lower grade historic dams.
I was that if you last week and I've been impressed with the significant progress made on open pit infrastructure associated mainly with the building of the whole right from the play which was the new pits constructed on the other sort of the river.
And reconfiguring roadways for more efficient upright operation of the CEO as opposed to date wage project.
As many of you will know is located in quite a high rainfall environment and adjacent to the Cavalli River, meaning that use of mining fleet can be impacted by under four conditions.
With the commencement of the dry season in late Q4 focus was placed on the construction of secondly from the Ts EFT and improving X Pete roadway conditions.
This work is progressing well and we should be far better prepared for this year's wet season.
Moving onto Hoon day on start 35 production in the last quarter remained flat at slightly higher throughput was offset by lower price subscriber.
As we mentioned on the previous quarterly call. The third quarter was impacted by severe rains, which delayed the development of the hydride bore IP and waste capitalization activities have been delayed.
This meant that we had word to work hard to catch up in the fourth quarter of last year and continuing into this quarter.
Process credits decrease despite a 20% increase in mine grades as low grade stockpiles supplemented the mill feed and recovery rates remained flat.
In terms of full year results on the next slide.
Production decreased and all in sustaining cost increased due to low grade stockpile supplementing the mill feed.
And a shift to processing, a higher proportion of harder for sure.
By comparison 2000 and that in benefited from high grade Softgel and a lower strip ratio.
Looking ahead to the rest of 2021 day is expected to produce up to 250000 ounces at an all in sustaining cost of up to $895 per ounce.
Mining is expected to be focused on vindaloo and brackets.
The top end of production guidance and low end of all in sustaining cost guidance.
Oh preits potential to stop mining at the high grade CARICOM deposit.
Let a portion of the year.
The permitting process for this pit is well underway.
There's been a few changes in the past few months to the management team and I can say that they are really working well together across all facets of the operation to ensure the Hyundai can be a safe consistent producer for many years to come.
Turning now to slide 37 for AG.
Hi recovery right in Q4 compensated for loan mill throughput and mill tons milled cried.
Oman remained steady with most of the opening sourced from the West pit Weiss extraction progressed at the south pit.
In terms of process grades they say Christ as like Red stockpile supplemented the fate.
In terms of the full year on the next slide production decreased marginally due to lower mill throughput and great, which were partially offset by a higher recovery right.
Looking ahead, we expect the mine to produce up to 124000 ounces in 2020 at an all in sustaining cost of up to $990 per ounce.
Money is expected to focus mainly in the north pit with contributions from the west pit in the first half of the year and from the South pit extension in the second half.
Overall throughput and recovery rights are expected to decrease marginally due to the how to all blend.
The team continues to perform well at Bell and is totally focused on maximizing performance over the coming years.
Finally, we tend to come on slide 39.
Before talking to the Q4 production I would like to take the opportunity to talk about the fatality that occurred the last week.
We deeply regret the loss of life to one of aircraft are afraid as Robert who died following an accident in the counterfeit.
So the incident is still under investigation, we have taken this opportunity to really look hard at all of our mining operations across the group to ensure that we have overwrought systems and processes in place and that everything is operating and being operated accordingly.
As often happens following a tragedy lot. This all of us get a second chance to really improve on how we operate.
Hopscotch Roberts family and colleagues as I'm mourn the loss of a husband father and highly respected work line.
Quarter on quarter production remained flat at 27000 ounces as an increase in stack tonnage and recovery right offset the lower state right now.
Mining activities focused exclusively on oxide ore and waste from the county North pit.
Prices tonnage increase following upgrades to the second system upgrades decreased slightly as low grade stockpile supplemented the fade.
Turning to the last lot of the operations review in terms of the full year production decreased due to lower grades associated with additional ore stacked from stockpiles.
This year regarding production of up to 110000 ounces for comma at an all in sustaining cost of $1050 per ounce.
Mining activity is expected to occur at the cannot pit throughout the year.
While the GE will commence production in Q1.
As mentioned in the reserves and resources slide.
We will continue to undertake definition drilling along strike in the Gigi one and cannot fits with the intent of extending the mine life of the speeds.
And with that I'll hand over to Sebastian to conclude the presentation.
Many thanks, Mark as we have shown throughout the presentation. We have successfully moved from a pair of intense capital investment to one concentrated on generating significant cash flow.
This is the pinnacle moment in our company's history, and a testament to the efforts of the team over the past five years, where they're on the exploration project or operational side.
Now that we have the strong foundation for the company. We are focused on two key initiatives the strengthening of our balance sheet and ensuring optionality is built into our portfolio.
Following the portfolio repositioning we now have strong fundamentals centered on high quality asset base generating strong free cash flow yield we have demonstrated a strong capital allocation discipline with a 20% Roger target, which we are approaching and thanks to our exploration successes, we now have a strong organic growth pipeline.
I think that we now offer an even more attractive investment proposition to the one we did a few years ago. When we were largely a turnaround story.
Before I take your question I'd like to thank again the team for their tremendous efforts in both 2019 and over the past few years, which ultimately resulted in this achievement. Thank you as well to our shareholders who have supported us in this journey. This could not have been done without the support and we expect that they will now start seeing this report rewarded thank you very much.
Such.
Thank you, ladies and gentlemen, Leven I begin the question and answer session. As a reminder, if you wish to ask your question. Please press star one on your telephone and wait your name to be announced if you wish to kind of see your question. Please press the hashed Kay.
Once again, if you wish to ask your question. Please press star one.
Your first question comes from the line of sight Terry Please ask your question.
Hi, Good morning. This fahad from credit Suisse. Thanks for taking my question.
You talked a bit about capital allocation.
You're seeing from.
Pure pure gold companies that are trying to attract generalist capital I'm curious what are your thoughts on instituting a dividend, particularly as the free cash flow improves.
Quite along the way of deleveraging already maybe just your thoughts on.
Thanks.
Thanks, I as well as we as we've been saying over the last.
The last few months is our our key challenges you know to demonstrate to the market. The robustness of our cash flow generation, which I think we've done now for two quarters. The objective is to demonstrate in Q1 in Q2.
Which will give you know a 12 months rolling cash flow generation that we're now ready for.
Putting in place a dividend policy.
So this is on our agenda for the July Board meeting in order to have this 12 months.
Site to decide the.
The type of dividend policy, but clearly that's a that's in our minds. This is a way for us to demonstrate the robustness of the business.
Going forward and we came in putting liked in place in the in the second half.
Okay, great that that's helpful and just.
On such a chronic kalina, what gold remind us what does the gold price assumption that you're using to assess the economics right now and.
Is that is that gold price assumption something that you could change given what's what's happening more recently with gold prices. Thanks.
Yeah. The I mean, the studies that we are currently running our than at a certain hundred gold price and we don't expect to change that.
If you recall for example, with.
EG, we were also showing the economics for those projects that 1000 dollar gold price. So the objective for US is to continue to be very discipline on the way, we look at a gold price and making sure that we have 20% plus return on capital employed on those projects.
Okay. Thank you.
Thank you. Your next question comes from Justin Johnson Mr., Kevin. Please ask your question.
Hi, guys. Thanks, very much for taking my questions and congratulations on a couple great projects built in reaching this inflection point.
My first questions on.
The medium term profile and I realize that the studies is probably coming soon but.
Breaking in.
Im towards the end of this year do you expect.
Back up and in the next few years driven by.
And then just on the cost profile of their costs are a little bit higher this year do you expect that's come down.
And the next couple of years.
Sure I mean, just anything that in on this has been.
We are expecting and you'll see that in the technical reports that we will publish them in Q2, which is being able to stabilize Hyundai at 250000 loans for the next the next tenure.
Clearly the fact that by year end, we should put in production.
Carry pump, which will be much higher grade and mostly also oxide.
This will help a lot in the in both the throughput, but also in driving down the all in sustaining cost. So we're expecting some positives around that 421 and going forward.
Okay in terms of your current thinking about.
I guess.
Approached standpoint.
Thank you.
As to push throughput, there or given the higher grade, which you just.
Target.
It is.
No. We think we mentioned last year that we wanted to see how the carry area was moving in terms of size to see whether at some point, we would have a potential.
Call for an increase in the plant capacity.
This stayed with Wesmark, we feeling that the receives some room I mean for de bottlenecking. The the current plant and obviously by improving the mixed we should be able to increase the bid the the throughput compared to a obviously what we had last year. So we're more focused on that for the timing rather than the then adding.
Some some capacity.
Okay.
Absolutely.
Million costs terms is today.
Going forward.
Sort of higher.
Stripping.
Number should come down.
Well I think that you know a 19 and 20 in particular the first half of 20 is higher than what we would expect compare to the mid term. So I would expect some some improvements obviously in a in h. too, but more importantly, as scary from gets in a issue those.
Should see those improvements in 21 in 22.
Okay. Thanks, very much and just my last one.
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Yes.
The reserves or come down there.
Gold price is youre.
Station that.
Price remains as it is.
The medium term that.
Come back.
Okay.
Continue.
Deserves.
Strategic.
Oh, I think we've taken the.
I would say a cautious approach them into the asset based on the gold price that we so last year and some of the results that we got on the on recoveries in the in particular in certain pits.
But obviously given that it's a low grade operation is highly sensitive to the gold price environment.
There are a number of things that.
We haven't decided to do so far the it could be revisited if.
In the higher gold price environment.
Aspiration for example have been stream down you know given the environment in a in that north spot. So are there was no real focus over the last the last two years 18 months I mean on.
On exploration sulfide also had been something that.
We haven't pushed forward given the gold price environment in the vast things obviously will change if if the gold price stays where it is right now on the on spot.
And as well as you know ekso extensions on the on the current pits. So a thing it's a it's a conservative approach in a into a I think a desirable also approach, but it doesn't mean that the these assets gonna stay with this mine life, we expect that.
Hopefully, we'll continue to increase.
Over the next 12 18 months in particular with this current gold price environment.
Okay. Thanks, very much that's a that's very clear.
For the lineup.
Yes.
Thanks, Justin.
Your next question comes from the line of James Bow from RBC capital markets. Please ask your question.
Yeah. Good afternoon, I'm just firstly on your guidance for next year, you know you've got quite a broad range in terms of fuel and Koskotas. Just wondered if you could talk about the scenarios, where you get towards the top and all of that range and what we should be looking out for as the year goes ahead in terms of.
Operational performance or maybe the early start to carry pump et cetera.
Thanks, James I think you got it right I mean, the reason of this range is mainly due to the.
Timing of.
Carry pump, but at year end.
Karyopharm would be obviously, a very low cost operation and very high cash cogeneration and depending on where when we'll be starting a mining and getting a answers from from this bid will basically.
Make the difference was in the within the guidance.
It's a very significant.
No impact on on the overall lost production and cost performance.
We expecting for now to have the permit for carry bound to be delivered at the end of Q2. Beginning of Q3 is you know things goes this way then.
We pretty confident that.
We should be in the in the lower part of the of the guidance, if we getting a bit of delays on that front then we'll be.
Probably more in the mid to the higher higher end of the guidance.
Okay. That's great and then just looking at return on capital employed obviously moving higher heading for your targeted 20%. When we look at the asset write down and you gave on slide 28 in terms of whether okay, where keys are you can see obviously column is lagging quite significantly there.
Let me sort of willing to tolerate that sort of level of Roki before you color looks at the potential for disposal from that asset.
The answer is not long.
I mean, I think we've shown over the last three years that.
We want to be focusing on the assets that are in a bringing the level of returns that we are expecting.
And therefore, if we feel that those assets can deliver this type of returns then they probably don't fit into our portfolio. So I think that that's fair to say that a in Oklahoma is on the spot and.
And either we see based on the new gold price environment, some perspective to in order to increase significantly the returns there otherwise you know karma will become non core four of our portfolio.
Okay, that's great.
We see 2019, you had an approach of another company you talk about M&A risk as being a risk that's been addressed it should we think about you maybe being slightly more conservative on the M&A front in Twentytwenty, given where the project pipeline is and the opportunities you've got to timber items is there.
I think we keep we came having the same approach which is a given the portfolio that we haven't the optionality that we have in the portfolio and also the cash flow that we expected to generate into 2020.
Then there is not a priority we look at external growth more on an opportunistic basis.
And I think that we've tried to demonstrate to a you know to the market and to our shareholders that when it comes to looking at M&A, we try to be very discipline in order not to do crazy things and the fact that we're able to start and end the process. When we feel that were not able to creating value for our shareholders in those should be.
Someone some comfort to give some comfort to our shareholders. So you know a lot is happening in the in the market. The good news is whenever you have to whenever you feel that you can go to a negotiation there, but do you want to make sure that you completely free to move out of that table.
If the conditions on the there so that's what we've shown with we sentiment and we continue to be in a very disciplined on that front.
Okay. That's great. Thank you.
Thank you. Your next question comes from the line of Gray from BMO capital markets. Please ask your question.
Sebastian it's Roger if from BMO capital markets here.
Just a quick question on the protect CRO upcoming resource estimate on P.A. I mean, how do you. How are you looking at the capital intensity for for Tech given that the development timeline seems to be aligning pretty well with the remaining mine life at IPO and there whether there is scope for reuse of some of the equipment that you're.
That you have.
Reducing the capital for for Tetra, how should we look at that.
Well I think thats right, that's exactly what what we're looking at a it's a bit too early I mean to be able to you know to answer the question, but we've been looking at Citigroup has a nice transition from a from IPO to this to this new project.
Potentially both in terms of our key staff and also as.
In a moving some of those key equipments potentially from from one to the other this is why are we moving now to a scoping study that we expect to enter to publish a in the in the next few weeks and you know obviously fitting who is still early objective is a you know to come up hopefully also with pre visible.
It is study in a by the end of Q3, which will help in terms of guidance on.
What we can achieve there.
The most important for us is to see what's the synergies between the two the to the to mine. The two assets a if there are some then we'll be a I guess mixing smartly I mean, the the profile and the timing if there is less synergies than.
The there is more freedom in terms of of timing, but clearly that's a that's something that we looking carefully at.
Okay.
Thank you.
For me.
Your next question comes from the lives of Richard Hatch from Genentech. Please ask your question.
Thanks, and thanks, so much appreciated and especially on some comp can you just remind us.
The common stream if the yet.
Reduction to the reserves short mine life.
Do you in any way shape or form in terms of any additional payments on that stream or is it should be that when it will save us from the.
Hundred million.
And then just guys. So you add six option and production thereafter, and it doesn't matter if you call that luxury vessel. Thanks.
Yes, Richard that that's exactly the case I mean, it doesn't impact in doesn't change the a the streaming structure, which is moving from.
6.5% on the on the remaining path.
Thanks, Kevin and the second one is just on working capital facility and.
So you had a strong.
Fourth quota and should we be expecting kind of a continuation of that that they stuck is there any any mill Jason the offerings that you can then squeeze.
Richard definitely we will keep on trying to drive down our working capital levels.
I think unfair to suggest flag the collection.
Election year in Burkina Faso, Weve, a very successfully now in our vast receivables and getting those in.
Towards the end of the year that that outsize any risk I might flag tracking fairly confident that will continue along the lines that you have seen.
During the third fourth quarter.
Okay. Thanks very much.
Your next question comes from the line of Jody Maxim Haywood Securities. Please ask your question.
Yeah good afternoon.
Maybe you may begin start with some from the Toluca loose, particularly in terms of how you view.
Asset portfolio management.
The producing assets you have and.
Yes, the realized losses model.
And potential segue free.
Well, it's a fairly crews perhaps.
Just in terms of you get to remind me in terms of viewpoint there in terms of it.
Creature across key criteria that you look to employ when when you're looking at assets.
Core to non core.
Perhaps a viewpoint in terms of.
Optimal structure in terms of number assets under management or at least jurisdictions will diminish.
Yeah sure well in terms of.
The way to look and manage the the overall portfolio is really making sure that we focus the team on assets that are generating the right level returns I mean, we've said.
A target of 20% return on capital employed for the group and therefore, when you are deep dive and as thing. This is why we wanted to show for the first time a bit of split between the return on capital employed for asset.
You see that a you know clearly some some assets I'm not the level of performance that.
We would like a and the either we find the solution to get them to this level or the answer will be that they don't fall into a into our portfolio and there might be in better hands somewhere else.
So that's the way I mean, we're looking at.
At the portfolio and this is why we we sold the over the last three years three assets between Oh, you gardens, among tobacco to as those assets were falling short in terms of a returns and.
As you can imagine still taking a lot of management management time.
So thats probably the first point the second point in terms of you know overall portfolio I think that with with the team that we currently have.
No we give them into a operate to six to eight mines I would say.
I don't want to be a you know above those six eight mines, because otherwise you start having a strong and large.
Team to run them and use on the steady benefit from the same level of synergies.
What's important is to keep that focus over in the West Africa, where we have a lot of a lot of synergies and also it's a very useful on a in terms of of management.
In being very focused geographically, so you know up to six to eight assets and continuing that focus over several countries in West Africa. That's that's the abuse of your strategy.
Great. Thanks, guys. Thanks, perhaps.
Moving now to in terms of understanding with Fox its future production maybe.
From there is you expect to just offset flow great start novel material overtime or do you expect to see incremental.
Improving from throughput rates, given given where you where you thought you achieved in Q4 versus normal nameplate.
Yes.
Sure well for a for each key look like I mean, we have some.
Some infrastructure to get to the.
To the assets and the and obviously.
You want to do those those infrastructures during the dry season, the rainy season.
We're expecting to get the look like a permit in by the end of Q2, beginning of Q3, which means that you know infrastructure work will be done starting after the rainy season this year.
So you will be expecting you know look like two to come in production in the H. too I would say h. to 21.
But in any case, we'll be updating all that with our technical reports in the in Q2.
Okay, great and perhaps in more detail in terms of.
So obviously coming out of the wet season, I guess early in Q4.
Moving into a number cooperating. So you are looking at changing learning average loading capesizes equipment service.
You mean that at 80.
At SSG Suraj.
Well no I think that.
One of the key a the key subject the that we faced at the beginning with a with EG and the multiple bids has been mainly the soft rock.
And therefore, having to run mostly with 80 teaser rather than a our DTC. So as we move forward into the dry season. A in are we expecting to have a better performance in those through as well as Rob duties.
Somehow it's good that we've kept I mean, those are those entities from the heap Leach operation as a they will serve during the rainy season in order to have a balance approach.
Between the ages in equities in particular during the critical season.
But clearly the objective is to have a much better productivity during the dry season running with the with the duties.
Okay great.
And in terms of living maybe Ovature, Hyundai and looking at.
I guess the broader role to play in nature.
The objectives.
Sure I guess, a nominal sort of 10 to 12 your outlook outside calorie pounds.
What are your.
Your main priority targets are those so those you'd look to.
Shield feel that sort of future production yet.
Sure well I think that with we skywest carry sense are coming into reserves in Q2, we will be able to we should be able to a you know to demonstrating the technical reports about 250000 loans for the next to the next 10 years.
But what's interesting is when you look at the again the exploration potential around hoon day.
We still have big.
Exploration targets like a contest where the wounds. She has unique way, which are north of where a which are very interesting and that will start to drill a this year. So you know I'm quite confident that.
The success that we've seen in the carry area. There is no reason why we don't continue to have some a significant success in the in those new areas in the north but the way.
Great, Okay, and you're talking a little more question.
In terms of leverage to oil for us in terms of Fortunately operating cost to get an idea.
Hello oil or oil costs should diminish.
I guess it corporately in assets.
Yes.
I think that enough for the timing in average diesel price no for the group is about 1.2.
When 1.1 to 1.2 dollars per litre.
So we should see as you know a big part of this is also you know local taxes.
So we tend to see.
You know the impact after a in a few months is a these on a rolling basis, rather than just a spot on the oil, but obviously, it's going into the right direction for for US in terms of overall cost improvements, but I would expect a in these two have significant impact only is it continue.
As for appear the Simon.
Given that.
Again, all the taxes into locally or.
Mitigating the biggest of a of those a decrease in the in the oil.
Okay. Thanks.
Thank you as we'd like to time I would now like turn the conference back to Mr. Multitask.
Thank you very much operator, well. Thank you all for attending this Q4 and a and year end results and looking forward to present you. Our Q1 results in the next few months. Thank you very much of a good day.
That does conclude our conference for today. Thank you for participation you may disconnect.
[music].
Okay.