Q1 2020 Earnings Call
But at least on mute to prevent any background noise. After the speaker's remarks, there'll be a question and answer session. If you'd like to ask a question drain assign simply press Star then the number one on your telephone keypad. It seems like withdraw your question. Please press the pound Keith. Thank you Mr. Shawn Boyd you may begin your conference.
Thank you operator, and good morning, everyone and welcome and thank you for joining.
Our first quarter 2020 conference call. This.
This presentation does include forward looking statement, so just want everybody to be full warrant.
Hopefully wherever you are we're doing this remotely as well so hopefully wherever you are.
You're saying you're doing well with your family is doing well.
Because were doing yes are we hopefully during the Q1 <unk> direct a question. So hopefully that goes smoothly it because we thought.
Our senior staff working from home Apache and online.
But as I go through the presentation I want to spend some time just on.
Our thinking at mindset around.
I will just around the dark covert 19, and how we manage that really how we're thinking about the business and position the business as we sort of move through the issues around Covance 19, I think as you know Uh huh.
Weve been challenge more than most companies.
In the quarter, having seven over eight operating mine a reduced a minimum activities will get into that how we manage to how we manage that with our people.
What it meant per assets will talk a little bit about that but as we went through it.
Clearly the focus was the health and safety ever employees, the wellbeing of our employees the comfort level with the families.
So we've been able to manage through that very successfully and while we were doing that and even on minimum activities, we were still able.
To position the assets and look after so.
Issues that we had been managing a through Q1, so that we could have a strong second half.
In terms of our actual respond to the pandemic.
As you said that as we've said many times before and so long term business you have to think long term.
Although the.
A pandemic is devastating there's a lot of loss associated with it.
Things will improve.
So the question is is manage through a pandemic panel beyond it.
Our view is things will likely never get back to where they work a lot of the protocols and measures that we put in place will likely have to continue for many months into the future and we'll talk a little bit about that but we think as an industry. The gold industry is better positioned than folks in terms of managing.
And in terms of getting back.
To a situation closer to normal where we can take advantage.
HM price deck for our products.
It's a as strong as it's been in seven or eight years, so that provide certain advantages and also dictates the strategy. So as we said we've been very focused around hygiene around screening.
Around physical distancing and in terms of positioning as I've said the industry is in a much better positioned than most because.
Our physical discussing challenges are relatively short duration.
In things like pages, where or close quarters for a few minutes at a time, it's not like we have as an industry.
Ended period of time is where we're right on top of each other so we can actually manage the business.
A lot better than most industries will talk a little bit about that as we get into the mines and how we felt this on some of them buying a we've also we've all also employee testing.
Which is another layer of protection, we've tested all of our none of it employees, we've tested all of our employees and Lynn.
We hope to expand that testing we are involved in a a pilot project in none of it that's how we got access to the a quick testing methods that testing method has now been approved by provincial and federal government.
We're in a good position there as we said, we're looking to expand that hopefully bring that Val d'or.
The other thing that stood out for US here is really on the E.S.G. side as we've said before we found ourselves.
In a position where in the and a lot of the areas. We operate we're in a much better positioned than even the governments and the communities a to provide critical surfaces and to provide critical health for the communities.
For example in Mexico, we actually have for health care capacity at our minds than many of the communities do.
We have as many doctors as the communities do we have more sophisticated medical equipment like ventilators, Oh, we have more ambulances. So we're in a position to help those communities. We did set up a separate facility.
For the government I think governments request, we opened up an old finding Tam.
To provide if needed in the community in isolation center. So on the social side of things, we've been doing things like that but also a and none of it for providing food hampers on a regular basis told the 450 families in multiple communities.
We're able to transport quit a key supplies to those communities on our flights from the folks we've been investing in food thing. So all of this is something we would do a informally anyways as part of the way we think but it's also I think focused governments and communities on the benefits of mining.
As the government communities are looking for leadership looking for assistance.
And that actually builds the case for mining and I think many of you know we started a we make mining work social media advocacy campaign last year and this really hammers home a message, but I also think it's important as we move forward.
Because all of US have no idea. How this is going to play out and one of the things. We saw was that different governments approach mining from a different perspective, some cold is essential some cold at non essential.
We are in regions, where initially it was determined non essential but I think the government's realize particularly in Quebec said it was although initially determine non essential it was a high priority industry that not only was able to benefit the communities, but also because able to provide well paying jobs are pacing.
Second tax.
<unk> dollars towards the government and I think one of our jobs here as we go forward is to ensure that we continue to make the case for mining because we don't know Theres a second wave coming we don't know how long. This is going to go and that's why we've been very careful with the restarts is take leadership demonstrate this works demonstrates that we can protect our employees demonstrate.
We can make our employees families comfortable so that.
If there is a second wave or this thing continues for a while.
We can continue to do what we do well in the communities and continue to operate our businesses. So we're very focused on those initiatives then we'll talk a little bit about that.
As we get into somebody specifics on the sites as far as the first quarter.
But the big impact was really.
Nine days of shutdowns at our Quebec operations, two of our Quebec mines, where our best cash flow generators. Historically, so for 90 days in the quarter back ended the quarter two of our best cash generating binds.
We're down as was Goldex.
It also impacted our operations and benefit because one of the things we didn't do it none of it is to protect the communities and none of it because that's a high risk those communities or high risk.
They have a history of lung issues and poor health a they live in quote close quarters. So we made a decision earlier on early on to isolate our operations from the communities and have our none of the workforce go home and that continues to this day, we're still working on plans to bring back we're still working on plan.
The fill in.
While they're still at home, allowing us to continue to ramp up so that was a key also.
Strategy, but it also did impact our operations I'll talk a little bit about that but we have restarted in Quebec, we'll talk about that and we're also ramping up and none of it which is all about really positioning the business for the second half will we expect to returned to production levels and cost levels to those that we saw.
As we closed 2019 very strong in the fourth quarter of last year. We're also focused on free cash flow generation. Our overall capex numbers will come down from roughly 740 to 690. So that will certainly help in terms of generating free cash flow and we still have a lot of confidence in our business and the fees.
Maintained our dividends our quarterly dividend 20 cents per.
Per share.
As far as an operational update.
The focus was number one priority deal with cobot 19, and the impact look after employees try to manage a business, where we were shutting down basically the minimum activity seven or eight mine. So we're dealing with thousands of employees and multiple communities that wasn't easy as we've said in my 35 years.
As the busiest sort of seven or eight weeks I've ever had.
I think just based on the complexity of all the things that are involved in managing through this but we didn't lose sight of what we needed to do at the assets. The teams did an amazing job.
At sort of managing.
Things they needed to do at the asset level.
Everybody knows that we had plans to upgrade infrastructure.
At the West minor Ron whatever we had planned to do we got done.
In the first quarter impact we are actually before we had to suspend operations, we actually were in the West mine area developing.
We've actually just taking the first production blast in the West mine area within the last 24 hours. So.
So far so good as we continue to ramp up.
Iran and we're also looking at ways that we can increase the mining rate at the neighboring property at the wrong. It will talk a little bit about that in Milan section male leaving the job one of the main jobs was too.
Fix the feeding system to the crushing plant.
That was repaired.
In March we had actually been running the plant at over 4000 tonnes a day prior to having to reduce activities there.
So we had good indications before we were impacted by coated.
Thanks.
Work well with the repairs ultimately, we're getting a new unit in let's say.
The repairs have gone well.
Actually operating at 85% capacity from underground ore stockpile as we continue to ramp up in the mine area, we'll talk a little bit but that.
Meadowbank focus was just getting caught up and catching up on equipment maintenance backlog.
Getting the lake that material out of the open pit, creating more mining surfaces.
We've been running at 50% in our mining rate due to reduced activity is there and as we move into the second half what we expect to be back to normal levels.
Instead of at both of the site.
We're really excited about exploration.
In the quarter I think what we're seeing there is so we've mentioned this before is there seems to be a lot of life left in these old mining can a lot more potential we've been saying that in the past with respect to east Colby and we've been saying that with respect to what we're seeing on the old escape property at El said five but we're now seeing it again.
Interesting enough.
In the wrong.
And let Ron is blessed with the sickest package of favorable rock in that whole sector. When you go from going on the old can be or I am goal to boost gate, which was bear to Ron to the east which is ours.
We were blessed with the tickets package or rock. So we always had multiple lenses in that with various types of mineralization.
And what we were seeing in the West zone, which we've talked about in the past.
As a repeat of what we saw 25 years ago in terms of.
Small north south fractures that were filled with a lot of visible gold.
That we're situated parallel to our drilling so we never really pick them up and that's why we're seeing that upgrading in the west mine area, but we've actually seen something else that we saw many many years ago, we're actually seeing what looks like the re appearance.
The 20, nor the zinc so flynn.
Which is massive sulfide.
We're seeing decent thicknesses waiting assays, what we're seeing massive sulfide over sort of true sentences of eight to 10 meters.
I would suggest lots of zinc lots of silver.
Still need to do the assays, but situated in an area, which makes sense. It's on the eastern side of the deposit there's still wide open.
So we've got a program to continue the drilling off to the east and.
It wouldn't surprise us as we have the reappearance of that lens below three kilometers, which could take an interesting those lenses tend to have a lot of tons into them.
So it's early remain to be seen but it shows you that says a lot of life left in this camp.
At Canadian Malartic.
We continue to drill east Colby I think east gold is important because just with Odyssey and east melodic it was never going to work. It was too low grade on its own it just didnt make sense east Goldie given the tonnage given the uptick in great. The better grades gives us a chance now it's still early.
We continue to get good results were getting a decent thicknesses and a higher grade core, but we've only drilled and on spacings of about 150 meters.
The plan and strategy now over the next 18 months.
Two type no that drill spacing.
To about 75 meters and hopefully we continue to confirm the continuity and the geometry of the deposit so that we can upgrade the resource classification and so that we can understand what's possible and what ultimately you man and the eco can put together.
For that opportunity at Canadian Malartic, and Santer Gertrude us we put out some pretty good holes. We've got some recent drill holes.
Which continue to look good.
So that's going to be a focus of our Mexican business to try to understand how that fits in.
As we move forward.
Just briefly on the operating results.
Again, these were impacted by temporary shutdowns and reduced activities.
I'll just highlight two here.
Goldex, even without nine days at the end of March was still above its budget very good productivity, there and kittila.
Has remained open we had a.
Temporary shutdown of the underground mine will talk about that but even with that they were above their budget as well. So good performance from those mines.
The financial highlights Ecevit noisy that's really driven by.
The weakening of our local currencies against the U.S. dollar, particularly the Canadian dollar, which on January one was 1.3.
End of March 1.42, so that had the impact of.
Impacting our deferred tax liability. So we had to add back 18% to our headline earnings and also we had mark to market on our foreign exchange and diesel hedges.
Of about nine cents, so normalized earnings of 23 cents for share so not bad given that we were impacted in the back half of March.
The coal on the financial position.
But the started this week to really understand their know how this foot unfold. We just wanted to be ultra careful no magic to the number we decided to draw down a billion dollars on our credit line of 1.2 billion. We've paid back half a million we expect to pay the balances we continue to ramp up are pretty.
Action over the next few months.
We didn't.
Pay down our maturity on April seven $360 million.
We didn't term 200 million of that out.
Which given the volatility in the markets and the way that treasuries were moving around our team did a very good job because that was not easy.
In fact, the week that we did that debt deal. There is only I think about six debt deals done that beat in all of the U.S. market and normally there's dozens and dozens of these things done.
So we got it done average of 11 years at 2.83%.
If we had a weighted a week.
Builds that were done a week later they were much better credits nervous they were paying for the same term about <unk> percent more interest so our team did a good job.
Getting that done so our debt and overall debt came down.
In terms of net debt, because we did pay down 160 million of that.
Over to bulk to term out to reduce that.
We did get a credit upgrade by DBRS and we did have.
Fitch.
Issue, there and our full credit rating on us with a rating of a triple b with a stable outlook. So all of that again.
It is positive as we look forward. So I'll go through this a fairly quickly and then we'll open it up for questions I think laronde as we mentioned the emphasis was really just doing the ground support. So we can get back into the West mine as you know that's a higher grade area.
We have.
Seen last year when we're in a significant upgrade of 3% to 50% contained gold due to the north south fractures and a lot of visible gold in that system. So it's important to get back in there.
That drives production dries production growth as we go forward. So I think that was important to get back there at the key there as we deal with coal bid.
As we looked at our OPEC operations and began to call people back as the Quebec government on April 15th allowed to be opening of mining.
Just a process each of the employees were called individual by their supervisors, we sent them a video.
Which outlined in visual form what they were going to see when they came back to the sites in terms of screening in terms of hygiene in terms of physical distancing and I think one of the key things which is.
From a mining perspective really jumps out at you is the the way we're managing the cage.
Each of the employees entered the cage were operating at a 50% capacity each the employees into the cage one by one.
They are separated by occurred when they can't face each other they can't look at each other.
I can't talk to each other so.
So there isn't that cage for five five plus minutes.
So.
Thats been well accepted we had 90% take up on the returned to work its all voluntary, forcing anybody to come back to work not only did employees have to be comfortable the.
Families have to be comfortable so what we found when people return. They were excited about the fact, we're excited to see a their fellow employees.
So things are going well.
As we go forward I guess, the big question as well Okay. These types of things may extend.
For a much longer and many months, how do we offset the lack of the drop in productivity from some of these.
New measures.
We believe that.
What we already started a program to understand sort of the optimal size, our workforce and the fact that we've had to scale back at seven or eight mines gives us a better field as we reintroduced people slowly.
The optimal size should be.
And most of the people that havent been put back in yet be the contract workforce. So we're hoping we can be more efficient with that contract workforce.
That could introduce some savings to possibly offset some of this.
Productivity loss through these new measures.
But it's still early we're still learning.
For we're confident that.
We're going to get a really good feel of how this is going to work going forward.
Largely because we but weve been forced to scale back and we're actually doing more productivity with less workers in places like none of it than we are doing before so we really have to let this play out.
As we go forward, so jumping to Canadian Malartic.
We did start that mill shortly after things were allowed to reopened we restarted it on April 17.
Running about 60000.
Today running office stockpile as we ramp up the mining activities. So that restart has gone well we mentioned gold ex the productivity is is really driven by really good performance in the rail there. So that was a great AD and a great use of old technology, just adapting it in a new format.
And tailoring it to that particular operation on were also benefiting from higher grades and more tons in the south zone and the focus on I think is going to be driving.
Good solid performance at Goldex for several quarters as we move forward.
I don't bank focus was just.
Managing the communities as it was meliadine, having the workforce cohort isolate the operations.
The from the.
Communities going to at 28 day rotation from 14 again that was all voluntary we're not forcing people to go up for 28 days, we had more volunteers and we had spaces. So thats a good sign that rotations working well ultimately we have to come back to something less than 28 days, that's a long period of time.
To be up there.
With that help helps the productivity because we're having fewer changeovers.
So I think that's a plus and thats positive as we work through the issues around Cogan focus there was just catch up on maintenance remove the lake that material open up more faces.
In the open pit, we went down to 50% of our mining rate.
We stop the mill building a sufficient stockpile, we've just resumed long hole trucking to bring New York to Meadowbank.
We've talked a lot of improvements on getting parts from Meadowbank to the Amber site, there's still work to do at this one so of the three Laronde Meliadine and Amort. We always said this was sort of Q1 Q2, the others are more Q1.
So there's still a bit of work to do and a bit of catch up to do because of cope it but they've made a lot of good progress there and it's set up for a much stronger second half as we resumed production and get up to over 9000.
Today in the second half at Meliadine as we said eight for an issue feeders will were resolved.
They function they worked well, but even in February I got to give the team credit even with no eight from feeder.
Work around we were able to do 3300 tonnes a day in February even with the work around.
So getting the apron feeder repaired.
Manufactured parts, we have to spare plates in from the manufacturer.
We should get together unit in July August barges come in.
So so far so good there.
We are running that plant now at about.
3500 tons to date.
Q3 about 4000 tonnes a day Q4 about 4600 tonnes a day, we've started to pump out the.
The additional binding horizon.
So.
Were in a position to continue to move that part of the mine forward as we pumped out and get to developing that area. So that's what's going to drive the additional tons in Q4, but also thats one of the higher grade areas of the underground mine. That's why we're comfortable on the Meliadine.
Production.
Profile so.
As we look at.
Meliadine and we look at.
Meadowbank one of the things that we have to do is reintegrate that none of us workforce.
At this point, they're not ready to come back.
I think theres still anxiety. They have had one case of Colgate 19, and none of it. It appeared this week, it's important for northern tip of Baffin Island, so not near any of our operations, but theres still something unease and anxiety there so.
We can actually ramp up we can use.
The contract workers, we can use employees that we had planned to have come in in the summer to do some of the duties that we had our workforce there's still a key part of our operations, we want them back, but we only want them back when it safe for them to come back and Theyre comfortable coming back.
At Kittila.
Again, we said, it's a above budget.
They.
And the only mine that's really maintain the processing through the entire quarter. They did have an employee test positive the isolates employee right away when he was a feeling not well.
They did contract tracing they tested immediately the people that he had contact in.
Prior to him not feeling well all of those tests coming back negative the employees better now and we have actually tested all of our employees in Finland.
No other issues there and I think finished team did a really good job reacting responding following protocol taking isolation steps.
Fantastic public health authorities, working with them to do the contact tracing and ensure that spread.
Does not.
More widespread than just impacting one employee a good work on behalf of kept a lot.
In the southern business, Mexico has taken the position that in April.
All non essential businesses were to go to minimum activities were still doing some.
Getting goal that little Leach pads.
At those operations, particularly in the India. The government has subsequently extended that now to the end of May.
They have made.
Hey.
They do have.
Opportunity that if you're operating a business in a region where.
The cope with 19 is not a major issue where theres very few cases that they will consider allowing those industries and those businesses to start back up that date, which could be may 18. So we're certainly in an area right now where.
There's not an awful lot of cases there.
So there may be an opportunity that we can get back to work.
Before the end of May early June so we're going to continue to monitor that our team is working very closely with the secretary of the economy Thats responsible for the mine.
To highlight what we're able to do in the community and the fact that we can still protect our employees.
And and run our business. So we'll keep you posted on that.
Operator, if you can open the lines for questions, we'll try to see how this works remotely I'll try to direct questions to those those.
Members of the team that our online is that can respond to the questions. Thank you very much.
Like to ask a question at this time. Please press Star then the number one on your telephone keypad, if you'd like to withdraw your question. Mr pounds. He will foster just a moment to compile acuity roster.
First question comes from for Hot with Credit Suisse.
Hi, good morning, Thanks for taking my question.
Just the first one is a clarification the 480 to 500000 ounces per quarter and the second half.
Incorporate any.
Any productivity losses is that right.
Yes, that's correct.
Okay and then my other question.
Second half the year is obviously looking very good from a free cash flow perspective, you don't have any debt maturities revolver will get repaid.
Just high level, what are some of the free cash flow capital allocation priorities.
Well I think the focus on that side really doesn't change.
For us it was still always to find that balance between.
We do see debt.
Essentially improving financial flexibility.
Reinvesting in our highest quality projects not the entire pipeline. The emphasis is still trying to stage that out and that's why we're continuing fairly actively drilling some of the key projects to get a better feel for the relative ranking and prominence of the projects within the pipeline and then.
Clearly we are looking to the.
The dividend Dustin.
We no one really knows how this will all unfold, but I think as we said we alluded to start.
You know this has been devastating.
For many people, but also for industries and a lot industries are going to take a long time to come back.
The mining industry, particularly the gold mining industry is one that can come back fairly quickly into a much better pricing environment for the product and given the stimulus that's been thrown.
And I'll ask me economies.
The prospects for gold are pretty good.
We're not sure how it again there is no guarantees on this but.
I think.
It it kinda reminds me a bit of now I'm dating myself, but it kind of reminds me a bit of 70 980.
Where the gold price move fairly quickly.
To a level that.
Companies to really anticipate and the amount of cash that was generated by the industry and a very short period of time was huge and I saw that when I first walk into a eco in 1983.
As an auditor.
And they had as much almost as much cash as their market cap.
And thats the year that day instituted the first cash dividend because of that and so I.
I would expect goal to hit a new high in US dollars, it's had a new high and almost.
In every other major currency and.
So the industry is going to do really well up 1700, it's going to do a tremendously well at 2000.
Question then becomes.
Your question becomes even more important at that point.
Because what we need as an industry is the disciplined to make sure that the bulk of that gets returned to shareholders.
And.
You can see that Paul Pan I made the right way back when.
Because he had way more cash than he could actually put to good use and he decided when it wasnt the norm back then.
To start the dividends and even in 1980, we actually paid a special dividend, but one point. So that's going to continue to be our focus if we're fortunate enough.
To continue at 1700, plus and maybe 2000 plus at some point.
Thank you.
Next question comes from Ralph Profiti with eight capital.
Hi, good morning, everyone. Thanks for taking my questions.
Sounds good to see the sort of turnaround and things going well and the west area of Laronde. If I can maybe ask a question as you sort of put some focus on this expansion at Lz five we've seen the grades come down to about two grams a ton in the last few quarters I was wondering if that's sort of.
Good go forward assumption on some of the grades that we can associate with this potential expansion.
I think thats, roughly where we.
Looking at I don't see we're we're not sort of forecasting a big bump in grade that's generally what we get there I think the strategy. There is that the reason that we actually went there.
In the first place was not just to get 100000, or 200000 ounces and make a little bit of money.
Ultimately there are several hundred thousand ounces over there that were left at a much lower gold price by the previous owners.
There was almost similar to the thinking and strategy around Goldex spend 90 million to reopen it after the issues we had 2011.
Take a view that we only had three years.
Of mine life for that 90 million and we'll probably end up getting 10 to 12 years.
So we're not looking for great bump, but we're looking for more tons.
Which is good return.
Good cash flow, particularly at these gold prices and the extra benefit we've had from there is the ability to test our automated equipment tested an environment, which isn't as complex as were wrong, because I guess one of the things that this issue and pandemic has highlighted the more you can use automated equipment.
Better off your employees are safer you can respect physical distancing. So all of those were real bonus on Els at five.
You've on I don't know if you have anything to add in terms of.
Mining and moving forward on just ramping up some tons and what we're seeing over there.
Yeah, I think to you.
Moving up in tonnage it's been the biggest focus I think we've lost.
Rearranged the engineering team to focus on Morone at depth and.
Basically understanding the potential in that area. So the group has been focused on some satellites on higher grade satellite phones that they were left behind in the bear Dave. So these are.
As we go further is that they're also integrating some of these ideas in future.
We will update as we get more information on that.
Okay, Great separate question on on Kittila and.
The prudence of delaying the shaft expansion I've seen in the couple of quarters towards late 2019, you sort of hit that 500000 tons on a quarterly basis I was wondering exclusive of the shaft expansion do you think you can you can push operations there to get to that 2 million tonne annual.
Lies rate without the expansion.
I'll just start and then I'll I'll give you have on to fill in some of the details.
The shaft.
Project.
It was impacted by cold it really wasn't that decision.
Two.
Sort of suspended outside of cope it the shaft sinking contractor the workers were Canadian so we need to make sure those Canadians got home.
As this thing started to ramp up so the focus was on making sure. They got home our team in Finland has been in touch with a comedian ambassador to Finland too.
Start working on.
Program to get the Canadian workers back so that we can get that project back on track, but youve on maybe can fill in some of the details.
Yeah, specifically to your question that's a good point.
The both the mill in the mine presently and probably until the end of 2021 will be in a position to get a doctor that 500000 tons per quarter.
So that's that's a good thing on.
As we go from.
Assuming the better the shock completed the cost structure underground change drastically so there's lot of vault.
Focused on trying to complete this project is through this weekend.
Because of the.
The magnitude of the cost reduction.
As we are starting to mine below like Fivesix hundred models that you can kilometer factors on all that you're getting a little bit.
More challenging.
I see so that's good clarity thank you.
Next question comes from Greg Burns with TD Securities.
Yes. Thank you Sean I'll give on can you talk a little bit more about the saving water issues.
Nearly double the paste backfill, what you've done to address issues that you talked about.
Q4 results.
Yes, I think on the paste backfill.
And reduced activities there we kept mining so it was important to continue to mine.
Continued a process and why we're mining at reduced rates and processing a little bit less I think we're processing around 3000 tonnes a day versus the plan at four we're able to catch up on some voids and backfill. We've also use consolidator brachfeld.
So we've done a really good job just catching up on that which is important as far as sailing water, it's more about really permits.
We continue to engage the and the authorities I think everybody acknowledges that.
The best solution is a pipeline rather than have bus and truck.
Water and dump that water during the summer season, because those trucks.
Pick up an awful lot of dust so.
We've been engaged at the local level.
With our indirect partners and immune associations with the none of it government at the federal level. That's also involved in that permitting.
To make that case, so we still expect to get those permits later this year, we still expect to have a pipeline in place.
Next year.
Got storage capacity for two years.
The cost is capital from an operating cost perspective, it'll be cheaper.
So it's really the answer to make.
The right environmental solutions, and it's really the answer to be more productive in terms of water management water management kind of the biggest issue now versus where it where things were at 10 years ago from a mining perspective. So this would certainly help so we don't we havent had any pushback on that people understand thats. The best way to go it's just a matter.
Through the permit process.
Thanks.
Next question comes from carry Macquarie with Canaccord Genuity.
Hi, Good morning, guys. Good morning, John morning.
Question.
Hi, Kerry you may have to speak up a bit we are having trouble hearing you.
And just set better that's a lot better. Thank you. Okay. Yeah, maybe longer term question, you mentioned being potentially and a healthy gold price environment here just wondering how you think about your.
Project pipeline beyond the phase two at Amaruq, and Meliadine and our their projects. There that you think and move forward or do you think you need to supplement with supplement that with M&A at some point.
Well I think if you look at how we built the business until five we've done a lot of smaller deals so.
Certainly focused in terms of our valuation work.
Still monitoring sort of single asset projects, but theres nothing out there, we feel compelled to own a moment.
People say hey, maybe this is an opportunity to be proactive and may be aggressive theory.
This period, we don't see that at all we Havent really sped up our project evaluation work, it's just sort of.
Disciplined and measure just trying to understand things.
We're really trying to do.
Ahead of that is just to understand what do we have at Kirkland Lake.
There is likely a buildable buying their at upper Beaver, but how does it fit.
We continue to watch with interest what our neighbor is doing in terms of drill results on their structures. So I think that camp has a lot of potential.
Where is that where should that asset land.
That's a question that has to be resolved at some point.
We like our exploration team has always like that they have liked it for 10 years, even when Charlie page how did that Queensland.
Certainly the gold price helps but it has to stand on its own and so we would have to stack that up again.
Things like the underground Arctic.
How that one fits in.
Two years ago that was not going to make it.
With these goldie, it's certainly got a lot more potential but again as we said it's still early.
That has the potential to extend the life of a large.
For quite awhile.
And with East Goldie you have the potential when you add in Odyssey in East Malartic, you have the potential for a fairly sizable underground mine at some point in order to determine what that is exactly we need the drilling.
So I think what we've told our team is that the drill priorities at your drill priorities should be focused on pipeline and we need to understand that pipeline.
And so the focus on the drill priorities as Laurent are these are there do zones emerging at depth.
Surprise us given the history.
Given the favorable rock package, given the thickness of that.
The fact is we're drilling into an area, we really had drilled into the past does this mean it goes much further east pain. So.
These are the types of things, we're trying to fit in but I don't I don't sense that.
We're not.
We don't have the appetite.
For a massive building phase, we don't think it's necessary.
We'd rather think.
The strategy worked so are there other things out there we could add at a decent price and work and work into the pipeline, but in order to determine whether those are any good need to understand our pipeline better so it'll be more measured continued to be measured.
Great. Thank you and maybe just on Malarchuk.
I need to any advance from the discussions around the royalties there. They can comment on no. We just put that on old I don't think.
Well I think the position that both humana technique or taking is that we need to think about it.
As.
How does it look under the existing conditions, making no assumptions that those conditions could change.
And the good thing about that.
When you actually on it 100% with a partner.
You direct every drill hole you you apply every budget.
Every dollar that you want to spend on it and you determine the pace.
And you've got in the hands up some pretty good underground mining companies that have experienced so we're going to work out of that work on it at a pace that makes sense, but we're going to drilling and we need to tighter spacing as we said.
But although early.
Our guys Lincoln.
Great. Thank you.
Once again, if you'd like to ask your question. Please press star one on your telephone keypad, we have a question from annual checkup.
Question Bank. Please go ahead.
Yes, good morning, everybody.
Morning, I, just wanted to come back to none of that if I could either Sean our our Yvonne maybe just talk a little bit about I know you you've got to reduce workforce right now.
Can you just talk a little bit about how you're looking.
At the requirements that you need to ramp up tick capacity and to get after the second half just on each of the site.
You know, how you're going to get there with manpower and how you we get back on some of the job.
Well you look at four.
I'll start I have four to 500 employees.
With various scaled up.
So.
That is a small much smaller subset when you look at.
Which of those employees are actually get involved in critical mining.
Tasks and responsibilities.
So these are jobs that.
Can be filled in by contractors some of them can be filled in by.
Our rotation in the summer, we usually do a fair amount of hiring.
During the summer, we got a lot of take up in the summer.
Lot of these jobs wouldn't take a lot in terms of training.
As we said ultimately we want our none of it workforce back, but theres a way that we can manage sort of ahead of that and the strategy is really around contracts. So we've already started that process.
To to assume that this may take through the summer before the annual Workforces comfortable coming back.
We don't know for sure.
We are engaged.
And talking to them on a regular basis, but maybe you have on you can.
Sort of fill in some of the details there.
Yeah, well I think like you have to look out there is from each operation standpoint at Meliadine.
There's not too much concern going forward ramping up because there.
We are already roughly about 75% of.
Normal workforce at sites.
And adding personnel lending from mostly.
We're in a position that will will find through.
Contract through some resource in that area. So not too concerned it may be the challenges will be more because you proportions of into it on the operation side of things is more predominant at a.
At Meadowbank and so far like we will more makes at 55% of workforce up there, but the construction industry can supply a lot of.
Contractors to for heavy equipment operation.
We are seeing.
We don't expect.
It is to return probably for.
Few months at least and.
As we ramp up in tonnage, we're going to be basically.
Getting.
Employees from that.
I'm not group of contractors out there to supplies.
And just so that I understand that.
Yes release, you mentioned that Q some stopped on the underground project.
Ooh stopping and redirecting.
The employees that to underground.
Now you time is that how it's working.
No actually well, yes, and no some some of the.
Manpower's spin either return home the maintenance guys had been returns have been.
Reintroduce into the site to focus on backlog.
So it's a variety of things with the.
We will and then we will adopt probably will probably restarts some minor development work towards the.
The end of Q2 Q3 in Q4.
Okay, and then maybe Sean for you and I've been trying to get a handle on this and you touched a little bit on that which has been you know with that then you how can safety measures.
So that's been saying.
I'm trying to understand the long term impacts.
The cost structure on productivity 10 for the mining industry not been asking all of the company's next question.
No I know you're doing work on it can maybe qualitatively give us some.
And indications of what you found to be a latest challenge on on this basis than your best opportunity, maybe what seems like you're saying yeah. I think the greatest challenge you know a lot of these plants are fairly sizable. So you can operate these plants and still respect all the physical distancing measures.
Pressure points in the mines are generally at the front gate.
'cause, there's limited access and limited entrances.
So with that screening process. So the way that we've managed the screening process as you've got to stagger. The ships and so you don't have as many people showing up at the same time as you normally do to waive Hello to the security guard as they pass through.
Now there is for example at melodic Theres a series of trailers, where you have to actually go through.
Physical screening and also a series of questions. So you have to stagger to go through that she can manage that without a lot of impact on costs. The employees have to adjust to a different shift schedule.
But it's really in the underground mines on the cage deck and indicate and so the question going forward again, you stagger the entry.
You don't have 150 people showing up let's say for example that Ron.
Eight in the morning or 730 in the morning, all lining up to jump into the next cage.
Staggering the shifts, but the capacity and those are half of what they normally would be the question. We have going forward is that.
Thats worked people are comfortable with it.
Can we get more productive and use that page better by using face protection, whether its mass whether its plastic shields.
Because we're really focused on that short term contact it's not like they're standing beside each other for hours as we said it's several in it.
So we're looking at ways that we can.
Maybe.
Utilize those cage systems, better going forward, but again, it's going to take some time, so it's hard to quantify but I think the real opportunity now.
Is what we were trying to do here over the last year as we went through that building phase and we started to ramp everything up is we said now it's time to look at the workforce and as you're building stuff you know people.
You are adding people things don't really settled down to give you a chance to really take up close hard look at things. So I think what this is Don has actually allowed us to strip everything back down again, and then reintroduce things very carefully and we're hopeful at the end of this that we can do the same things we're doing before with us.
Smaller on track workforce.
That could be the opportunity so it's hard to quantify it now but from our perspective. This is all manageable and I think our people really did a good job not just designing things specifically for our minds, but working together with their colleagues and peers and other companies to make the case, particularly to the pullback government that this is an industry that.
And actually do things, well and demonstrate leadership around things like hygiene and screening in physical distancing and testing.
Which we think a lot of these things we should probably just keep them going anyway.
Because it makes the employees comfortable so well have a better feel for this.
Probably in June.
And so we can certainly circle back and provide more color on that at that time, yeah, and I would assume that any additional costs on the navy.
You know something for you to asset in that you'll be getting benefits some from yet FX and fuel hedges.
That's helping to offset some of these additional costs.
Through the cost structure without the effect statement, yes, I think that's one thing that.
When we've looked at it with the Treasury Department is that so.
Not just the Canadian dollar, but it's all its the peso and that's the euro.
Just moved in a positive direction end the diesel price relative to what we had budgeted unexpected and so what we've tried to try to do is just.
Protect levels better that the budget numbers.
And on the FX side do it with zero cost collar. So we still have that participation.
Yeah.
That can make a difference of 40 to $50 on out so.
That can have a meaningful impact.
On the unit costs as we go forward.
Yeah.
Okay and look for more information on that Sean, but I agree with you I think of all industry and mining industry with all that health and safety measure Thats already in place before calls at 19 as you know is as one that is very adaptable to what we have to Dan. Thank you.
Thanks, and but I think as an industry we've got a.
Demonstrate too.
First our owners, but demonstrate to our employees and our communities and the government.
That we can take leadership on this but it it because that if we can remain essential.
That puts the industry in a really strong position because we know other industries are kind of struggle.
And the gold industry.
Is in this position, where it's getting a.
Good price, which could be a better price.
It's able to run at pretty close to normalized levels fairly quickly.
Which means on a relative basis.
Returns that the mining gold mining that youre going to generate.
It should be viewed a lot better.
On a relative basis and.
As general a start to revisit as resource on the start to get a bit of inflow.
As many of you know these shares are still not widely held particularly.
With the vast pools of money in the U.S.. So I think that is the opportunity the opportunity is to run responsible businesses.
That stay disciplined as the gold price moves up.
Generate higher returns.
Uhhuh dividends up.
That's the formula for success no guarantee.
But that's the thing that certainly.
In our mind as we think about strategy.
Tactics.
And that's not second half a margin expansion tough looking forward.
Thank you we'll leave it at that we have our AG haven't today.
Which is virtual so we've got a few things to do before that.
Thank you for your attention what we've tried to do it.
Because we've been working at home.
We have the opportunity to.
Get our teams together fairly quickly to respond to inquiry. So as we move forward if you'd like a one hour one on one.
To talk about some of these things in more detail more than happy to do it so.
Again, it wherever you are hopefully you're safe and your family is doing well and we look forward to.
Engaging in person at sometime down the road. Thank you.
Today's conference call you may now disconnect.
[music].