Q1 2020 Earnings Call
Greetings and welcome to the first quarter results conference call. During the presentation, all participants will be in listen only mode. Afterwards, we will conduct a question. That's a session at that time. If the question. Please press the one followed by the foreign you tell us.
If at any time during the conference in each region operator, Please press star zero.
As a reminder, this conference is being recorded Friday may 1st 2020, I would now let's turn the conference over to Mr., John Pearson, Vice President Investor Relations. Please go ahead.
Thank you operator, I would like to welcome everyone to Centerra Gold's Twentytwenty first quarter conference.
Cool.
We have summary slides available on our web sites to accompany each speaker's remarks, today's call is open to all members of the investment community and media.
Following the formal remarks, the operator, we'll give the instructions for asking your question and then we'll open the phone line two questions. Please note that all figures are in U.S. dollars unless otherwise noted.
Today, joining me remotely on the call is Scott Perry, President and Chief Executive Officer, Darren Millman, Chief Financial Officer.
Then they Jordanne Chief operating officer and use of Raymond General Counsel.
I would like to caution everyone that certain statements made on this call today, maybe forward looking statements and as such our subject to known and unknown risks, which may cause actual results to differ from those expressed or implied also certain of the measures. We will discuss today our non-GAAP measures.
And I refer you to our description of non-GAAP measures in the news release in the M.
DNA for more detailed discussion of the material assumptions and uncertainties. Please refer to our news release and Mdna issued this morning, along with the unaudited financial statements and notes and to our other filings, which can all be found on CDR and the company's website and now I'll turn the call.
All over to Scott.
Thanks, Don and a good morning, everyone. Thanks for dialing into that call I'm just a on slide five of the accompanying earnings cold presentation deck.
Just firstly in terms of the safety you would have noted that one of the key highlights this year Oh I'm sorry, recent key highlights this quarter was the outset mine, which just recently transitioned operations. We actually just recently celebrated one yet on the of operations without a single loss time incident.
Fantastic, it's a commendable I just want to I recognize that in terms of our management team at OKS Oh, we believe from a safety perspective out come in continued commitment to let's say potency is a driving force behind achieving such milestones.
Our focus moving forward has to be absolutely relentless in terms of us achieving our goals of zero and eliminating fatalities from within the business.
The second bullet point in just on Cobot 19.
In terms of the current of ours Syncera continues to prioritize the health safety and well being of our employees contractors communities and other stakeholders. During the current outbreak cobot 19.
Taking steps to minimize the effect of depending on our business.
[noise] today, the cobot 19 pandemic has not resulted in any material impact on Syncera is operations and the company. Currently does not expect it will impact 2020 production. However, the potential effects of Coca 19 are unpredictable and the company continues to monitor the situation that each of its side and we continue to take this.
But necessary steps to prevent or minimize any effects dependent may have as you would have noted there's no change to 2020 guidance.
Let's say bullet point here just in terms of upset.
Quickly transitioning to operations is going to be a third operating gold mine within our portfolio.
On January 31st we achieved first goldcorps at upset that the ended the quarter in terms of the construction. This project. We have now approximately 95% complete during the quarter offset contributed 4480 6000 ounces of gold production is going to be an important said asset of in now portfolio and it's going to make for increased diversity.
Moving forward as we move forward here over the course of the calendar year into the 2020, we're expecting progressive increases in terms of sets coal output profile.
Just in terms of some of the key quarterly highlights.
During the six bullet point that the another robust quarter in terms of our production levels.
Particularly good operating momentum incremental facilitated a companywide gold production result of 190000 ounces of gold.
Hi level goat output in terms of the corresponding on sustaining costs you can see we achieved at very low very competitive $712 per ounce. So.
Given the prevailing gold price environment and that strong level of gold output and obviously the competitive so all in sustaining cost you can see that really.
You can see that generated meaningful free cash flow companywide basis.
In terms of during the quarter generated free cash like companywide of $77 million, which include $96 million and positive free cash flow from control and $22 million of positive free cash flow from Mt. Milligan.
The strong level of free cash flow for the balance sheet transition into a positive net cash position that ended the quarter as we move forward here over the course of.
2020, we no longer.
Okay that is no longer in construction mode. So I would expect if we continue to deliver we continue to execute we should see the balance sheet continuing to grow our over the course of this year.
As I mentioned earlier under covered 19 today's release, we are maintaining guidance for 2020.
The second last bullet point here.
Just based on the Companys financial position recent strong operating results and cash flows.
Board yesterday approved a dividend of Canadian four cents per share.
Just lastly, just one a note in terms of providing macro environment on terms of the current economic condition.
Gold prices a strong right now.
Also what when noting is in terms of though so the exchange rate environment since the jurisdictions, where we operate in terms of the oil environment and its impact on diesel fuel pricing seeing particularly robust margins across all of our operating assets. So is this is to sustain does bode well for us and terrorists profitability.
Cash flow generation moving forward.
Just on slide six of the presentation.
The chart here in the top left but just looking to graphically illustrate the quarterly cash flow.
During the during the quarter.
You can see the green, Colombia, the first Green column, it's just the aggregate of the positive free cash flow that was generated by comes on Mt. Milligan during the quarter. So 118 million those returns that wasn't drawdown on our revolving line of credit facility of $82 million U.S. and then the red columns just illustrate.
How and where the cash was deployed during the quarter.
As you can see as the chart illustrates was meaningful quarter in terms of positive free cash flow generation.
I just referenced the chart in the bottom right hand corner on slide six.
Illustrating here is our consolidated adjusted free cash flow and so what we've removed and what we removed from these call them back in 2019.
The.
The the settlement expense associated with these strategic agreement that we entered into with the government Kurdistan, but I think when the chart illustrates is do you look at Q1.
Realized gold price of $1487.
But also now that offset is transitioning the operations that are not funding is significant construction expenditures you can see just the level of free cash flow that the the businesses generating.
In the quarter as I mentioned gold prices here today stronger than what we're realizing in Q1 thing at very favorable diesel fuel price environment very favorable exchange rate environment. So again, I think that this bodes well when you think about our future profitability and free cash flow generation potential just lastly on slide the chart in the bottom line.
Just a continuum about net debt to net cash profile and you can see the columns on the rider that Chuck just given the strong profitability strong cash flow generation during the quarter you can see the balance sheet is now transitioned into a positive net cash position.
Just on slide seven just in terms of out environmental social governance profile.
In terms of the bullet point obviously.
Continued focus on safety, it's absolutely Paramount.
Thanks for that earlier.
Second bullet point here just in terms of our license to operate.
We've now achieved 81 consecutive month of the business interruption Fantastic achievement.
Bullet point as it should be that they never portable incidents during the no reportable environmental incidents during the quarter.
Tens of.
The full point here continuing to work and focus on that commitment floor.
Two assets and turned to be a diverse and inclusive organization.
Our initiatives here that are underway.
Second last bullet point, we are now working on a corporate wide climate change strategy.
Hoping to have that finalized by the end of the shift and just last bullet point here.
We have implement we are in the process of implementing the World Gold Council is responsible gold mining principles center as a member of the World Gold Council and signatory to these principles.
Now looking to establish conformity in compliance with all these principles and that's another key initiative thats being rolled out across our operations. This shift.
With that I'm not going to turn the presentation over to our Chief operating Officer Mr. Dan days, then say 10. Please.
Thanks, Scott good morning, everyone.
I'll start on slide nine.
Our quarter, one safety and operational performance was was terribly overshadowed by the activities following our tragic event and couldn't or in December and then a terrible accident that took place blaze tore took the life from one of our operators in February.
We've done a lot of investigations and analysis to understand what we're doing wrong and we've taken and will take even further action to greatly improve or safety.
Throughout the company.
We did have a number of positive milestones that Scott referred to.
Thompson Creek, we did achieve five years without an LTI.
And just recently at OCC suit.
Very commendable to go through construction and commissioning on April 19, they achieve one year without a lost time injury.
On the production front.
We had a strong quarter with producing 190 474 ounces of gold and we produced 20.1 million pounds of copper are all in sustaining costs was $712 per ounce sold.
For for Q1, 2020 Colm tour.
Congrats continues to produce at a steady rate, we're feeding or from our stockpile.
Performance remain similar to quarter, one ours for quarter four of last year with Q1, producing 152307 ounces afford gold at an all in sustaining costs of $644 an ounce.
We restarted mining operations in the last week of January.
After getting all the necessary permits and approvals and continued to strip cut back 20 in the central pit.
We're working with experts and the government to return to the waste dump development of the Lisi Valley, which will help us increase our tons per day.
Mind going forward in the second half of the year.
Come to work closely with the government officials and to date has been successful and managing the negative effects of gold at 19.
Specifically, we reduced turnover at our camp at our mine site and postponed to any non essential work.
But it did not overly affect our activities.
Come toward did generate $96 million a free cash flow in Q1.
At Mt. Milligan, we achieved a solid mill throughput average of 53527 tons per calendar day as we did have ample water to run at full capacity.
We had some difficulties with wet or which at times slowed the throughput.
But in the quarter. We've we produced 33681 ounces of gold at an all in sustaining costs of $901.
And copper production was 20.1 million pounds produced.
Our Q1 higher mill throughput.
Was offset by lower grades partly due to sequencing of the or and subsequent lower recoveries that came with the lower grade or.
We had very good success accessing nearby accurate for water and we continue to build or water reserves in the the TSS.
Milligan did take a two week mill maintenance shutdown at the beginning of April which helped give us the ability to do some social distancing at our camp.
The accommodate employees and contractors, who are self quarantining.
Plant is back up and running at planned rates and the team is working to bring the mining back up to full activity.
Overall in the quarter Milligan did generate 22 million free cash flow.
At OCC suit as a.
As Scott indicated construction was 95% complete at the end of the quarter first gold was poured at the end of January and their gold.
Production of 4486 ounces for the quarter and we are on track for commercial production in Q2 2020.
We go to slide 10 over operational key perform a key focus.
So for 2020, we'll continue to work on improving our safety performance.
With a special focus on reducing.
Fatality risks at Coombe door and throughout our operations. We will also further develop our critical controls.
Improvement plan.
Controls over critical risk.
At OXXO, we are ramping up to procure commercial production in mind tons crush store placed on the heat and our HDR plant running at design.
We are now near 100% of the plant construction.
By the end of Q1, we did have 386000 tons under irrigation and a very large stockpile of or waiting for crushing and placement.
But due to covert 19, we did voluntarily stop.
Mining activities on March 31 up until April 15th.
Well, we kept progress of putting more on the he and the HDR running.
During that downtime.
I'd now Milligan the spring melt commenced getting we're getting robust water flow and it's all being collected into the TSS.
For 2020, the Milligan team is focused on achieving consistent and improved mill throughput and recovery and getting a stronger handle on our mechanical availability of the plant.
The operating team is also taking steps to improve our cost performance throughout the company, we're taking advantage of some of the lower commodity prices.
To build our inventories had milligan, we're flapping the organizational structure scrutinizing rentals, and all contracts as well as improving mine productivity.
Good story is on track to deliver an updated 43 101 in the second half of 2020, converting measured and indicated resources into reserves and showcasing extended mine life.
Finally, we continue brownfield exploration plan to 32.
Billion dollars companywide and that come to our specifically 20 million for 2020.
If you go to the next.
Slide Slide 11, these are photos again of suit.
Last fall of the heap leach pad and facilities.
Due to call that 19, we voluntarily took a two week shutdown at Oxford as indicated.
Continued to stack or an irrigated and running the HDR plant, but on April 15, we did ramp back up to a full mining production.
To a normal activities.
Now I'll turn the call over to Darrin.
Thanks, Ed good morning, everyone.
Today following on the slide deck I'll be speaking initially to slide 13.
During the quarter Centera recorded 374 mean in revenue. This consisted of 299, meaning gold sales.
Three mea culpa sales and 42 million from them.
I lived in a business unit.
In the quarter installed 203 ounces of gold 160000 ounce attributed to the come to mind.
Actually 40000 ounces from the Mt Milligan mine and overall, 3%, increasing gold sales compared to the prior year quarter.
It should be highlighted the loss gold production was slightly up at Mt Milligan compared to the prior year quarter, we're processing material with a 40% lower gold head grades at 0.37 grams per tonne.
We also so 20.4 million pounds of copper the increase in copper production compared to the prior year quarter driven by mill availability.
And net earnings of 20 mean was recorded in the quarter. This included a 26.4 million noncash adjustment to close so asset retirement obligation.
The expenses associated with the movement in the underlying discount right with reference to US Treasury bonds. There was no change to the underlying activity required to remediate the properties.
The adjusted earnings after factoring in the non cash asset retirement obligation expense was 46.4 million.
The adjusted earnings per share for the quarter 16 cents.
Just move to slide 14.
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From a consolidated cost perspective since here in the quarter recorded an all in sustaining cost of $712 per ounce at asset level contour recorded an all in sustaining cost of $644 per ounce. Most Mount Milligan recorded an all in sustaining costs of 900 $901 per ounce for the quarter.
What's the books it achieved commercial production targeted late Q2 2020, the company will commence reporting it's all in sustaining cost metric.
For the quarter Centera generated 121 mean in cash from operations and 77 mean in free cash flow.
As noted in the bottom left hand table centera transition during the quarter to a cash net of debt position of 58 million with 550, I mean in liquidity.
In the quarter the company paid off its higher cost project financing facility associated with the oxymoron.
Set terra at the end of the core at end of Q1 elected to utilize the corporate facility as a precautionary measure to covert 19, ending the quarter with total cash of 194 million.
We expect to repay a significant math if not all of the outstanding corporate facility in Q2.
On slide 14, I would also refer you to the bottom right hand chart. Some key cash flow commodity drugs about business gold, obviously with carpet down, but I knew representing 10% at a consolidated revenue.
Diesel and UL, SDM, Brent index or a good proxy for out.
Diesel price movement.
The other important cash flow drop is not noted here are the Canadian dollar and a cookie some BAF favorably lower by 9% at 16% respectively.
These overall key positive commodity and FX movements 12 business are expected to be realized in subsequent quarters.
Finally, we remain well positioned as we enter Q2 with a significant value on surface, notably at come tool, where we finished the quarter with 932000 contained ounces of gold on surface in stockpiles.
Well set Mount Milligan, ending the quarter, we just under two to concentrate shipments in inventory the concentrate on hand containing approximately 85000 ounces of gold and 18.6 million pounds of copper.
Given the financial strength of the company and current and projected performance from a three mines centerboard elected to declare a four cents a four cents Canadian dividend for the quarter.
With that I'll pass it back to scoped to close out.
Thanks Darren.
Just on slide 16, so just just to wrap up I think head as Weve reported it was a notable quarter just in terms of the companywide called output protocol in the low competitive on adding cost profile since the first bullet point here.
Note that were maintaining our guidance for the year guiding gold production of up to 820000 ounces of gold at all in sustaining costs as low as $820 per ounce thing. The other key highlight this years, we were hoping to be increasingly showcasing outfit operating goldmine offset in Turkey and again as.
We move forward over the course this year, we'd be expecting to see progressive increases in terms of gold and tend to offset gold output protocol.
Just want to highlight the second last bullet point.
Continuing continuing to invest significantly in terms of our brownfield exploration program.
You would have seen early this year, we've had a lot of success at committal, specifically, so we reported that Weve delineated an additional 3.2 million ounces of measured and indicated results is one of the key objectives for this year that we're now working on is looking to prepare a new 43, one on one technical life of mine.
Glenn so comfortable and with that initiative, we'll be looking to bring a significant amount of this measured indicated resource into reserve category.
Well, that's going to allow us to show to demonstrate and showcase an expanded open pit resent mine life that control, which would be a fantastic.
The chart in the top right I spoke earlier.
We're in a good gold price environment as Darren I mentioned, we're seeing a very favorable economic environment. Just in terms of some of the devaluations that we've seen in the exchange rates in terms of the jurisdictions, where we operate likewise in terms of the diesel fuel price environment, I think that positions us well in terms of.
Free companywide free cash flow profile as well as our profitability moving forward.
With that I'll look to wrap up the call there and moving into Q and eight so if I can pass the call of its Maria operator. Please.
Thank you.
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Once again to Q4 question. It is one followed by the four.
Thanks.
Thanks.
We do have a question from the line of Daniel Mcconvey from Rossport investments. Your line is open.
Good morning, everyone. I, just so you know I think a lot of you'll get booted off the.
The webcast for.
Good.
50 minutes into it.
Two questions I mean, I guess first when mainly for Dan Dan come tour.
Can you talk more detailed this with the situation as with Covidien the country and at the mine site and for new people coming in can you go in with quarantine system.
Et cetera, right now.
Certain certainly Daniel.
Actually this country has done very well.
They did go into a state of emergency in three other cities, where we have a one our head office, but in the region, where our mine is there was no no cases of gold good and they're in the original city there at only hit a peak of about six cases.
So we did walk down or employees for four weeks minimum some stayed a little longer and then we've started doing shift changes by bringing people into quarantine.
And then bringing them up to the mine site.
After a period of time, but all of those were coming from areas, where there was no virus. So we've been very fortunate that come to our mine to operate substantially normally we did reduce some activity just so we wouldn't have to.
Bring in full complement to people, but we did stop all ex pats travel in and out and but that was back in early February and.
And we.
We continue to monitor very closely.
We're just now starting to look at.
Testing.
People that are from the city of fish catch because we have number of technical experts and were and we're looking at.
Utilizing the government tests that take about three days to get the results back and if people test negative than we would put them into quarantine for one week and then let them go to the mine site.
Okay, where do you quarantined them Dandy portion in the city or dumped in mind say, where do you do.
Well when I will both for the ones that we were quarantining early on in the first say six weeks of the of the epidemic. The we were doing it down at the Lake It's about 100.
Now on 20 minutes from the mine site and just at resorts and putting people in groups about 20 to 30.
Front resource.
Okay. Thanks.
By shifting from the Cynthia.
Okay great.
Thank you second question.
Scott The technical report coming on income tour.
It should add reserves, except for the resources is it could it could it significantly changed the mine plan over say the next five years, two and 3% or is it mainly going to be beyond.
The current mine plan.
Yes, thanks for that question Dan.
Ben do want to take that question.
All right I certainly can.
Daniel will be.
The current 43, one on one the running on.
Sees us.
Mining at full activity until 2023, and then and then feeding stockpile or dropping down until 2026.
With the additional of or the the goal is to run at the pit at the state we are.
No.
And that add additional life to the mine. So it would affect the next five years because of those latter years in 20.
23 onward.
Okay, but not necessarily the next three years.
Much.
Our goal is to stay at a at their current level or thereabouts.
Okay, great, Thanks, and congratulations great quarter.
Thanks.
There are no further questions at this time.
Okay. Thank you operator, thank you everyone for joining the call I noticed the busy day lots of other results coming out and we have our annual general meeting later this morning. So.
So we wish to thank you for participating and if you have further questions. We are all available by email to answer those questions. Thank you.
That does conclude the conference call today, we thank you for your participation and ask that you. Please disconnect your lines.
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