Q4 2019 Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the curriculum with gold Limited's fourth quarter 2019 conference call and webcast.
At this time, all participants are in listen only mode.
After the speakers presentations there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.
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Well it depends a conference over to your speakers.
Marketing Vice President Investor Relations. Thank you. Please go ahead Sir.
Thanks, very much operator, and good morning, everyone.
Welcome to our fourth quarter and full year 2019 conference call and webcast.
With me today are most of the members of the currently gold senior management team.
Including Tony Macoute, your President and Chief Executive Officer.
David source, our Chief Financial Officer.
Kaleo or senior Vice president of global expiration.
Yeah in Holland, our vice President of Australian operations.
Duncan King, our vice President of Kirchen like mining.
Natasha bad or Vice President technical services.
And we also Troy Fuller, who is our director of expiration in Australia with us today as well.
And there are other members of the management team here in the room also.
As indicated today, we'll be making remarks about the results for the fourth quarter in the full year 2019. After their remarks, we'll then open the call the questions. The slide deck that we'll be referring to is available with the webcast on the web site. Both on the home page in the event section.
Before I get started I would like to drive to everyone to the forward looking statements slide which is slide to the debt.
Remarks, and answers to questions may contain and will contain forward looking information about future events or the company.
Please refer to slide two as well as the forward looking information section in our Mdna dated February 19th 2020 for the three in 12 months ended December 31st 2019.
Also during today's call, we will be making reference to non I have for US performance measures. A reconciliation of these measures is available in the Q4 press releases.
As well as in the management discussion and analysis.
Finally, I'll emphasize that all figures given today will be in U.S. dollars unless otherwise specifically stated.
With that I'll now turn the call over to Tony Macoutes, President and CEO of currently cool, Okay. Thanks, Mark and thanks, everybody for for being on the call.
If you look at the results into your mom I'm going to start on slide three we you know <unk> tell you don't 2019 was a record year for the company you to produce over 975000 ounces of gold, which you know, but pretty much met the middle of our guidance range, our cash cost beat our guidance all in sustaining cost where my lowest what were some a lowest in the industry, especially has appeared.
Gold producer with no byproduct credit credits our earnings.
And adjusted length and adjusted earnings actually were both a record and I again hardly a industry leading it sitting at two to $2.74 a share for the year, a very importantly, though it isn't that big part about it we generated over $460 million free cash flow, that's an 80% increase from 2018 and with that kind of cash flow we.
I actually see significant built up our cash position from 332 million at the beginning the year to 707 million. So we had a really solid year and we get to sit here and what you said you're talking about it presenting and you look at the results, but fundamentally it's it's a result from the people that have Kirk and my goal doing all the work.
No. There was there is always down whether they are working at the mines in Australia or are there staff ceremony, the mines in Canada and developing developing.
I want me to mine mining mining the golden into people that are doing the work and so we really want to thank them and our suppliers and everybody else in the community that support us.
I'm going to move onto slide number four which is just looking at the fourth quarter have been pretty much can just.
Almost give you the same thing is what I talked about in the previous slide three in terms of outperformance but.
And very strong in the year, we had record production almost 280000 ounces in the quarter unit costs were very low kind of more cash cost to 55 announced any cost 512 announced we had record quarterly earnings per share of 88 cents per share and we generated $132 million of free cash flow.
In the quarter.
[laughter] journey, turning to slide number five.
All right just to assess it looks at the quarter and outperformance came from where it came from it from the mines and really came from foster build record production hundred 92000 ounces. We had good grades of 50 grams per tonne, which was higher than we expected. We also that higher throughput compared to the last few quarters.
He in Holland, we'll get a little looked a little more details of that later on the presentation turning to Macassa. It also had a solid quarter in Q4 grades were little bit lower than expected, meaning usage reconciliations and in the quarter, though I'll say that for the year as a whole. The we actually had positive reconciliation to degrade expected in the air.
[noise] going on to slide six it's as our you're not going at or guidance production was right at the men midpoint for target range unit costs are very strong strong we had a slight beat on guidance for cash costs, our capital and other expenditures came in pretty much as expected we made great progress with our key projects this year than.
Before shaft that Mccafs is now approximately 1600 feet. Currently we just finished putting in the first station at around 1500 level and the project is on time and on budget and I can tell you that we're currently look and that we're currently looking at revising our plan, which would involve the and the shops on an all in one phase getting it done basically in 2022.
And.
At less less than what we had in the budget, but we'll give you a little more color that little bit later at the mine level fossil there'll be this guidance for production and costs. It had a tremendous year macassa achieved this guidance we had some disappointment that at whole complex as you may have seen and we now we've got to these assets as non core on a conducting a strategic review for for what to do.
Uh huh.
Turning to slide seven in addition to a record quarter, if the big news for Kirkland Lake in Q4 was field to acquire detour gold.
As a major development for the for our company and our shareholders. We know detour very well is it truly world class ore body in a world class operation and we think there's a lot more to be found improvement up here to demonstrate that this is either tier one or the that tier one operation indefinitely in Canada, we plan to invest aggressively.
Between 25, and 30 million in 2020, and then more the following year end and expiration with the opportunities. We see we believe that production at feature can grow and hopefully we we we don't have to look very hard and some some of it in their own current plans each jet intention to increase production over 700000 ounces a year by 2021 with cash costs.
Sorry, but all in sustaining cost.
Sitting sitting between wet lease up somewhere around 850 announce and we think we get there as early as I mentioned has 2021 and then look to continue to grow the operation at current prices, we're going to generate a substantial amount of free cash flow at feature this year in and next year and in fact, we could.
And could generate as much free cash flow in vitro as we do it all our other asked assets combined.
And that's just from the plans we see now we haven't really spent a lot of time chances you really get her hands.
Ranch and families during his fingers dirty dirty and full of Calluses on it yet, but we see lot upside at detour.
And maybe I'll take the point that you're welcome to feature people.
To perkin like gold and and we're really happy to to be able to be now part of the tripled in terms, what we can do with that asset.
Going to a two to slide eight this shows our adjusted guidance for 2020, incorporating that deep feature as.
Here, we expect to be right around 101.5 million ounces for the year.
And again, there will see a lot of casual coming in 2020, which will support our efforts to invest in all three of our world class assets Macassa Fosterville and deter it also help fund our plans to be more aggressive in it with our share buybacks and our dividend growth has as we as we outlined enterprise recent press release and.
In our guidance you I'll just from my point, we we still include in our guidance here the full complex, which we've discussed as being a non core asset so as as the year progressive depending on what we do with with fault, we may be adjusting that.
And with the removal of that from from from the from the guidance.
Turning to slide nine turned now in mineral reserves with the addition to ditch or we did achieve strong growth in mineral reserves I think we the if we look at seemed into performance in the year in and you know with operating performance as I talked about earlier on slide three and and the results, we had and and.
The acquisition to determine how is to treat each helps to transform the company some significant.
Industry, leading things happening in Kirkland Lake goal, but you know when we look I mean, when we look at our reserve statement. We grew reserves at an event mckasson mined by by 9% Dobek, two two and a half million ounces, we part of that growth, we identified that near surface ore body and the cast so that we're going to begin developing into building and.
New mine here.
And then start to be looking to put begin and new source of production for the Mckasson mill over at Fosterville, We did not replace reserves we did discover.
And add new reserve at that Robbins Hill, and we talked about beginning to build a new mine at Robbins Hill and open end fund results, where we completed the fall Seville reserve itself by 637 ounces for the year. We did put a lot of focus on other areas. We didn't do a lot of infield drilling and Swan, which.
It gave us a feeling that maybe we need to be a little bit more concerned with some of our great estimates in some areas, but what are what we should emphasize we we've intersected a law that we've been second we had a lot of good intercepts at Foster Bill.
We went and extends to be an extent and showing an extensive mineralized system here, we encouraged by what we see with with our drill results and the large extensions and we feel we you have to be curious you have to be drilling and are we havent. Joel just had a really really motivated and they have lot of ideas of what they want to want to do it's wonderful.
Major areas of exploration in the company and we received a lot of potential to grow continue to grow reserves at foster Bill. It Doesnt, sometimes you don't get to replace reserves year over year, sometimes it come very quickly like really happened in 2017 in 2018, and we'll continue to work hard and and letter geologist reading.
Your out whats here, so with that I'll turn the call over to David source. Thank you Tony and good morning, everyone.
I will start on slide 10, as Tony mentioned, we had a record adjusted net earnings in Q4 2019 net earnings totaled 106, 9.1 million or 81 cents per share and adjusted net earnings.
Totaled 185.3 million or 88 cents per share the difference between the two adjusted net earnings and net earnings really relates to about 16 million of after tax foreign exchange revaluation loss that was not included in adjusted net earnings in terms of key drivers of earnings at larger came down to strong revenue growth improved.
Unit costs and lower Expensed exploration.
Slide 11 looks at our revenue.
Turning to slide 11, looking at a revenue in more detail revenue in Q4, 2019 totaled 412 million, 47% higher than Q4, 2018, and an 8% decrease from the previous quarter on a year over year basis, both higher wholesale and an increase in gold price contributed to about half of the.
132 million dollar increase in revenue.
Quarter over quarter, the 31 million increase was entirely due to higher wholesale with the gold price on change quarter over quarter.
Moving to slide 12, I'm looking at EBITDA Sean.
Q4, 2019, EBITDA totaled 285.6 million.
52.
Percent increase from Q4 2018 higher earnings was a key driver behind the increase which more than offset the impact of higher levels of depreciation and taxes.
Compared to the previous quarter EBITDA was slightly lower with the impact of the foreign exchange loss in Q4 as well as the foreign exchange gain in Q3, 2019 really accounting for the quarter over quarter change.
Turning to slide 13, our full year 2019 results were very strong net earnings were 560 million or 2.6 $7 per share that was more than doubled the 2018 level.
As with the quarter. The key drivers of earnings growth were sharply higher revenue improved unit cost and lower expense exploration revenue increased 51% year over year with 30%, 36% increase in sales.
980000 ounces contributing.
Most to most of the increase.
These factors were only partially offset by higher non DMV costs and increased corporate DNA expense, reflecting our continued growth on an adjusted basis. Adjusted net earnings were similar to net earnings at 576.4 million or 2.4 $7 per share.
For my last slide Slide 14, I'll look at the change in cash for the quarter, we increased our cash by 91.4 million to 707 million at December 31st 2019. There are few things on the slide I'd like to point out as was the case throughout 2019. It was our operating margin that really drove the growth came in.
Cash a combination of record sales and improved unit costs were key factors contributing to the higher margin.
You can see on slide 14, the various uses of cash we had not surprisingly the most significant is our capital expenditures.
Again this quarter. We can see is that we are funding all of our growth and fill rapidly building our cash position.
With that ill turn the call over to in Holland, Vice President of our Australian operations.
Thanks, David.
Turning to slide 15, I wanted to provide some comments on the quarter for festival.
The operation had an outstanding result, with production of just short of 192000 ounces, a new quarterly record.
The key driver was the exceptional ride performance for the quarter 49.3 grams per tonne.
Also contributing to the result was a record quarterly new recovery of 99.2% with tons essentially in line with previous quarter.
The great performance was driven by US one production during the quarter the image on the right hand side of the slide shows a long section highlighting the sources mind. There were 10 steps in total non for the quarter on this front or what do you have right different levels.
On the development contribution from Swan was approximately 68% of the tons containing 90% of the ounces produced over Q4.
The strong production results translated through exceptional unit cost performance operating cash cost of one isix those brands all in sustaining to 58 grams and earnings from operations for the quarter, which came in at $230.6 million.
Investment continues at first of all with sustaining capital of $25.3 million and growth capital of $11.2 million for the quota.
The growth capital was focused on the three mine project spend less shop ride pace plot and mine water treatment plant with excellent progress on all three.
Well I'm water treatment plant was commissioned in Q4.
Hi slot commenced filling the first underground stuff in January and the ventilation upgrade is expected to be complete in early April.
Turning to slide 16, and to reinforce festival completed now stands between 19 with full year production is 609.4 thousand ounces, which exceeded the guidance range if thought 90 to 16.
Unit costs were also exceptional with operating cash cost of one notch same at all in sustaining of to 91 for the full year operating cash cost performance came in below the guidance range of 130 to 150, driven by the strong production performance.
With that I'll pass over to tuck in King to discuss the Canadian operations. Thank you Ryan as we turn to slide 17, as Tony mentioned earlier Macassa has solid quarter. In Q4, we produced 56000 ounces production was down from the previous quarter, which was mainly a function of route.
We did have some doubled in Q4 that didn't perform as expected, though as Tony mentioned, the overall impacted reconciliations in 2019.
Excuse me with positive cash buffer for 71 for the quarter and the all in sustaining costs were 721.
Tony also discuss the shocked earlier work is progressing very well, we had our peak year of capital will be shopped in 2019 about $76 million.
We're down about 6200, now and advancing about NPD as I've stated we are looking at baby doing the shaft and one for these and saving some capital.
Turning to slide 18.
Turning to the full year in 2019, we did well against guide we produced 241000 ounces within the target range up to 40 to 50.
Cash costs were $414, which was within our range of 402 for 20.
This year, we expect similar production at slightly higher unit costs, which is largely a function of route.
2023, we expect to see the sharp jump in production and lower costs.
Now I'll turn the call over to fair value.
Okay. Thanks Duncan good morning, everyone for today's call will be starting with slide number 19, providing an update a recent work at the Mccaf to mine, which remains the key exploration target for Canada in Q4.
Sounds like we see an image showing the overall exploration targets that were aiming for super antos onto a long section.
Of the current zones in mind infrastructure dedicated to overall area. We're targeting is very large over two kilometer long by two kilometers deep find mainly by the limits of the key zone such as the main don't just outlined in between and pledging to the west and the SNC, which is the purplish tone in the central part is light, but even these limits are pretty much just the limits.
The drilling.
Exploration targets are shown in yellow line and for the most part just direct extensions of the two main structures as well as amalgamated break which is located immediately to the south of the SNC.
In terms of recent work pretty much all of recent efforts have been focused on the SNC and amalgamated nearby to the east west minutes of the structures on the 5300 foot level.
[noise] for Q4 included 38000 meters the results of the drilling.
We reported our best described in the latest press release, which was announced in late December.
And and look at at the results we view these as being very very positive.
Not only if we add significantly to the extension of the essence CNL committed but we had several high grade intercepts near the limits of these two structures. So based on these results were not various price that we did add significantly to the reserves.
Now turning to me next two slides.
Typically showing gentlemen, a little bit more detail on on that results from the press release Slide 20 is we're seeing additional detail for both the for the essence east and West.
As to the.
Right is mainly for the west and the one to the left is for the since seat.
As indicated both images.
Not only have we see do we see some very good intercepts in the whole, but we've added some very good extensions to the zone.
As mentioned the total amount of extension is about 300 meters on on both of these directions, turning now to slide number 21.
At this point, we are seeing some additional detail.
From billing that was done on the amalgamated and as you see.
From the initial announced holes that we announced last year, where we're just a few scattered all nowhere also now starting to see a fairly well defined structure, which is running parallel to the meld with break and what's the best parts into the lining up pretty close to where the intersection of the SMC.
But keep our so anyways a key part to note. This whole thing is that is still at a very early testing stage of development it and already starting to see significant zones emerging in this area.
So in summary, new work at the mine continues to extend the SNC in amalgamated obtaining some very high grade numbers, there's plenty of new targets still Joel as you go forward and drilling is still continuing at this point in time with an expanded program planned for 2020.
So with that I'll now pass over the call Detroit bowler, our director of expectation for Australia.
Thanks, Eric and good morning.
Turning to slide 22.
Drilling if possible over the quarter has been focused on the law Phoenix area and Robins Hill targets.
All these targets represent significant growth opportunities for the company you talk writing to sections containing visible gold intersected in all of the signs.
On the Grand rigs have been dedicated to growth programs targeting extend into the law Phoenix and cygnet brought targets.
Tailing dam plunged from the Swan Zine has now extended into kind of mineral resources mineral reserves approximately 200 made is down plunge.
For from late December 2009 mineral reserves. In addition, inferred mineral resources have been extended approximately 350 made his damn punch from the lower Phoenix linking to the last thing Sapping third block.
Continuity of hydride sulfide mineralization in the operating system has now been confirmed to extend to the 5400 made in holding.
Which is approximately 700 made is down plunge from the updated the same but 2000 and not a mineral reserves offering substantial mineral reserve growth opportunities for the company moving forward.
In addition drilling in the signal design, which sub parallels the Swan zine and seats approximately 120 made his footwall.
As NAV to finding third mineral resources of an approximate 650 made a struggling and 300 made a Dan deep link.
Several intersections of visible gold or tuning hog rights have been to following the sign an infield drilling to increase resource confidence will progress on these attractive growth targeting 2020.
Three rigs out of Q4, I think dedicated to expression of growth targets in area.
Drilling is primarily focused on targeting the antiphon offset setting keen to the structural setting can tying hydride visible gold and allow fading system.
Drilling progress is being slow due to difficult grant conditions. However, geological models I continually being updated based on incoming information.
Evidence of substantial design to sulfide mineralization and occurrences of visible gold in the setting a driving continued exploration efforts in this area.
Two dozen non drilling in harissa resulted in expansion of inferred mineral resources approximately 400 made it down plunge from the December 2009 mineral resources.
Turning to slide 23.
Robin seal programs continue to retain encouraging results with a hearing side of hydride sulfide mineralization with internal signs of visible gold mineralization.
Now to fall into a depth of approximately 650 made his blood surface.
Q4 drilling combined with the rest of two days on a non a drilling culminated in the establishment of a mine mineral reserves of 209000 ounces at Robin sale, which extends to answer the 40 420 level.
And the mineralized system is I've been damp lunch for potential further expansion.
Recently completed step out drilling along the Curie folk train towards the staff of existing mineral resources is also establish that mineralization proceed along the structure.
Finally, one point I kilometers to the SAP.
Demonstrating that this is a significant scout meaner loss structure.
The company is now committed to an expression draw from the fossil underground infrastructure drifting towards Robin seal mineral reserves, which will facilitate further exploration to cure restructure and adjusting trains of mineralization.
Three D. Seismic program was also recently completed in December 2009, and data processing is in progress, which will assist with future exploration target generation.
Thats all possible more unlike the company is continuing to slow attractive regional targets in the north to the north of the more nice and is continuing to advance expression activities in the into the at the cost of my Lane Union race and pawn Craig project Aries.
With that I'll now turn over to tiny mcbridge demand at present to us.
Hey, Thanks try and thanks, everyone.
David Ian Duncan and Eric for your input in the call and again, when we get a sense. We we did have a salt solid year and solid operating performance. We did we add the one if you want to talk at the the moves on the table. The CAGR on a table was that was the reserve replacement at Foster Bill, but you know as as he and I am sorry, as Ian and Troy.
But.
And went through you get the sense that there's there's a lot of potential defined find new reserves, yet we'd have a lot of different priorities happening and we'll be working on on me on replacing reserves at foster to over the next few years.
And go to slide number 24, and we try to wrap up and we did see a press release yesterday that announced so our value enhancement program fundamentally the company belongs to the shareholders and we're here to work to try to provide maximum value for our shareholders and we outlined a few few key components in our press release and and in our.
Hi enhancement program number one is we plan to buyback 20 million shares over the next 12 to 24 months, we say through our NC IB we put it in an automatic purchase program in place or and we do intend to be able to at once we get full full approval from the TSX be able to be buying back our stock on a regular basis and we expect to start.
Happening over the next few few days.
We also doubling our dividend effective Q1, 2020 dividend will be 12, and a half centsfour per share per per sorry controlled map centsper share per quarter or 50 cents per share from Iran for full year basis.
Dieter is a third components, a key initiative for growth and value creation for our shareholders in the company. We have a lot of plans here and we're going to invest wisely in Detroit and we think there is a lot of great lot of lot of new value that can be created here and be realized by the shareholders and just some indications as I mentioned earlier, we see detour being able to.
To generate that as much free cash flow as other other mines combined and it's not necessarily a function of what the all in sustaining cost is going to be its.
Here at Detoured, some volume of the margin that's going to be created by as we grow this production in this asset.
And then some are for finally, we have doesn't need to both our whole complex and our northern territory assets as non core we're going to do we are in a strategic review, we know and what's your strategic review, where we're looking at.
What do we do with these do we.
Do we get how do we move these four days some of them or require investment and capital.
And exploration they may be there.
They are sitting in a certain point in terms of where they meet the criteria that what foster vilma Kassa and deter brings to the table in the current form no. So we're going to look at opportunities, whether it's selling them or or doing some other wasting to two to extract value for our shareholders.
And.
And we'll be giving you more input on that over the next three months.
Anyway, a this summarizes Kirk links company that is it is about creating value and again, we say we we worked for the shareholders were here to create value for shareholders. We've seen our share price struggle recently and were very serious about doing whatever it takes to again be a top performing stock and whatever what it takes his hard work.
We've got people rolling up their sleep so we've got.
Lot efforts on exploration, which has been a key component of driving value for the company. We have lots of efforts and no in terms of you know focus on development as we're doing analyst Duncan indicated with its with the shaft that Mckasson, where we're looking at and where we were going to get the shaft and probably a year earlier for less cost and it was in the capital project.
And that really helps us to rebuild build mckesson to figure in a better mine and lower costs and that's true true value creation and you know when we talk about the value enhancement program, but about a spending almost $1 billion buying back our stock and increasing our dividend to 50 cents a share we're doing this and we have the ability to do this and this might.
Market with these assets and still remain debt free and as a matter of fact, we still see significant cash flow generation in 2020, and 2021 and 2022 in 2023, and so where we would probably be able to be extending these programs into future years. Because you don't visit these that would be we believe that has to be to.
The pump profitable to be to generate value and to really make make a difference in terms of the communities in people's They are and to the shareholders anyway. Thanks for participating our call today and be happy to take any questions.
At this time I would like to remind everyone in order to ask a question.
Star than the number one on your telephone keypad, we'll pause for just a moment the compiled acuity roster.
Okay.
Your first question comes from Cosmos Chiu of see RBC. Your line is open.
Hi, Thanks, Tony and team and first off congratulations on completing the detour deal.
I know, there's a lot of work.
Maybe my first question is maybe I'll try to tackle the b, but on the table for its I think thats, what you call that Tony.
But the decrease in reserves that fosterville here.
No. The tonnage decreased I also decreased a great decreased how does that impact your three year guidance on on cost of because if I went to work out my numbers, if I want to take say the throughput keep at the same for 2021 2022, Oh need at least 30 gram per tonne.
To get to your 552 600000 I also see your production clearly that's higher than what your reserve grade is today. So could you help me maybe reconcile those two.
Yeah, Hey, Cosmos.
LNG.
Hey, guys just too just to stepped through this in a little bit of data.
We actually so pretty significant volume growth.
Now, let me now reserves over the course of the the year.
So we saw extensions to the Phoenix system down plunge from.
Swan, we sort extensions to harissa down plunge of current reserves and we saw her maiden reserve it at Robbins Hill.
Combining the festival in Robbins Hill line, we actually increased volume from 2.7 million tons to 4.2 million tons. In total. So we are building out that loan the along the loss.
It is absolutely true the reserves, we've added over that period dominantly cellphone. So they are.
In that five to 10 Gram range.
With Swan itself, what we did see during the course of the year was.
Well as an adjustment.
Really due to some infill drilling results plus a reconciliation in development, which did have a slot reduction to the to the to the grind.
But the grade of this one reserve itself remains at nearly 40 grams. So it's it's a high grade pace.
And it remains the core to the three year.
At auction window for us So we would expect.
Should be able to consistent with what weve.
Discussed before and guided towards Kosmos, we would expect to increase.
Over the next three is actively as we've brought on line all of our.
Continuing to bring on all of our major projects, which really de bottleneck. Some of these paces. So we're able to increase production out of Phoenix gravity increased production out of Harrier and within a three window start to see potentially some production from Robbins Hill. So.
Hi, good answers your question, but it's really.
So one remains.
Quarter that three year program.
It's a high grade reserves, plus we start to see.
Volume increases as well.
Push or so so in that case CNO, Tony how should we look at it long term because if you you know if you don't add to your swallow reserves.
The three year production guidance could you say actually use up all the reserves that Swan what you've added so far robbinsville as you talked about sulfides and all lower grade so far.
So could we be looking at a pretty steep drop in grade and your number for your number five like how should we model at this point in time.
What I would say Kosmos is it is a limited is very much in expression story for us the the reserves that one thing I'll point out the reserves at Robins Hill.
So that so that definitely sulfide.
But they are up.
Yes fairly shall I say 650 made is below the surface and and above.
The grade tenant that we see in Robbins Hill these better than Phoenix was at the same elevations.
And we see quotes and visible gold intercepts in Robbins Hill.
More than we saw them in Phoenix that that that's no guarantee that we see a slowing down plunge from Brazil.
But it's a it's a pretty positive indicator for us and one that we really encouraged by site. So we think.
Investing $70 million to $80 million, an expression over the course of 2020.
And locking to maintain those sort of levels over the coming knees.
Again, I thought a lot so.
I think that think again hopefully that answers. Your question that we were really optimistic about what we see going forward in terms of in terms of exploration potential yes.
Part of it is the conundrum that I've always happens what underground gold mine right.
People Lucky I see a three year window is that all you got I mean, you would have to assume that things are going to fall off a cliff like Ed only if we find nothing right and you get defensive we there's lot indications that we continue to fine.
Fine mineralization extend mineralization and we're drilling and we've got.
Good understanding on the relationships of of the Swan style of mineralization, our Eagle style of mineralization at how it how it how would how it comes and where it comes into the system and part of it is getting platforms and getting where it is there's nothing wrong with outlining a big Reis, our high grade resource figuring out what the what the size of it is and then going up.
They are in mining it out that's that's the nature of our be the Beast of who we are.
We're going to look and find to find the next ones and I think there's there's significant exploration upside at foster but it is you know it is more where more of an exploration company at foster Bill funding our exploration through through through mining goals that very low cost.
And then on exploration that Tony I know youre $70 million to $80 million budget for 2020, how much of that is being put toward say resource expansion versus you know resource conversion into reserves and you know I'm just wondering come say the end of 2020 or early 2020, why what should we be expect issues.
Be expecting.
More tonnage or can we expect some of those resources today to be converted into reserves.
You want to give some color on that Trey.
Yes, so the the programs.
Mixed.
Robins Hill, with particularly looking at extensions down plunge from Robbinsville satisfy looking to increase the.
Third resources and understand the size and scale.
In particular.
Our body.
Add.
Hi, how are you.
We have we have some extensional definition drilling.
But we also have a step at program targeting the call and offset.
So again looking to bringing awesome inferred resource blocks body in the and.
In the Phoenix area itself.
We've established a quite a lot and said mineral resource block there at the moment.
The focus down plunge from the.
The existing.
Reserves to do some definition drilling to brings more into kind of material for conversion into reserve slider in the.
So sort of half half I guess.
Yes, probably not OTA yep okay.
And that maybe switching gears a little bit here on detour.
You know I guess this is a good lead and from foster, though just running $70 million to $80 million an exploration at foster the.
Only spending $30 million at detour, which seem to be a bit load to me like again in context of what are you spending of fosterville and given the under capitalization of detour in the past.
Is that just a nature of those kinda surface drilling versus underground drilling.
Im just trying to get a sense in terms of is there a possibility that number increases.
Overtime.
$30 million a detour.
I'll, let Eric give you some color on that in a second there Cosmo, but I think fundamentally part of it is a permits part of it is the fact that where you have.
You have to understand in relation to winter and summer in the region and we're already into a winter program and so part of it is as logistics around around getting getting drills, and where to drill and where we can get permits and drill now what you have a short see it sure is not much more left a winter and kind of hard to say is short winter, but spring is coming.
And what we can do there and so we are going to have an aggressive exploration program, it's going to be rebuilding up as the year. Progressive then into next year Winter program, but I'll get Eric give you more color there.
I think Eric you had worked at detour previously and so maybe you could give us a bit more detail in terms of what you're targeting and what you see the highest potential is.
Okay, Yeah, well I can kind of cover off on both those questions I mean, as Tony mentioned I mean.
We can't really.
Immediately start for the program because I mean, we don't have the infrastructure. We don't have people. There's the site we want to me areas, we want to drill.
Do you need some.
Preparation I mean, some of those areas our west.
And ER and its noted that there is helping to area because everyone is we feel it is the best their TV. So [laughter] fill out I mean, those buildings and so we've got a ramp all those things up and but at some point will be up to eight to 10 gels be able to do.
Million per year does not on the one now in terms of the main target.
The main really what we're looking at is really an expansion of the resource really around the main pit area.
We know that when the mine the open pit.
What was designed and then.
Started up I mean, there was still some very large areas.
That were left on drilled.
And those areas are.
Essentially between west and the only less than what the main pit and underlying that the west. It. So they would have a very large impact on the is our systems were to fill engine and we have very high confidence that they will fill in I mean, the main structure at the west that is the same one in the main pit.
And it's actually been drilled on the 55 60 level or an extensive any by plots are gone back in 1990. So.
And part of it is actually in incurred laterally converting.
And in extending so.
So that really is the main target practice is and so that means that we have to get into these areas that are little bit left on the north side of the pit, but its target we feel very confident and we're going to be able to add water resources. We think that we can get lot of the drilling we need to get those resources and designed by before.
The end of next year, I mean, we'll get a lot of it down this year early into the year, but but enable to do a new design.
And shown expanded deserve.
Into next year.
And Eric although some of those underground targets like UK and things like that.
Later on.
Well I mean, that's the same tightness in either the direct extension of the patents mineralization and re right now the pit bottomed out in the nation is RIDEA.
Not the ore body stopping.
Okay as rate underneath the pit.
And.
Theres others on the side from the UK, so that will be.
We'll be testing for extensions the mind only went down to 700 meters at a maximum point.
So.
We see lots of targets at or above the elevation, but but then again a lot of upside going below that as well.
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And then and then maybe extending on detour here, just just want to come from some of these numbers here, what's the capex or detour I don't think you broke it out in your and your press release yesterday, Tony but.
Did say previously sustaining Capex 160, 575 million now 420 230 million can I just take that difference on assume that everything is detour.
Yes, yes, Okay, and then HM.
Just give some kind of the big end the big capital programs that detour part of it is building a new tailings facility and new water pawn service that some of the major and capital expenditures, that's happening insight and then would be adding to that with the exploration et cetera HM.
I know you've given us Tony you know your production guidance would do it for 2020 is that fairly even through the different quarters could you give us a bit more color.
Yes, I think this this.
Well, we tried to say is this year is going to be a lot. The same as what last last year was and.
The big Big ship, Karen and Thats, where we see that differences starting happening in 2021, 2022, but yet I mean, it's it should be fairly fairly straightforward quarter.
Equal.
Equal equal throughout the year, that's what really okay. And then maybe one last question on detour, if I may Tony you talked about potential if somebody's your thousand ounces, even as early as year 2021, that's clearly higher than what the Korean mine plan says so could we be expecting Aneel mine plan sometime.
And then on that what kind of news flow can we be expecting from that lease exploration drilling program and timing of some of that news flow.
Well, yeah, I mean in terms of that did that there had been work on a new mine plan for detour that was being worked on I think there's a the goal was to try to get something of that some of that out I think that timing that with previous there were some around June July of this year. I think you you can you can see something coming out as as the year progresses.
But fundamentally for us as we're developing a new mine plans, we want to start getting some drilling done get a better handle on on on on on what the but with for full potential is of of the deposit here and ensure that were not.
Biting off our nose.
With with what we're doing in the short term because we see potential some significant growth potential here in terms of resorts were going to be looking at alternatives from mining underground combining an underground operation with the with the open pit here you had talked about Q K et cetera, we're going to be looking at that those sites options and we're going to be drilling for new resource at the new extensions and some other.
Areas as we paid off so as the year progresses, I would think that as we have material information as we as we get more color. We've got we're going to be putting up more and more results and probably sometime towards the late summer early fall, we'll probably.
Look at looking at getting people up to up to site than.
His show what we got in what we what we what we're trying to do what the potential is here.
We have lots of ideas and we really getting into motivated and you've got some people outsider. We've got a really really skilled workforce in a very motivated group of people with working up there and they see a lot of upside and you know just being able to fix some of the hand cups off of them and giving them the ability to do to do things is what we're working on.
Thanks, Tony Thanks for the detailed answers to my questions on those other questions I have.
Your next question comes from John Tumazos of John Tumazos, very independent research. Your line is open.
Thank you for taking my question.
Tony I know, you're not giving the fourth and fifth year guidance 2022 in 2023.
Looking ahead.
2020 to have them the casts a shaft ahead of schedule.
It will have.
Benefits of prudent twice on me to say 2023.
Productivity gains at detour.
And then.
Whatever.
New reserves shoes define as foster bill and surrounding zone, Cygnet Robbinsville et cetera.
For the force here 2023 in the fiscal year 2024.
We need to pop something into our excel spreadsheets.
Do you think it's better to put seven.
Grams or 10 grams.
For a bigger number for foster Hill.
And there is a lower Phoenix.
Sort of a gap, where you hadn't defined reserves and resources and you're just getting access.
Is there a chance.
So as that comes into reserves 12 months from now.
Okay.
Okay, well I'll I'll start I will start answering question, maybe I'll give you that give you a little more color on.
On Fosterville I mean, if I look at the plans and sort of again forward looking statement and division and what we're working to build by 2023, we've given some indication mckasson between four and 500000 ounces year with production coming from March the surface near surface deposit plus now coming out of the shaft.
We see we're working towards a keep maintaining fonts mill production at current levels.
Maybe ill be plus or minus 10% from that and then we're looking as as we talked about with Dietrich dethrone over 800000 ounces a year with all I know and so to get a sense of where where that's that's sort of what we're going to work for over the next while and we'll have potential growth, but in terms of answering the questions in terms of what the.
Some of the other parts your question I'll leave it up to end to discuss.
Thanks, Thanks, Stephanie Elijah.
So so and I guess as I touched on before it is.
It is an expression story.
For us.
We would expect there to be reserve conversion in level things the system, absolutely continues and and we would expect to see growth phase.
I think the answer to your specific question about what the grade is.
Is it.
That's a great question.
What I would say is that we see continued expect to see continued growth on but Phoenix area and Robins Hill systems.
And we are seeing the same mineralization trends they that we've seen within banks in all three.
That is that.
They are almost exclusively sulfide in the alpha parts of the system.
And then Addison dip, we start to see some visible gold and as a consequence high grades. So so without giving you that being able to give you a precise number.
We see that trend in place and with and we're encouraged by the by the prospective high grades at depth seasonal in all three systems.
And and we'll keep you informed as as as as you as soon as we've got results.
And if I could try to paraphrase.
I think you just said in that lower Phoenix zone.
So it hasn't yet had.
Reserve conversion, where you're just getting access and for data into next year, there's a chance.
That has courts free gold mixed in with the sulfides.
And resembles Swann.
Other areas, it's more mortal sulfide ore.
Were you hoped that as you go deeper deeper deeper you pick up.
Free gold courts, but you're not there yet.
Yes on the on the first part I would say I would say yes.
Although we've clearly seen I want to sulfide results within that lower Phoenix system, but it is widely spice and there's more than one instruction. So so that potential exists.
With the with the more mortals.
Harrier and Robins Hill.
What I would say that we've already seen those signs.
John in that the deepest holes in the system.
On average showing the higher grades so.
So with some quotes and visible gold so we're seeing similar trends.
Thank you I'll give someone else a chance.
Your next question comes from Robert feel free of rubber Joe.
Your line is open.
Oh, Thank you very much for taking my call.
The results that have been explain this morning and.
We were released yesterday are highly impressive. However, I think there is a big problem here in trying to.
Reestablish the confidence at the market in the spot I mean before.
All of these exceptional results were announcing the acquisition of dealer stock was trading at $67.
You started making all of these announcements, which should have if anything increase the value of the stock yet wouldnt down by about.
While as of yesterday, I guess $19.
That's a lot of billions of dollars in the capitalization of the company.
How do you plan on reestablishing the confidence of the model and in particular, how do you plan on getting the stock up to where it was even before we had all of these exceptional announcements.
Hi.
Hi, Thanks for the question good questions a fundamentally I mean, we know as we talk about the legs of the stool than what we do to create value for the company for the shareholders. A number one the first part comes with Diamond drilling and exploration success and putting a lot effort into exploration so investing in diamond drilling and you know not only.
Not only discovering new higher grade deposit side, and as well as Doug expanding add resources and expanding reserves at our operations that it's six extends mine life et cetera. That's number one number two by investing into these assets with capital programs, such as like say Macassa with a shaft or you know at foster Bill.
New ventilation systems and pace, Phil that allows you to to be more reduce cost and be more productive and potentially and grow production, there and or it will produce produce the same amount of goal that lower costs and create value that way.
Third part is you know focus on on on shareholder return that we aren't we know we've we've had her NC I'd be into passed we know, we're winning and best Im sorry in buying back our stock and look at things that way plus provide dividends or returns to shareholders, yes, yes.
That all of that.
We should all of that I mentioned to me that all of a sudden you're starting from a base of around 40 $849. When the base ought to have been 67 or $65, where the stock was trading at before all of this.
Yes. So so again you know it it we in terms of getting value you're part of it is demonstrating the value is the value. They demonstrate the value that's in the ground any assets that we have.
Thats right I don't think you're going to get.
You can't get value and from from from area has to be from from results and that's what we focus on providing results I mean, we've had significant results and success in the past and we're going to continue to work on that and fun and doing the fundamental things that get create value right.
Well that's on that's based on your future expirations and hopefully they'll turn out as you knew seem to think there is turning out but if were suddenly isn't they don't turn now does the.
As.
Interesting and.
As you projected to be well this stock is going to go even lower is not.
Well, but I mean.
You mean, the end are you doing the value is created by exploration success right. That's that's where value is you need good ore bodies and good geology and good jurisdictions, we remind we'd good people and investing property to reduce costs. That's that's the fundamental how do you think that it's so so yeah, you know what if if we drill holes and we don't find.
Another ounce of gold in any one of these assets and Thats a value, but but that's a you know that we then we have to go look someplace else and we'll we'll be prepared to look someplace else very quickly and invest wisely into those things, but where we're very bullish about the the exploration upside to foster built probably one of the best exploration it not probably you did.
The most exciting exploration.
Stories and areas and all of Australia.
Look at Mckasson exploration success, and the growth that mccaskill through through exploration and development and what we're doing in terms of building value Macassa and then we look at do we tell you detour you know if you don't the asset as it is today with exploration success, plus and investment. We can now we can we can grow sustainability grow production growth.
Grow grow mine life, and lower costs and that creates value. So that's what it's all about thats. It thats. That's fundamentally I mean, all we can do I can't tell you a mid pain rosy picture and and bullshit too in terms of things. It's all about result, so that's the only thing that ever get gets there and we got to say what we.
Doom and do what we say and if the results are there if that if they if they diamond drill hole fine fine fine or and things will be good if they don't they won't but we think we're in some of the best rocks and you had determined the abitibi in fair can make him a cast awareness. We we've got the best geology, and new region and Assembly and foster.
We got some really exciting.
And the right rocks in the right geology to find new deposits.
I I don't Delta, but my concern is that.
Scott was at $67 without all of these new projects that you brought on the goal and for some reason the market did not accepted and I haven't had a chat so look at what's the pre opening minutes. This morning, but earlier this morning.
Even with the results that were released overnight.
Which are very good by the way I am not criticized not at all but what does concern me that that confidence is not there. It was down I think the the bid was I forget 49 or something and.
I don't know what is that now but.
Have you had any comments from any one as to what you anticipate in the next little while as far as a stock rose.
Ill.
Maybe I just.
Got to we can talk about this whereas we're shareholders too we recognize that we understand that part, but we can only create value bye bye bye when one way and then thats by getting results were in a great confidence and in a market by demonstrating what we do and both and you forget about the passing on looking at a future and.
We've got people and people are going to work towards demonstrate that value if the values there and the market the market rate reflects it but you know that's that's I guess I don't I I you know in terms of in terms of what you say again were shareholders too we see it too and we're going to we're going away.
Look at where were working and putting the money to work and they any and the ideas and and the people focused on what we need to do to create value and the fundamental level and the company anyway. Okay. Thanks.
Your next question comes from Josh Wolfson of RBC. Your line is open.
Thanks, just looking at the Detour reserve update I may have missed this earlier, but is there any information on.
This includes the reconciliation that they had been reporting last year, including changes to the density calculations.
No. It really is just more or less and with it we're going to reserve done by demonstrated depletion reserve at this point in time.
That that so it's a reserve that was put out the work we've done by pre yachts and it's a reserve that's there now.
So that's the that's some work that's going to be going on in in 2020, and somebody asked about some updates and those are somebody updates that will be coming as the year progresses.
Understood and there is there any perspective you have.
Provide in terms of.
What's the what's the changes or that you'd expect I think previously talked about 5% upside from that density calculation, but they reported 20%.
2019 are there similar sort of a conclusion cereal to draw from that.
No I.
If I mean I can let the Erik I give some comments about the first thing I mean, it's like everything you know in week, we can have our own view at the end its with and I know there's people talked about it all positive reconciliation density differences et cetera.
I think we got leave that up to the coupons that are doing the work to do due to work fundamentally and at that and and come up of what it is but Eric do you have any color on that yeah. I mean, we haven't done the detailed study that but I think the overall, we're seeing more more tons more ounces.
Then was pretty block model and there could be multiple reasons I mean, whether that's I mean, a little but after solution is a news on being found density.
A lot at present.
We think that could be some refinements to the jealousy model I mean, yes.
Yeah, Jake so we're going to be doing lots study on that over the next to the while in.
For now we're happy that it's trending in that way I see a there I mean it in terms of the resource model. That's there and we've built on drilling that is done.
Pre maybe pre 2012 lot of lot of the drilling has been now where we want to do some new drilling plus reinterpretation as Eric said read reinterpretation of how the block model we've been done.
Thats search Radiuses, a search directions et cetera.
Caving factors all the things that happened there was a large inferred resource within within the within the pit and the past that because the density drilling. So there's some of that could be explaining it just conversion of inferred inferred resources. So lot lot of low the moving parts. We do believe there is upside there both in you know and opportunity.
For that but we need to we need to be able to bring the results together in NSP, it's going to be done by looking at it looking out past what's happened in the path and the information that you got.
And in terms of what's being mined and what's going through the mill plus Scott combination of they started doing some resource and sorry, a grade control drilling into picked up last year and we intend to increase that at the efforts there plus do some some some additional drilling we also want to start a you know is doing a lot more asked saying and not more often.
Operational as saying in the pit then into benches and put an assay lab on site to allow us to do that over the next while which will all add information. So we can actually come with with the facts as opposed to say why this is theres lot of moving parts a lot of things happening and we try and we're going to try to get the answer.
Understood and be the goalpost that's provided on this 700000 ounce target.
The roughly 850 units as early as 2021.
What's the key sort of driver of that and if the timeline is the strictly I guess the throughput permit improvement that you talked about previously.
No I think that lot of that is really a reflection of of what's happening in the current.
What's been happening in terms of pre strip and if you look at the plan and some refinements in the plan, but what's happening in coming into 2021, you're going to have a water or you're going to have a higher higher amount of ore mined in the year, that's going to have a lot of lot of positive impact on that right.
And the grades going to get better if youve into year. Just few things that are happening that are that are happening pre pre us and we're just looking that that opportunity plus there's there's the increase mill throughput and potential for that there's some further upside with further increases on mill throughput further increase a mine through.
But and further understanding of resource model so.
I understood Great those were all my questions. Thanks.
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Your next question comes from carry Mccurry of Canaccord Genuity.
A line is open.
Hi, Good morning make my questions have been answered thank you.
There are no further questions at this time I will now return the call to our presenters.
Thanks, very much operator, and thanks again for everyone for participating today, what you've heard us that we're a company that's moving forward and we three very high quality assets, all of which are generating free cash flow and all of which have significant growth potential we've got strongest balance sheet in the industry.
We're using that balance sheet to reward shareholders were also using it to fund our growth in our budget. This year for exploration now as a $150 million to $170 million.
The foundation of this company a success with the drill bit and we've got three assets. What we think there's a lot more success with that drove that the comp.
We've had success at multiple targets on all of them and I can tell you that we're very much looking forward to continuing to update the market as we continue to go forward with our work program, which has extensive.
And with that whole. Thank you again for participating and look forward to our next conference call.
Ladies and gentlemen, this concludes todays conference call. Thank you for participation you may now disconnect.
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Oh.
Yes.
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