Q4 2019 Earnings Call
Thank you for standing by this is the conference operator, welcome to the Torics Gold resources Inc. fourth quarter and year end 2019 results Conference call. As a reminder, all participants are in listen only mode and the conference is being recorded.
After the presentation, there will be an opportunity to ask questions.
To join the question Q you May Press Star then one on your telephone keypad should you need assistance during the conference call you may signal, operator by pressing star and zero.
I'd now like turn the conference over to marry about off General Counsel and corporate Secretary. Please go ahead.
Thank you operator, and good morning, everyone.
On behalf of the Torics team welcome to our fourth quarter and year end 2019 conference call before.
Before we begin the presentation. Please note that certain statements to be made today by the management team may contain forward looking information. So please refer to the detailed cautionary note it stays m. DNA.
On the call today, we have Fred Stanford, President and CEO, Steven Thomas CFO, and Jody 'cause <unk> co COO.
Following the presentation, there will be available for the question and answer period.
This conference call is being webcast and will be available for replay on our website. This mornings press release together with the financial statements NIM DNA are posted on our website and have been filed on SEDAR.
So please note that all amounts mentioned on the call today or in U.S. dollar so unless otherwise stated I'll now turn the call over to Fred.
Thank you Mary and welcome to all the lives.
We will follow the same pattern on this call is we did in Q3.
Jodi 'cause ankle and the C O overall, well heavily operations portion of the call Steve Thomas in the CFO role will follow with the financial highlights or reveals the quarter.
Before getting started I would like to recognize Jody in the entire site team.
For the recent achievement of a phenomenal safety outcomes.
Earlier in February they surpassed a milestone of 5 million hours worked on site without a lost time injury.
Achieving 1 million hours in the mining industry without a lost time injury is something to be celebrated a.
Achieving 5 million hours is almost unheard of.
Congratulations to the entirety.
After Jody and Steve have provided their updates I will provide an update on media Luna exploration and lock a high.
I will now turn the floor order Jody you for an overview of operations during the quarter.
Thank you Fred and good morning fall in the line.
I'm pleased to report will be posted another solid quarter to round out 2019, producing 125000 ounces in the quarter and 454000 ounces in here.
Level of production not only play such high end guidance, but also surpassed 2018 production record by 28%.
As Fred mentioned, our production achievement.
Only by EUR 60.1.
Yeah, No lost time injuries, and accord and close every year with lost time injury frequency 0.63 over a million hours.
This represents a 32% improvement over a year and 2018.
Stacks up against a best in class performance anywhere in the world.
The 5 million our milestone is something that we're all exceptionally proud that I mean, how your team is committed to delivering 5 million more.
Finally on the agenda, there were no reportable environmental fills in the quarter.
Turning now to <unk> production.
The performance excellence continued out of both the pits and stuff so.
Not Ricky stride out all in 29.
In the quarter, an average of 16000 tonnes per day with mined out of L. B mall at why has.
Great.
0.7 grams per tonne as expected.
Similarly sub still contributed with an average of a thousand tonnes per day in the quarter.
With great, averaging 7.6 grams per tonne completely aligned the plant.
Turning to the processing plants, there are three key areas.
First performance excellence in search.
Second.
As it relates to reagent consumption.
And third alignment issue for the segment.
Taking these one other time.
First off.
During the last market update I reported that we had an excellent September through that starts plans with the agitator neutralization take having been changed out.
And I'm pleased to report that this trend continued for the entirety of Q4.
Blow through your plans averaged 452 cubic meters per hour for the quarter against the design of 400.
Copper recovery averaged 91 person against the design of 91%.
And cyanide recovery averaged <unk> 0.49 kilograms per ton aboard mills versus the design 0.47.
But this sustained level the performance I think we can safely say that we now have start operating its design.
The soluble <unk>.
In the third quarter, we reported the presence of soluble iron sold he said was driving up cyanide consumption.
We're just starting to bench test various methods oxidized.
At the tail end of Q3, we tried oxidizing leach circuit using plants air.
That seems to work so we moved onto bench testing. The addition of oxygen gap.
Except one defense, we moved into a field trial pumping oxygen tank three during the first week of November.
I'm pleased to say that while levels of iron and publishing went up from 61000 to 66000 parts per million from Q3 to Q4.
Our cyanide consumption had a reverse trend.
Went down from 4.05 kilograms per ton to 3.52 kilograms per tonne from Q3 Q4.
We were encouraged by the results that in January we installed typing to an additional tank and they'll be circuit.
Began to pump oxygen in there as well.
30 days on the second level of testing results have been promising.
In terms of been talked to cash flow every half kilograms per tonne sign I'd say results kind of cost savings of approximately $400000 per month in cyanide alone.
And there are we supposed to savings and downstream reagents used in the finite destruction process as well.
Lastly, I got Simon alignment.
Thanks throughput averaged 12120 tons per day in the fourth quarter relatively flat from quarter three.
The main factor that negatively impacted throughput in the quarter wasn't unexpected failure in the SEC coupling on the opinion side of the drive system.
Happens in late December and took up 81 hours to repair.
Taking picking up off of Archrock of a record milling month to close out the year.
You may recall that we had a similar coupling failure in June of 29 team that one was on the reduce your slides to drive train.
Given that both of these failures where alignment related immediately took the following action.
First we undertook to separate independent inspections are big browsing and the full fleets under the Sag looking to rule in the or rule out the theory about some visible cracking in the grouting, what's contributing to the alignment issue.
We landed to external alignment specialists on flights one with global experience in the other from Mexico.
I was watching what's your what's already being tracked automatically we also began tracking flock vibration measurements three times per day.
We took some extra time during our January shutdown to fully aligned all components of the drive train.
Together with other maintenance being performed the January sat down with 88 hours all in.
At this point I can report that temperature and bike race and data, it's holding within design tolerances and.
We have seen an excellent run of over 14000 tonnes per day meld in a period of them been between the January and February shut down.
Well I don't think it prudent to conclusively rule out that crafts routing grouting has contributed to the alignment issues.
Certainly the passage of time without temperature and vibration excursion is very encouraging.
I expect that you will have more to report out on that at the end of Q1.
I will now turn the call back over to Fred.
Thank you Jody.
Steve can you please take us through the highlights of the financial results.
Thank you Fred and good morning, everyone.
Q4 was another strong quarter for toric scope by both operationally and financially.
This quarter rounded out a record breaking year for the company, leaving Torics with a far stronger balance sheet done at the start of 29 chain.
Record production levels and the elevated gold price in the second half of the a deliberate over $300 million of cash from operating activities.
Given the significant cash generation in Q4, we elected to pay a third the $66 million in accelerated debt payments. In addition to the 20 million accelerated in Q3.
This meant that we closed when she launching with principal outstanding of $190 million under net debt position of $22 million, approximately 200 million better than at the end of 28 two.
The Q4 closing cash balance of $162 million underpins, a positive working capital balance of $97 million.
The reduction in working capital compared to Q3 arises as the debt prepayments made reduced the long term portion of the debt balance rather than the current liability.
So the income tax accrual increasing Q4 is tax losses were used up in Q3.
This current tax liability will be settled in Q1 of Twentytwenty.
The other major component of the working capital balance inventory of $129 million.
By 6 million from Q3, due largely to a 10 million dollar increase in New York stockpile balance, reflecting the 300000, increasing ore tons as we continue to mine right above processing.
After taking account for primarily non cash impairment.
The balance sheet reflects on so that during Q4, we invested a set of a $12 million deferred stripping activities and sustaining capital in line with plan.
And I said $11 million into growth projects media Luna sub so all of them on deep.
And said that [noise].
Development, so much hi mining program.
For the full year. This brings us to was a $100 million invested to develop the open pits investing sustaining capital and advanced the growth projects that more support near and long term production.
Our guidance for Twentytwenty investment in these programs will continue and gross immediately when as we develop the feasibility study advanced infill drill program commenced a ton of one to the Beauxis River.
With this future capital program ahead of Us on Wall Street pay down debt during 2020, and 2021, we implemented a modest hedging program to cover right thousand ounces monthly per job production using zero cost collar hedges with a cold $1400 and above.
We will continue to monitor the suits have been achieved this program being rolled into 2021.
Now turning briefly to earnings for the quarter and full yet.
Before produced over $102 million of EBITDA and $330 million for the full year.
Along with a minimal net debt position mentioned earlier. This means our net leverage ratio was below <unk> 0.05, and along with all the covenants under the credit agreement we are in full compliance.
Earnings from mine operations at $41 million took us to full year earnings of 161 million underpinned by increasing price in Q4 versus Q3, which resulted in an average realized margin of $864 per ounce sold 127000 ounces sold.
However earnings were lower than Q3, due to lower polymet sales and higher depreciation largely reflecting the noncash impact of impairing the long term low grade and ore stockpile, along with depreciation of the previously capitalized costs Oh, the Mone C and the wall has west peers.
I'm pleased to say that with all the total costs for Q4 at $617 per ounce on full year at $619 per ounce I, you seek let's say $767 per ounce the key for an $805 for the full year.
Both cost measures for within our guidance range.
This was achieved despite cost being impacted by elevated reagent consumption to treat Saudi boy in an increased cost of the site based profit sharing plan driven by a higher taxable profit position.
Income before income tax expense for the quarter was $31 million, an 118 million.
As indicated earlier the company is now what Crewing card income tax in addition to the mining royalty, resulting in a tax expense for the full year of $64.5 million.
Offset by a deferred tax recovery of 17.7 million.
The two key drivers, giving rise to the sizable deferred tax recovery of the depletion of tax losses, and the relative change in the book value for property plant and equipment versus the peso denominated talks about here for which the talks about he was impacted by a 4% strengthening in the peso during.
Yeah.
This has resulted in net income of $35 million.41 per share for the quarter and for the full year net income of $71 million on a basic basis 84 cents, a share and 80 cents a share on an adjusted basis.
In summary, Q4 has delivered significant free cash flow and earnings per share and our closing balance sheet shows a healthy working capital position and a continued journey to a net cash positive position expected.
2021.
In 2025, plus will remain on maximizing cash generated three sustained production and cost control strengthening our balance sheet through effective Treasury management.
Enhancing corporate returns through a rigorous caps, we investment discipline.
Thank you for listening and with that I'll turn the Mike back to Fred.
Thank you Steve.
I'll conclude with an update on media Laura exploration, then MCO high.
The infill drilling program at media Luna provided a nice boost to the confidence in the geological model for the deposit.
Team at 100% success rate and upgrading targeted inferred tons to the indicated confidence class with a modest increase in grade.
And Twentytwenty, we will drill to intercept another hundred targets, what's the objective of upgrading to additional areas of the deposit.
This will give us three mining areas to include in the feasibility study, which is planned for release in Q1 of next year.
Several trade off studies are underway in preparation for the feasibility study.
One of the critical trade offs was how to access the deposit.
We looked extensively at options to go over the bosses River.
On it or underage and we have recently decided to go under the bosses River with a southern kilometer tunnels from the yields you to the media loan to deposit.
In effect. This makes me Luna an extension of L. G and we can continue to use of facilities of systems that we have established over the past few years.
[noise] the tunnel onto the river will be far and away the best option from an environmental perspective.
With no risk of anything [noise] falling or leaking into the river.
It will also reduce costs and permitting risk.
What's the designs, we're working on we expect a media Luna will be one of the most environmentally and socially optimize mines in the world.
We expect it to be an all electric mining.
And Jody is looking at solar power options to take advantage of the high solar loading in this part of the world.
However, the tunnel into the river has a longer excavations shot joel than some of the other access auctions.
We expect it to be of lower costs, but it does pose a shovel or risk if not started this year.
Hence we have an event some of the media Luna project build capex to Twentytwenty to get started on this title and for infill drilling to further add to the reserves note.
We have diamond drill down of the river and the rock qualities excellent for totally.
Drilling an L.D. and sub so also continues to be successful in extending the high grade mineralization.
We will be investing capital in 2020 to get yield the opened up for mining and extending the sub scale infrastructure.
Interestingly these deeper discoveries are getting down to the elevation of the processing plant, which opens up off those for future lower cost access.
[noise] continuing with the macro high updates.
29 team was a year of testing the more innovative aspects of the mining system.
We demonstrated that we could excavate tunnels using overhead monorail based equipment.
So we can excavate titles at a gradient of minus 30 degrees, which is four times steeper than conventional titles and hence one quarter the links to achieve the same elevation change.
We demonstrated that we can achieve conveyable fragmentation, and both short haul and long hole primary blasted.
We also demonstrated that we can must go a long hole open stope with a low cost 30 horsepower electric slusher.
Twentytwenty will be or perfecting the processes that we have demonstrated as viable in 29 team.
Moving on to test the conveying systems that are part of the Mako high system.
The flexible trimming conveyor has been commission now.
The steep ramp conveyor has been manufactured and is in transit to site.
The conveying solution from the open stope growl to the football Footwall will be tested later this year.
In the media Luna title, we will test using conveyors and the excavation process.
We are expecting to excavate that tunnel at advance rates that are that will challenge the modern Erie or records for drill and blast calls.
We're also advancing on the design work for the services to support this mining system of the future.
The current focus is on more automating mine design.
The pace of inbound inquiries from other companies corporates is increasing.
Once you 20 is going to be very interesting here for torics on a number for us.
I'll now turn the floor over to do operator to coordinate any questions from call participants.
Thank you we will now begin the question and answer session to join the question Q You May. Please press Star then one on your telephone keypad, you'll hear a tone acknowledging your request. If you are using a speakerphone. Please pick up your handset before pressing any keys to withdraw your question. Please press Star then too.
To join the question Q. Please press Star then one it now.
Our first question comes from Trevor Turnbull Scotiabank. Please go ahead.
Yeah, I had a couple of questions I guess, the first one just related to some of the work youre doing with cyanide consumption and the Iron you mentioned that you've got it down about a half a kilogram per ton and I. It sounded like it was around three and a half kilograms per tonne I just wondered you know that.
Perfect World kind of what is your target for cyanide consumption.
So I'll answer that.
We've just started with tank the second tank on the cyanide consumption and yeah. We would expect the results to about double what we saw in the first time.
So if we get down to three we're doing well Oh.
Okay.
And then a quick question on Mako High you talked about having.
Tested the ability to do these excavations at a 30.
30 degrees and and I know you're waiting to get a conveyor. So that you can convey up that steep ramp I just wondered what do you doing in the meantime to actually get material up that ramp or is it going out or is it going down another way.
Oh right now we slice it off the ramp.
On the site tour will be there tomorrow and the next day and people will get a chance to see that but we flush it up the ramp and later on when we use the conveyor and the ex division process will slush onto the tail end of the conveyor as we advance it down the route.
Okay.
And then last question Fred you came out with the first tranche of updated a infill drilling for media Luna and I couldn't recall had.
I had that resource calculation also taken into account or any dikes that you have it may be alona I know, you've gone and done those calculations in other parts of the mine I, but I couldn't remember if that had been adjusted for immediate Luna yet.
Yeah, it's going back a few years Trevor it was the the work on the dikes and media alumina and the age dating over them relative to the period of mineralization that led to the changes in L.D. So all of those things were included in the very original media Luna resource.
Okay.
Great. That's all I had thanks Fred.
Thanks Trevor.
Once again, if you ever question. Please press Star then one.
This concludes the question and answer session I would like to turn the conference back over to Mr. Stanford for any closing remarks.
Thank you Eric.
In conclusion.
Turing says a lot of exciting catalysts in play for the near medium and longer term.
Deal GE is a beautiful foundational asset.
The team is delivering on the potential loved that asset.
The media Luna project is moving forward on schedule and shows great promise to make the E. L. G asset a cash generator for many years into the future.
Hi continues to demonstrate that has the potential to be an industry does disruptive mining system and the strategic advantage for tourists. These are interesting times to be a part of the mining company. The Torics is and is becoming.
We look forward to the next call to report the Q1 results and signing off I Hope that you all have a wonderful day.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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