Q1 2020 Earnings Call
Thank you for standing by this is the conference operator.
Welcome to the Aero Copper Corp, first quarter, 2020 financial and operating 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. He makes ignored operator by pressing star and zero.
I'd now like to turn the conference over to know done executive Chairman of Aero Copper. Please go ahead.
Thank you and good morning, everyone July that you all.
Results call.
The news release announcing his first quarter results is available on our website cannot see though.
But I suspect mentioned ideally I put a three month ended March 31st 2020.
Comments made on this call contain forward looking statements involve risks and uncertainties concerning the businesses operations or financial performance of the company.
For a discussion of the risks and factors may need to the actual full must be different. Please refer to our most recent is also available on SEDAR.
Unless otherwise noted.
All amounts are in U.S. dollar.
Joining me on the call today, David strike, you as co founder Chief Executive Vice President.
Weighing dryer.
You know as Chief Financial Officer.
Good day.
Vice President corporate development.
As we all continue to work with mostly I'd like to take a moment to recognize the extraordinary efforts taking place throughout our organization.
The bar employees contractors that families and I local communities shakes.
How did the same time, ensuring that our operations could teach performed during this period.
Oh company has been in Chicago, where local fight against covered 92, the donation of companies like <unk> testing kids, a critical medical equipment, including ventilator.
<unk> operating footprint.
To date, we continue to have no disruption to our operations supply chain all sales channels I was result of coated 19.
During the first three months of this year a core assets in the Caribbean finally.
A teacher form as well as David will elaborate further on it's cool.
From a financial liquidity perspective, we remain in excellent shape as a company.
We ended the quarter with approximately $45 million in cash.
And with the amendment about credit facilities during the period.
No material principal payments due until March 2022.
In common with many developing countries because at 19 point that make us triggering an unprecedented currency volatility, resulting the resulting on a significant weakening of the Brazilian real against the U.S. dollar.
Yes, that's had an interesting impact on the company as we U.S. dollar revenues.
We had <unk> dollar revenues for up to 18 month bonds.
By using foreign exchange call is buying falls to ensure a base revenue stream and selling out of the money calls to minimize the cost about insurance.
He will shorten the current volatility adversely impacted our GAAP earnings due to required accounting treatment of recognizing the non cash that body obese ethics contracts whilst of course, we do not recognize the actual U.S. dollar revenues until they occur.
Moreover, the benefits to our operating business Bosqi outweigh the apply fair market value of these booked expenses are evidenced by our record quarterly see one cash costs cash from operations and our revised U.S. dollar guidance ranges for the balance of 2020.
Our hedging strategy has always been to protect against one of the biggest risks to our underlying business.
Hey, rapid strengthening of the Brazilian currency.
We continue to prudently manage our exposure to this strategy.
With all of that said I'd like to reiterate that operations are off to a strong start in 2020.
And our business continues to be very well positioned in the current environment.
With that I'll now pass the call that was a David to provide a brief review and update about operations and then way will provide a year the companys financial performance.
Well this will be available for questions immediately following the cool.
Thank you know.
Just to briefly touch on what no mentioned I'm incredibly proud of the ongoing efforts to help protect our onsite personnel and local communities from Kotak 19 [laughter].
Beginning in late February we restricted all traveled to and from our operations encouraged work from home all non essential style and requested that all high risk employees stay home with full pay and benefits.
Throughout a sites, we have implemented social dispensing practices enhanced sanitation procedures.
Temperature wellness screening at our main gates.
More recently started random covert 19 testing at our operations.
In addition, our teams have been integral to organize and community response efforts against covert like team to ensure that up communities are equally well prepared.
Our colleagues in Brazil have risen above and beyond what is expected under normal circumstances, and this effort and commitment deserves to be recognized.
I production results for the first quarter reflect continued solid underlying operating performance.
During the period, we produced 10657 tons of copper in concentrate Mcs say.
7866 ounces of gold.
Our next cold.
[laughter].
Focusing first on a M.C. as say operations is could you saw valley.
We milled 670 959.
Grading, 1.95% copper achieved average metallurgical recoveries of 89.8% during the period.
Contributing to mill totals.
You May ask my 234800 tons grading, 2.26% copper we mined during the period, a 27% increase in tons mined as compared to the fourth quarter of 2019.
The quarter on quarter declining grades mind wasn't anticipated due to normal stopes sequencing and we continue to expect grades for the full yet to be inline with our unchanged guidance.
Averaging approximately 3.5% copper from CMS.
At the below the line 347125 tons grading, 1.39% copper wouldn't mind during the period inline with our unchanged guidance for the full year of approximately 1.4 million tons greeting, 1.4% copper from law.
As Bill mentioned, we achieved record see one cashcall.
71 cents per pound copper produced during the first quarter, reflecting the continued strong operating performance M.C. as say and the weakening of the Brazilian Reais <unk> relative to the U.S. dollar.
We are maintaining out 2020 production guidance for occurs operations. However in recognition of a significant movement in the Brazilian real <unk>.
During the first quarter, we have revised out U.S. dollar capital and operating cost guidance for the balance of the year.
Oh, Yes, you weren't cosco excuse me a full year see want cash cost guidance.
That's been reduced to 70 to 85 cents per pounds of copper produced from 85 to 95 cents previously.
Well, our captive program remains materially unchanged.
A revised capital expenditure guidance range is $56 million to $68 million as compared to $74 million previously.
Well the total matrix of exploration program remains unchanged our drilling costs are benefiting from a decrease in the U.S. dollar cost per meter that's reflected in our revised exploration guidance range of $20 million to $25 million through September of this year from $28 million previously.
Our growth projects Mcs say remains substantially on track.
The high intensity Regrind mill delivery and installation remains on track for completion during the second quarter.
Incredible accomplishment by that seems to manage the project during this period of global uncertainty.
Timeline for commissioning of the new mill post installation is uncertain at this time due to global travel restrictions currently in place.
All right, but our team is actively working through several possible scenarios and I'm confident we will be in a position to get the mill up and running as soon as practical practicable, while ensuring our employees and contractors stay safe.
The full scale testing of our recently installed all sorting plant remains ongoing and according to plan.
For the first talk for this year, we will be testing a variety of different all sources have varying grades through the course of valley with the goal is enhancing the value of these deposits through upgrading.
We expect to be and the position to provide more detail on the results of the test program in the second half the year.
With respect to exploration has put a SaaS valley. We currently have 26 drill rigs operating.
Our exploration program continues to focus on the high priority programs and the deepening extension of the blood mine, where we see continued high grade continuity of a super part at depth.
The down pledging plunge extensions of a serious about massive sulfide congestion.
And the fan drill program testing for continuity of mineralization beneath the main for mass bodies as well as several regional targets within the mass system.
At the same time on exploration team is busy advancing a greenfield exploration efforts, including both exploration drilling and ground based geophysical work.
So if it is currently focused on for newly interpreted mineral systems within the portfolio of targets to find during the company's comprehensive targeting work.
Each of the new systems as an every strike length of five kilometers and contain multiple prior to drill targets.
Well preliminary results are encouraging additional detail on these ongoing exploration programs as expected during the second half of the year.
We anticipate providing additional detail unresolved on our ongoing exploration program in our upcoming quarterly exploration update typically released four to six weeks following our financial results.
At the annex gold might ramp up of mining activity continues to accelerate within the sentence oneo vein.
Following the successful transition from the bread and butter campaigns in late 2019.
Production during the quarter totaled 7866 ounces of gold and 4868 ounces of silver.
Total mill feed off approximately 36211 times grading 7.76 grams Donlin gold.
At average metallurgical recoveries of 87.1%.
Gold production head grade and recovery improved quarter on quarter by 30, 23, 26% respectively.
Reflecting continued working face development within the banks.
See you weren't cash costs averaged $594 per ounce of gold produced during the first quarter.
Improvement of approximately 39% as compared to the fourth quarter 2019.
The company continues to expect production to improve throughout 2020 and full year production to be weighted towards the second half of the yet.
Oh and your production guidance for the next gold mine remains unchanged at 38000 to 40000 ounces of gold and revised do you want cash cost of U.S. dollar for 25 to 525 per ounce of gold produce a reduction of $50 per ads for the full year.
And your capital expenditure guidance for their next gold mine has been revised to between seven and $9 million with an additional $2 million to $3 million to fund it sound going exploration program.
I will pass over to wane who'll provide an overview of our financial performance.
Thank you David and good morning, everyone.
During the quota the company, so 10432 tons of copper in concentrate and 7526 ounces of gold <unk>.
<unk> combined revenues of $67.7 million.
Well copper sales volumes were a modest 10% lower than the prior period.
Gold sales volumes with 30% higher than the prior period as ramp up of mining activity continues to accelerate within the Santo Antonio vein.
As David mentioned, we achieved see one cash cost of 71 cents per pound of copper and $594 per ounce of gold during the quarter.
These results are underpinned by strong operating performance from both of operations and a significant weakening of the Brazilian real relative to the U.S. dollar during the period.
Both of which contributed to a $37.3 million and cash flow from operations, which is a record quarter for the company.
Adjusted EBITDA was $33.4 million, reflecting a 7% increase over the prior quota and noteworthy improvement given the significant 20% decline in copper prices over the same period.
There's no mentioned, we did have significant noncash foreign exchange impact enough first quarter results.
We actively manage our BRL exposure through the use of currency color contracts hedge against a rapid strengthening of the reality.
The acceleration of the Cobot 19 crisis during the quarter resulted in an unprecedented 29% depreciation of the reality against the U.S. dollar to Fivetwenty on March 31st from for a three on December 31st off 29 team.
This depreciation coupled with increased volatility of the underlying cross currencies. Both contributed to significant increase in the fair market value assessment of these 10 contracts, resulting in the 52 million dollar expense in our income statement at quarter end.
For the $27 million, a foreign exchange expense relates purely to the translation about U.S. dollar denominated debt.
As a result about functional currency being the real.
Well I'll headline net loss for the quarter was $53 million well 62 cents per share.
After adjusting for those noncash items, our adjusted net income was $21 million or 23 cents per share fully diluted which far better reflects the underlying performance of the operation and the company.
At a corporate level, we amended our existing U.S. 150 million dollar credit facilities during the period.
Amendment reduced our overall cost of borrowing and differentiated you'll principal payments for two years, which now commenced on March 2022.
Our total cash position at quarter end was $45.5 million, including restricted cash compared to $23 million at yearend 2019.
The increase is primarily due to the drawdown of all lines of credit which was done late in the quota as a proactive measure in anticipation of uncertain times.
Our business continues to run well and generate significant free cash flow and we anticipate having no immediate need for those drawn funds.
And that night I'll hand, the call back over to know for concluding remarks.
Thank you Wayne.
In summary, I'll first quarter performance can be.
Summarized as follows one continued strong operating and financial performance in our core business Mcs say.
And improving operating performance next go.
Money activities of the Santo Antonio they continue to accelerate.
To our growth projects remain largely on track.
Three.
The benefits of the a significant weakening of the Brazilian real well that's the U.S. dollar.
Significantly confiscated by the noncash fair market value assessment that adversely impacted our GAAP profitability in Q1.
An incredible effort by our teams in Brazil to mitigate the impact of Koby 19 cents all of our employees contract is well, let the local response I've heard about communities and ensure continuity of operations supply chains and sales channels.
Thank you very much for joining the call we will turn it back to the Albrecht you open the lines for questions.
Thank you we will now begin the question and answer session to join the question Q You May Press Star then one on your telephone keypad, you'll hear a Tony acknowledging your request.
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Our first question comes from Justin Chan of numerous Securities. Please go ahead.
Hi, guys. Thanks, very much for hosting the call and congrats on a day corridor I hope all the are doing well.
My first ones on I guess on a few related to to the currency stopped but I guess the first one would be.
Looking at whether continues now five 5.7 or are you can.
Do you does further incremental.
Relations go straight through to the cost line and if your guidance is based on five or your actual I know a U.S. de caused continuing to to come down as we see that are doesn't reach a natural limit.
I can pick up on the Oh, the hedge side and I guess, another Wayne will pick up on the cost side.
Look on that on the hedge side, you know the way, we hedge monthly going out 18 months, we don't.
Average the rest of year were 83% hedged so.
17%, we'll just because unhedged, so we benefit entirely from wherever the foreign exchange.
Got it turns out to be a spot basis the unfolds.
Yeah I did the money calls that we were written we benefit up to the Stryker those calls and then of course, we don't benefit beyond that point.
So what appeared at all.
You can think about it sounds a super profitability and BRL times from a dollar revenues and I were benefiting from that in terms of the revenue like.
So I think we will continue throughout this year.
Do you see that impact now the kind of two standard deviation move.
In the spot price of the Brazilian currency I noticed that triggers they.
Because the fair market values, you would expect as we emerged from the pandemic in market cycle down as you're already seeing in the stock markets of the declining because you expect that the foreign exchange.
Volatility would decline as well.
There will be somewhat of a reflection of the me all the BRL against.
The dollar time will tell how that plays out there or what.
Time period as to where they are spot me I'm, just too, but a that's that covers our thinking in terms of the of the hedging Wade you want to pick up on the cost component.
Yeah sure. Thanks, No I mean, I think one point just to add Justin on on on what and Allstate is obviously, we have the ability to roll the hedges right and we have proactively done that I'm in the past and we'll continue to do that so a lot of that is driven by the the width of the the color. We have so you know we have we do have quite a bit afflicts.
But in part as well with regards to the costs I think steel to what you asking is does that flow down. Yes. I think you know we've we've always said that I think between 85 and 90% about cost. So U.S. dollar denominated so if the I'm, sorry, Oh, <unk> dominant denominated beg your pardon and and so.
Yes, if it day, if you seem to 570 today, absolutely we ought we all.
At Riyadh recognizing that benefit.
Okay, Thanks, and in terms of Raleigh.
Oh, sorry, sorry go ahead.
That benefit flows through capex as well as you've seen in our revised guidance.
Yep.
Just in terms of rolling and I guess from a a cash perspective, let's just say imagines bought flat eventually would.
See some cash impact, but just from a modeling sense I'm sure each of us is running on commodity Dax, but.
And currency tax, but just from I guess, a rolling perspective, and a cash settlement perspective.
I guess, what's what's the current thinking and is there.
Or a profile that that we should think about in terms of.
Sort of the of settlement and and timing.
Justin I'll jump in here I think.
One of your peers in the analyst community at National or how to look at that with regards to the there's extensive information out in the marketplace.
With regards to banks for costs.
As it relates to the exchange rate going forward over the next couple of years and taking that into consideration is one way of looking at it.
These [noise] the unfortunate thing with regards to the methodologies that required in terms of mark to market did not take into consideration that these are fixed rate contracts that run over a period of time and so for accounting purposes, we need to revalue them as as of today, whereas as I said previously they have fixed rate.
Contracts. So another way of looking at them is to be able to look at what the banks are saying Oh banks, a full costing for the exchange rate on a going forward basis and measure those contracts I'd say continued to operate unexpired over the intervening 18 months to two years, a with respect to that full cost.
Gotcha.
And on the other one enroll pine Bluff practically every every month, we haven't we can make a decision do we feel like suddenly on or do we just roll it forward into another contract in the AD in say 18 month time will tell you this time.
And then it and then taking full advantage over the short term exchange rates pretty flexible way for us tactically to deal with what's going on in the spot market.
Okay Gotcha. Thanks, that's very helpful and and just another one related to currency. They don't forget the line I'm from the tax perspective does.
You just walk me through what if any kind of.
I told cash payment impact there is on taxes related to the exchange rate you.
Does your extra profitability of BRL times results in higher cash taxes payable if this were to continue.
Well, yeah, Justin I mean, it to that two elements to that there is this I mean, if the underlying business makes more money, we have to pay more taxes, but I think maybe the question is out you know certainly on the losses. If we all booking losses was all those are tax deductible. So yeah, perhaps I missed I understand your question I mean it.
We ultimately the whatever the profit if we have more profitability in Brazil, Yes, we book that we will use about net operating losses, there little bit quicker and would probably be into more of a cash tax paying situation, but again, there's a lot of variables that they've obviously going to that.
Okay.
That's that's very helpful. Thanks, guys.
Good to hear that their cash there their tax deductible.
That's.
Great quarter, I, just had addison clarified questions on that on the accounting side of it takes a lot all clear up a lot.
Our next question comes from Orest Wowkodaw of Scotia Bank. Please go ahead.
Hi, good morning.
Just curious given given the I'm presuming rheoswitch devaluation I'm just wondering if there's any impetus to actually increase your and your exploration budget I given the U.S. dollar terms, it's actually coming down is there an opportunity to do that can you handle more rigs.
Certainly.
I thought I'd love to you.
I think focus more in terms of doing some more the regional exploration or possible.
Thanks Hurst.
From your mouth to God here, yeah, we'd have to be I'll continue to increase.
Droke drill rig count I think at the under the current circumstances I think that is difficult.
With regards to cruise.
Remember is where were.
Well, we're effectively working internally, we're supposed to be now to get our contract is I'm specifically major in the other two contract is on the drilling side to work with US in terms of of looking at a crew turnover is a et cetera et cetera that is quite a challenge in Brazil right now.
With regards to them being able to do that in and out and so I think right now yeah, we'd love to be able to add more rigs under the current circumstances I think at 26 at a and C. Assaying. Another five annex gold I think we're right where we can be right now.
All things considered.
Talked about I think a focus or six month drilling campaign at the polar deep.
But since then the you know the strike length seems like it's gotten a lot bigger I'm wondering if if that now means that you're going to spend a lot more time showing up the part D and well also curious what the cut off is we're making the.
The new I guess 43, why don't want that'll come out late this year.
Great questions.
So as you know the put a the deeps remains open to the north.
Our ability to continue to drill to the north is is constrained at the moment.
By the underground exploration development drives that we have in place.
We had hoped and still hoping at some point this year to be able to bring in a drill a directional drilling specialist.
Now to allow us to at least.
Look into the north and see a how the ore body is looking to that point, a further to depth and north but as it stands right now those five drill rigs that we have there.
Specialized to be out to stay there and so they will continue to drill out the deeps project, perhaps for the balance of the year because once we drill out for the Prefeas. Some of those rigs maybe not all of those rigs will remain in order to start doing the infill drilling to get that into Stoke design et cetera et cetera.
With respect to the drilling a the drilling will continue.
And it appears to be right now through the end this timber.
We will be the drilling that will be incorporated a we're hoping to do that the first crack that the the engineering team will get a with the resource will be something at the end of June July well, we're hoping to be able to include through the end of September.
With regards to the project.
So yeah, hopefully that answers the question that you're seeking rise now ours.
It does thank you and does that mean, you know we should anticipate kind of mid December timing for the updated.
My plan for <unk>.
We're still we are putting the study in front of the board on November eight.
It would be our hope to be able to release, an updated 43, one to one.
To the marketplace within a couple of weeks thereafter.
Okay, great. Thanks, so much.
Our next question comes from Rafael de Souza of see RBC. Please go ahead.
Hi, good morning, and thank you for taking my questions.
So the first one is on the re grinding mill. So just wondering if you were to see some delays in commissioning.
What sort of NPAT should we expect to your 2020 copper recoveries.
Great question, a rough Allen good to hear from you with respect to that so I mean that love it.
It's difficult to say, we don't anticipate it all comes down to win Brazil reopens the border to international travel, we're hoping to get some clarification with that over the next couple of weeks as you're well know with regards to yourself being Brazilian [noise]. The team in Austria is ready to travel.
When the border opens a if the if they're able to travel relatively soon we would hope to be LTB, finishing commissioning in August which would result in a four to six week delay.
Okay. Thank you.
And just.
Since you're.
Imagine any results.
Maybe I'll take the flip side of ours questions. So can you remind us how much could you cut in your exploration program. It's things continue to escalate in Brazil in terms of Govan 19, and he's got to.
You know do some some additional liquidity and thing contained in matters.
Right. So you know with regards to that we've run a number of different scenarios with regards to exploration contingencies with regards to captive contingencies, a with golf to exploration, we have three to four different scenarios in terms of looking at cutting.
I think when we look at the overall program I think there are certain parts of the programs I think to Mount that would be cut as a very very last resort and that would be the drilling at the deeps project.
The use of the big see rig in the in the Greenfields exploration and the underground rigs at the mass mine during that program those are pretty much sankt amount.
But with regards to the other parts of the program, we can cut and move and the just as necessary with regards to that in terms of where we gain comfort with regards to our ability to continue to operate or what are the things about exploration program is our crew.
He's a tick a spread out throughout the valley, both major and or a other contractors have their own separate bases of operation away from town.
And so they are somewhat insulated not entirely somewhat insulated with respect to any impacts and that's been done deliberately bias has as well as our contract as we would much prefer.
When we have shipped changes without contract is that we have we actually have a quarantine protocols in place in which they had rented houses out in the valley away from.
Impacting.
Our communities, thereby allowing us to implement the two week quarantining, a cruise coming in in order to two help the cruise going out so we can cut.
But as we sit right now with respect to that we don't see any reason that is that being on the horizon. Obviously, it's a it's a moving situation in Brazil right now.
Okay. Thank you and just stay on covert 19 do you have any any updates on the third party lot closures you you mentioned recently in your expiration.
Yeah, So oh they'd probably lot count clothes shoes are primarily related to labs in South Africa, I doing or platinum and I see p. work as it was a as with respect to.
This 60, M. exploration drilling a the only way we can give you any guidance with regards to that as is we're in the same place everybody else Africa has a very restrictive.
ER quarantine in place and so we are like everybody else with respect to waiting for those labs to open up they are some backlogs with regards to L.S.
In Brazil, but not as severe outside of that everything else gets a assays in our own labs at the mine.
Okay, great well. Thank you for taking my question.
Thank you refill.
Our next question comes from Chris Korea Goodwin funds. Please go ahead.
Thank you I wanted to ask your question about your gold assets, whether there's been any updates changes strategy or anything you can share with us.
Hi, Chris Thanks, Thanks for the question with regards to strategy Oh.
Our opinion remains unchanged right now.
And next gold is a operation that we see significant upside to.
And when we evaluate the opportunity.
We've spoken to many people in the POS we use the reference from Austin powers movie is.
It is a it's very much in many me I've Mcs say in that we are indeed have under utilized mill with a very large exploration land position and one that I think our skill sets as a team lend very very well to with regards to continue to add value at that acid over the near to medium term certainly.
Once we have unlocked the values that we see inherent that being exploration within the district and starting to increase production within the mill to get utilized at full capacity of that mill. Then obviously at that time, we may have another relook at the strategy.
With regards to have sits now portfolio right now we feel that we can add as good if not better than anybody else with that asset and so it remains an integral part of our company.
Great. Thank you so I could ask another went to more of a.
Big Picture question, if you if you.
Could it could help me understand sort of the politics of Brazil, There's ah.
Certainly the presidents in the news a lot.
With a different views and.
I'm wondering you know how you see Brazil.
Brazil's maybe standing in the world stage, and how that might impact them and mining sector.
No why didn't you take that one.
Yeah.
No. We don't really have a point of view on buses in politics, because we're not brasilia, we take a strong view then it's a it's for the resilience.
Can decide how they should run that country, a we operate a mind and by year end and not that also are the best we kinda without local partners.
We find.
We signed at the I. I the approach by year end about the costs as being a rational helpful co-operative sensible.
And we work hand in hand, but the local municipalities to try and come up with the best strategy that helps them as well as helps our operations I think the key one of the key criteria is it possible.
<unk>.
Those are all people to this virus is also.
Okay manage a the confidence of the local communities if they comfortable that a good procedures in place they call for though that we are the biggest acquired in the area of doing the best we can to ensure the safety of everybody well I think that goes a long way to creating the right.
Thank you.
You can adopt them today with no through it wherever you are in the world. We're dealing with this virus. It's a pandemic. So all in the same but always trying to work our way through.
Great. Thank you.
Our next question comes from Jackie peers Blocky of BMO capital markets.
Hi, Hi, guys. So congrats on a quarter I'm, sorry, I couldn't figure out how to cancel my question regards but.
<unk>.
I wanted to.
Just two questions for you, but thanks very much.
Thanks Jackie.
Once again, if you have a question. Please press Star then one.
Our next question comes from Stephens.
Of course, Mark Securities. Please go ahead.
Pretty much guys I'm, just maybe a slight follow up question there to Ralph just sort of talked a little bit about like you know sort of whereas comes to where students day scenario and you do need to sort of bolster liquidity cutting exploration just in terms of the actual capex budget I know, it's it's come down as well this year, but on the on the Brazilian real weakness how are you pretty comfortable.
With with that new budget now that you know you can you can do the entire program as originally planned this year or no is there any sort of sort of them non essential sort of components in there that could maybe you'll be moved decide to or deferred to next year as well. It was exploration really the first thing that would sort of see it could again in a worst case scenario with it if it got where they came to that.
Thanks, Stephen as I said, Oh, we have spent significant amount of time pressure testing.
Cash flows operations with regards to various scenarios that we've looked at.
And by no means as exploration the first item that gets cut with regards to that we do have some other discretionary capital items that we can if we feel we need to that would probably be cut before we'd start stepping into the exploration program.
However, we are extremely comfortable right now that we can affect the business plan that we and that includes a exploration program as well as our capital program that we laid out the beginning of the year with regards to the company as it stands right now and within the market that.
We see right now we are comfortable were not naive we're constantly monitoring the situation and we will count continues to do that but we have comfortable that weve pressure tested everything within our organization to feel comfortable at this stage that we don't have to make any change.
To a strategy or our operating.
Methodologies for the year.
Okay, great. Thanks, very much we a great to it just didn't see the production success in exploration unfolds the rest of the year. Thanks.
This concludes the question and answer session I would like to turn the conference back over to David strength for closing remarks.
Thank you operator, and again, thanks, everybody for coming on the call as a trying time for everybody, albeit that hopefully we're starting to see a little bit of light at the end of the tunnel with respect to the covert 19 a pandemic.
We're always available and so please do not hesitate to contact anyone of US should you have any questions or want to have any follow up with regards to the running school and we hope to be able to talk to you like we have previously during the course index quota and provide you with updates as and when necessary. Thanks.
This concludes today's conference call you may disconnect your lines, thanks for participating and have a pleasant day.
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