Q1 2020 Earnings Call
Ladies and gentlemen, and welcome to Mcewen mining Q1, Twentytwenty operating and financial results Conference call present for the company today are well Mcewen, Chairman and Chief owner, Peter Moore, Chief Operating Officer married Burley, Chief Financial Officer into basketball Senior Vice President exploration. After this.
This presentation there will be a question answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If he would like to withdraw your question I suppose Keith I'll now turn the call over to Mr. promiscuous Chief owner. Please go ahead.
Thank you operator.
Good morning, some shareholders, ladies and gentlemen.
[music].
It's been.
Even over.
Since the World Hill.
Like nation declared the cobot 19 diversity everything them.
Starting in late March.
Early April our operations are temporary shut down.
One other employees to comply with government imposed restrictions.
Ladies to say, none of our inventory where the answer is it a contract.
Yes, entre desires.
Before we hope this result is because of our rapid action in the business managers.
Yeah, we put in Q.
There's 60 black boxes back up.
Operating normally gold bar is starting to increase activity through the focus on preparing production.
Every restriction too.
And the San Jose mine operating 50%.
Yeah, I don't mind needed to take you would reach.
The government restrictions.
This is.
In June.
Let's turn to ballpark.
Last year was a disaster.
Hi, Good I'm sure you hope Oh problems would be far behind this issue either see significant kit.
This quarter, you reporting very large non cash write down.
So far in mind.
This is a result every device geological model.
The size and structural interpretation of it to fund.
This morning wants to be SAR assets for us They show for.
Even in Q1 new ones.
Many professionals who works for us.
Others, who technical consulting.
These decisions that cooling degree of severity on Tuesday.
No ready to close the mine right. It also has a very sad thing isn't for several reasons.
We believe there are opportunities to be operation.
Reducing costs.
They all seem to find additional resources.
Your next formation.
Thanks, Peter until then speak too.
These issues.
Later in the presentation.
Let me talk about our financial results for the quarter.
Liquidity.
As of Q1 liquid assets $31 million compared to 46 in the happiness in that year.
Working capital was 23 million.
However.
We are forecasting that are working capital. Please note the required working capital level.
Right buyers death.
Therefore, we are evaluating several alternatives.
We find that.
In order to extend in terms of about 50 million always yeah.
In Chile has an alternative financing in place which addresses the good.
Created by a potential working capital shortfall.
Hi, auditors has added a going concern.
Language to I find interesting.
And then it's reflected in our Q1 10-K report.
Assuming a constant.
See through.
Price remains constant.
And they've been able to refinance the debt Mindy.
True expenditure.
We believe we have adequate cash.
The company through 20 between.
The big item on their balance sheet income statement impairment as a goal by mine.
And when it's going.
Consequence of changes to the Georgia related to.
In mind.
Well, yes apartment water there is no external property evaluated.
[noise] that information gathering performed a couple of ability to us.
He just can kinda so nothing.
Only 9% discount.
They also news, which I believe it's hard to believe long term gold price assumption for 231.
The conclusion was it the carrying value <unk>.
Needed to be prepared.
[music].
That's we're recording a non cash impairment, reducing plans and the mineral property interest from $83.8 million in first quarter.
When you combine impairment.
6.3 in speech on the exploration things and co Jetstep G.
Consolidated net loss for Q1.
As 99.2 25 cents a share.
Excluding the impairment.
Yes.
The 51.49 uniform censorship.
Exactly.
Right and introduction to our.
Mm Chief operating Officer, Piedmont, who joined the company on it so second.
It is someone who I've worked with before the full course.
Good morning.
He's a very accomplished engineering executive.
Yeah.
Neither innovation.
Next to challenge conventional wisdom.
And just to say.
He has been working flat, though for the last six weeks.
I didn't say strategies that we believe there's going to turn accumulating into a pretty cool.
No that's either to continue with the presentations.
Thank you Rob.
I'm very excited to be joining mcewen mining of the opportunity to work alongside your young.
Acumen mining has a bright future.
We have some near term operational challenges to overcome.
The older pipeline of resources and discoveries with which the girl.
Before providing the operations and projects updates.
But what does your some of my background and how my experience can be applied to the challenges and opportunities that mcewen mining.
I'm, an engineer with a background in mining and minerals processing under the Masters degree in open pit and underground rock mechanics.
For the past 30 years I've worked with an engineer supervisor manager and executive in open pit an underground operations.
My experience spans Feasibilities, new mine builds expansions and the turnaround.
He also worked in the Red Lake mine for nine years and bearing capacities.
My experience is my general manager at the Victor Diamond Mine has taught me the importance of blending challenging clay Rich wars.
Material handling systems designed to optimize processing efficiencies and throughput.
I'd also like mine efficiencies and Tron first open stoping conveying will support the transition to production at our new from Koetje.
Speaking of from.
The ramp development it bounced in Q1 twentytwenty that for stores expected in Q4 2021.
The from deposit other resorts screwed up five grams per tonne.
Expected to provide two to three years of mill feed.
[laughter] low cost transfers open stope mining method.
Continuing with the update on the growth of the Black Fox complex high grade mineralization Grey Fox Pro drug Black Fox mine and the stock mine represent high growth potential to utilize excess capacity at the stock mill.
Hi, Great open pits are being evaluated degree pop culture.
Permitting is set to begin in Q2 2020.
Expected to take approximately two years.
In addition to the open pits underground scenarios are being evaluated.
Great box project is expected to grow into a bomb like core assets for the company.
The company has received permit.
Or received the permit to deepwater the stock shop.
Following auctions and cost to react system mine via the existing shop.
Resource definition drilling is required to further advance this exciting discovery.
Hi grade intercepts talkies are also encouraging and their strong potential for underground and or open pit mine.
The Black Fox mine lateral development was boosted in Q1 increased work pieces and access to new stoping areas in the west side of the mine.
Well the cost and productivity improvement plans include reducing stock dilution through improved drill control capable can trials.
More focused exploration and mining in the upper part of the mine to reduce haulage cost ground control optimization.
Reductions in rehab.
Proving development rates.
Moving to know about it results of the gold bar mine were disappointing.
An estimated 25, 35% reduction in contained ounces and the gold deposits as expected.
Drilling resource modeling updates and determination of the best business keeps going forward is ongoing and expected to be completed in early Q3.
Key drivers for rising costs and underperformance 20 like team is being analyzed for improved solutions.
Some areas for improvement being examined our resource reserve definition drilling to improve mine planning delivery.
Improved stock all management and blending.
Better unit mining costs and talk devotees with a dispatch system.
As my assessment of run of mine heap leaching.
Okay, great for and blast control offices.
In April the might be gonna stay gigs returned to operations that include maintenance type clean up some limited stripping for the next drill ready or in west.
And processing of stockpiled ore.
For a mining remains on hold as management I'm just plans for operations.
Well bar soap isn't the permit stage and is expected to begin production in the second half of 2021.
I'm going metallurgical work into keeps favorable metallurgy metallurgical recoveries in excess of 70%.
Central for run of mine, reaching.
The mineralization startup surface, an expiration is targeting the extensions.
In Mexico for old Guy on line continued to produce school residual leaching Phoenix projects study.
On the streets robust economics, I'm expecting finalized.
Study in the second half of 2020.
At our San Jose Joint venture mine in Argentina operations for me, a 50% capacity due to the government travel restrictions.
I will now turn the call over to sell them to take you through the operational.
Thank you Peter.
Our exploration over the last two weeks.
Lets focus on three properties.
Lots of talk some stocking Timmins, Ontario, and gold bar and Nevada.
During this time through our strong commitment to exploration. We did you resolve the car cleanly and be kidding I can think of all projects.
Hordes when programs have quickly driven reestablishment of the discovery process.
Well since that is contributing to our resource growth.
And to the definition of when the outstanding project development pipeline.
Here are some key highlights starting with Nevada.
The gold bar mine the final.
To assist with the model review and to Derisk short term mining we have design and then pit drill program consisting of our C reverse circulation and core drilling.
This drilling started in late March and about 15000 meter have been completed so far in Q2.
During the results as shown on this slide.
Our confirming it seems kind of gold mineralization over de risk picked ARIA and will assist reinforcing our model.
Significant during the results have been defining first input mineralization derisking mining with results such as five grams over 64 feet, including 11 gram per ton or 17 fee.
And then 3.4 over 90 feet.
Also strong intersection beneath the revised pits, such US 2.9 gram per tonne over 82 feet 1.2 over 144 feet.
And 1.7 Gram per tonne going over 225 shoot.
And potentially to extend mineralization to the southwest of gold pick where when you get an intersection of <unk> 0.9 Gram per tonne goal over 120 feet outside the pit boundaries.
Not that resource estimate using recent that mapping all historical in new drilling and formation and a revised mine plan are expected to be completed by the end of Q2.
In 2019 significant drilling or curate the gold bar sub deposit, where we have reinforcement George Carlin structure on the spending an increase confidence in the resource of this quality satellite deposit to the main gold bar operation.
The upside potential to grow the resource at gold bar solid, which then spent at 63000 ounces measure indicated remain strong.
And the drill program expected to start later in Q2 will focus on three main targets first the salt extension as the deposit is open for the last evening, India. This area returning significant results has shown on this slide.
Second the northern portion of the positive which was only partially testing and finally northeast southwest structures that control higher grade mineralization.
Moving now to tenants have the black Fox mine our focus.
For resource and reserves reserve extension is on the west side of the mine from 300 to about 700 meter that.
We have generated multiple positive intersection including I agree. It's typical of the black Fox style of mineralization, suggesting a potential launches increase over the target ARIA.
The most significant reason the recent intersection such 79 Gram per tonne goal over 2.9 meter and other hybrid pits are shown on the figure where the yellow highlights are indicating 22 NPD results.
At Grey Fox now we are pleased to announce that the mineral resource estimate for the grey Fox deposit.
Has been updated with exploration drilling completed in late 2019.
The updated resource estimate contain 800088.
Doesn't gold ounces up 7.1 Gram per tonne goal, indeed indicated category and 173000 ounces gold at 6.6 Gram per tonne Indian for category.
Representing 43, and 30% increase respectively compared to the previous estimate.
The grey Fox gold mineralization.
Mineralized system is large covering an area of 1.5 by 1.5 Kinda Mailer and is composed of five distinct deposit located on our Black Fox Brodie 3.5 kilometers south piece of the mine.
We believe the potential to grow the grey Fox resource is excellent.
Open pit and underground mining scenarios are being evaluated for the potential development of the grey Fox deposit.
More information about these evaluation would be provided later in 2020.
On the Soc property, our exploration is focused on the threeq of another trend, reflecting a strong gold system that oh, the stuck mine and newly defined zones of mineralization.
The main highlights of our 2019 do in program is the discovery of a significant news on of innovation Hot stuck with.
We have a total a total of 31 drill holes completed into this area. The gold mineralization is associated with cords vending and disciplined told fired often in the core screen neutral maybe crock.
During intersections averaged around five gram per tonne goal over wits, ranging from 15 to 20 meters and procure and an area maturing 265 meter along strike and 200 meter let's call it.
The new mineralized zone is located less than 350 meters from existing underground development at the mine and within a kilometer west of our mill.
Let's talk with remain open in all directions and the next person program is being designed to produce an initial mineral resource estimate entities test the extensions of demonetization in order to assets the potential size of the discovery.
How are expressing a fourth at stock produce results quickly with the first inferred resource at Stuckey. Some late 2018 on them, we upgraded it to indicated resource category at the end of 2019.
Chuck East is a sellers on of men mineralization hosting 121000 gold ounces located within one kilometer east of our processing mill.
Our 2019 program generated some of the best intersections, so far do use zone, including 63.6 Gram per tonne over 6.2 meter and 34.7 gram per tonne over 6.5 meter.
Suggesting potential I agree too.
At the historical suck mine, we have demonstrated that the mineralized gold system is open on the Dep extension of the.
Old mine with a deep intersection of 27 Gram per tonne. The goal over seven meter which include 0.8 meters grading 311 gram per tonne goal.
What's called that.
Not really 900 leader.
To conclude I would say that we are well position to keep adding value going forward based on solid exploration Foundation, we have established and tenants.
In only two years, we have developed a strong exploration pipeline.
Which goes from target delineation and doing testing to resource estimations.
Our rate of their success is increasing we are strong positive momentum and remain focused on the shoe high quality targets, including new discoveries that are showing excellent upside than they've lost and potential.
Southwest and Grey Fox.
In Nevada at Gold bar mining.
At the gold pick deposit to reveal a different geological setting and control of the Goldman position, then was the foundation of hours because they're going to study.
With this new understanding of the geological setting our in house technical team believes there is more goal to be farm on and around our highly prospective district scale gold bar property.
That concludes our presentation, we'll now open the call for questions. Thank you.
Thank you Scott van.
Operator please.
Please open the session for questions.
Thank you very much and as a reminder to ask a question you will need to press star followed by the number one on your telephone keypad to withdraw your question. Please press the pound he will pause for just a lot less compiler came in a roster.
Our first question comes from line uptake Solecki of Roth Capital Partners. Your line is open.
Hey, Robinson, Thanks for taking my questions and I hope everybody as well.
Okay.
It looks like work at Grey Fox is progressing pretty well I mean, it's going to see resources expand their are you able just provide any color on the environmental studies in permitting work that might need to be done 60 work towards bringing into the mine plan.
Sure I'll, just ask Peter to jump in on that question.
Yes Heidi.
We actually have a orient the.
No draft form ready to approve various works on baseline water management water studies.
Moving on to the Cree, God that or north and south pits.
Or will will mine through so.
That's sort of early baseline information and development of the project description.
Okay, and how do you have you seen that process slow at all just just given the operating environment run right right now with the pandemic or.
No actually we haven't seen.
Any impacts on that there's been a you know we've been all working virtually and engaging with our consultants through the RFP process.
And on the various departments. So we've not seen any any real impact there.
Okay. That's helpful.
And then just a gold bar it looks like activities right now are focused on.
Into drilling that go pick and stripping activities.
I'm just trying to get a handle on the budgeted cost for these during Q2 and going forward. So are you able to provide any insight on that.
I'm not hearing time.
As mentioned, we are we're evaluating the plans forward and ER will come forward with that and at the end of Q2 early Q3 as mentioned.
Okay Fair enough, that's all I had my and thanks again.
Thank you Jay.
Our next question comes on it back to somebody other lines.
Your line is open.
Good morning, guys. Thank you for taking my question.
Hi backing.
I would like to start look away, but is like how did he understood or you know you had about 15000 meters of drilling completed at Gorgon Bake I. Just wanted to you know I understand or do you think that didn't get sufficient enough to put out an updated results or do you plan to for the then beat its not.
Deposit.
So then would you like to.
Interactive question.
Yeah, sure I and good good morning Bhakti.
Yes, our hardware drilling so far have been focus on the west picked a part of the of the gold bar deposit because of this is where we are seeing short term mining. So we want to de risk. We want to also hopefully regain the additional along says.
That is currently lost or are falling under the revised.
Pit scenarios and we also testing extensions or around the pit the same time.
This discerning is critical for those reasons and I listen to death. The plan is to move to to go more software, we see good upside to increase the resource there and the come back up.
Hum gold bar for for a follow up drilling including on the use of the deposit.
We will have a resource update at the end of Q2.
Based on on a revised interpretation of the structural setting based also on on all of the available so recall, a new drilling and formation. So to answer. Your question. This this is key information that will contribute to a new ideas.
Resource that wouldn't be completed by the end of Q2.
Okay. Thank you.
One more question with regards to going but you did mentioned in your prepared remarks or that you have no leads docket stripping and galinsky processing stockpiled at this stage Oh, what level of stockpiles or do you have at site.
Peter could you address that question.
Yes, we had some stockpile material left or just before shutting down for coal go to below 60000 tons.
That will be used up in the next four or five days and then we have a another stockpile of.
Coking or in west pick about 60000 pounds that were contemplating.
Milling, but we haven't we haven't taken that decision yet.
Pardon could you maybe provide some guy no oh hello on the body.
[noise], sorry, I couldn't hear question, Oh, I can't Oh could you maybe provide some color on what kind of greed odd, but you know is that in the stockpile.
Oh, the broken or.
Oh, I'm I don't have not off the top of my head.
But yeah, I'm, sorry, I don't I bought a temporary.
Nobody.
Moving to Black Fox or you had pretty good results at the park and the drilling results you know shown in the flights look pretty good so I.
At this point you guys I still developing the actor from sports room is that on target and ended the builders those for them to be a what does that imply for black Fox I mean, do you see that expand I do see them I love expanding within the Black Fox mine or do you think you know.
So that would be there'll be an older placing the black Fox mine or what are the next two years.
Yes, so the decline as a boat straight line about 150 meters and we've got about 800 meters to get to the or.
The schedule I quoted earlier is is taking into account where we are currently in the decline.
And targeting first or.
Q4 2021.
The idea is.
Is that.
You know will extend hopefully on this west bank, the new discoveries that so vans team in exploration how sound in the western area of Black Fox at that'll actually extend out black Fox mining itself as well.
But initially it was planned Blackhawks would finish mining and from would start.
The additional development I mentioned earlier is targeting some of that west like area that we're drilling now and having good success on hits so.
My expectations as we'll see some improvement on the Black Fox mine side as well.
That's great. Thank you all but they've got to still advanced projects. They bought about a 1 million charge in Q2 with regards to Canada I'm, assuming that's related to the active development work through.
A question is.
How much more development cost you know the is the remaining for the development of film at this point and the second question is with regards to the 1 million caused a in Mexico, which is related to project Phoenix. So how much of that caused delays remains to be incurred in Mexico at this point.
Mary if I could ask you to provide those numbers. Please.
Sure. So in terms of Froome, we have for coffee to another round of 10 million 10.5 million.
For the rest of the year.
I learned Phoenix, there could be just to know they'll put Phoenix you know it includes also property holding cost. So we might have something similar for the rest of the year.
Oh, so is it going to be a 1 million Oh poker.
Oh, no not another quarter now there's another quarter like you know something similar part I think it comps.
Second half of the year.
So around another julianna there, maybe some like really small amount.
Got it perfect. Thank you very much that's it from my side Guy.
Thank you backing.
Next question.
Your next question comes the line and Adam Graf of B. Riley FBR. Your line is open.
Adam.
Hello, guys. Thanks for thanks for taking my call a just a just question Rob the the overall graphical development plan that you guys presented to US last time has there been any updates there.
On.
On schedule I think you guys mentioned, a a little bit about this potential for western Black Fox a development has there been any any update there on the overall coordinated plan.
I'm not in terms of schedule you know so couple of years out.
And.
Being possible production.
And then just just as far as the development over two to stock West are you guys holding off until you're breaking broke have broken through I'm froome or what's the Patel, what's the development plan there just to drift over to the to stock West.
Yeah.
Peter you want to comment on that.
Yeah, we have about a 250000 ounces of mineral inventory there that we're targeting which is enough.
To to pull the trigger on the development.
But we'd like to get a better resource definition drilling done first and as well the permit I mentioned that we received two deepwater.
The shot in the main shopped at stock.
Is another option, we're looking out a that could connect into that a decline.
And any potential remnant mining that would be in stock mean, so we're evaluating the costs and the trade offs of what's the best way to go bode well for their drilling and is required.
Could you guys get into the ER the stock main to do some you know remnant mining there prior to the.
Achieving permits for the for Grey Fox.
Yeah, the but the stocking is permitted and my arms around some wherever the permits to deepwater now and that's exactly the opportunity we're examining it's early stages.
We're getting some quotes on what it would take two deepwater the shaft and restore it to their production shopper an exploration shop. So I'm just going through some of those evaluations so over the next quarter.
And would that be you know you'd be looking of that you know prior to.
Development of or prior to at least drifting over to stock west to do underground.
You know test mining and and.
Structural confirmation and all that.
That's a possibility.
Probably are aware from previous communications, it's a fairly lengthy about a 202.5 kilometer development program for stock West. So we're looking at opportunities is there any we did bring.
Bring or you know to the milk quicker and get access for drilling, especially the deeper targets that are so Ben mentioned.
It would be helpful. If we could get down on some of the lower levels of the existing mine provide some grow platforms. There. So those are some of the things were looking out and hopefully can come forward with.
Some some you know exciting in all options on how to develop that Oh my.
Would you need to additional permits for if you were to open pit stock East and if you didn't you know what what kind of I know, it's lower grade, but at what kind of gold price dissolve a sudden that that that or become interesting because you have so much extra mill capacity.
Yes, we would need extra permits we haven't I'm actually advance out even though there is a fairly nice resource there.
It's near proximal to some water in a river there.
Hello, lying areas and as well it's its open further to eastern at depth, So where we're not sure you know the size of it yet to be able to to go to permit.
As what we've had no had some really high grade intersections and shoot so there's a there's an underground trade off.
Versus the pit and a more drilling to take that decision.
Alright, great. Thank you very much.
You asked.
Our next question comes from HEICO <unk>.
Sorry control Mike Kozak. Please go ahead, Sir your line is open.
Yeah, Hi, guys. Thanks for taking the high there.
So just just looking at the balance sheet here and with the gold Bar challenge is going to impact already on near term cash flows for the company I mean took to what degree can you cut back on some discretionary spending and are you in fact looking at cutting back on things like explorations DNA sustaining capex and if so.
Bye bye how much.
I'm assuming.
You know the current gold price stays there goes higher.
And we can refinance sorry.
The terms on your debt.
We should have it should have adequate capital to go through the year.
We've been looking at.
About $5 million of exploration.
Both black Fox and gold bar.
Isn't that a million in Mexico.
That's okay and if prices change then like the change our plan.
Got it.
And I think the the first principle repayments on that that started I think I had Q3, so I mean, presumably you want to Wi Fi that that.
I guess, I guess keep everybody that coming months, but yes, that's correct.
Okay, alright, thanks, that's it differently.
Okay.
Next question.
Next question comes lineup HEICO Healy got pitch C. Wainwright your line is open.
Hello, everybody they pay their her my name a minute ago got ready to asking and got script over [laughter]. Thanks for taking my questions guys hope everyone. On this call and their families are staying safe and I'm sort of grateful you guys still over 6 million exploration given the longer term potentially the assets there.
Just a follow up on Wanna Jakes questions earlier, a little bit I mean in regards to silver in your remarks, you spent a decent alone on the pre stripping out the gold pig a cold go pick west pit should we expect to see expenditures in that regard to Q2 in Q3 and building on that I mean, how much potential uses the or to the you mining.
And in that area in essentially just move it elsewhere.
HM.
Peter you run it takes out of that.
Well, we know we know west pick is a positive business case. So we're just looking for the best way to go about can carry the mindful, Oregon and make you know improvements to the overall cost and productivity is before we start.
Once we get the updated resource model.
Silver I mentioned.
Well, we run our are often pit optimization.
From a better view on strip.
But you know current and there's there's nothing major.
In terms of stripping that's the to change from the past.
And what was the second part of your question.
How much <unk> North I think I think you got it pretty well.
HM.
The I mean it was it was how much do you seen expenditures and how much is they are worked good could you possibly to lead a mining there.
Delay the mining.
You know it looks like moving elsewhere.
Oh and go after like pick east or something.
Correct.
Yeah, I mean, where where rates were right on top of the pick Westcor. Our current thinking it's too to mine I'll pick West and then move to pick east.
But there may be an offer the community to come down a job mountain there.
And do it differently than previously so once we see the resource update will be a well be looking at those scenarios.
Got it [laughter], regardless of the a nice to see list getting close to 90% of your volume is on the NYSE as I look this morning was orphan moving shares versus 480000 on average per day and Bronto. So clearly the listing is extremely important can you walk us through some of the timelines that you have.
So the you're willing to disclose but when you'd have to consider like a reverse split or are like any other options in order to make sure. You can you know stay listed given that there is a variety of approval processes that would be needed a few words or you know we're doing some of the copper choices.
Sure well, one it's not our intention to do a reverse split.
And the New York Stock Exchange at night is that.
Because it virus issues.
It's pushed the deadline for can hot complying.
Yeah that requirement of being over a dollar out too early December.
So.
We've we've got a good runway.
In terms of timing you'd have to get to know the shareholders and so.
Probably has to be looking two months before that so into their early October.
Okay. So that's actually much more compressed and I thought it would be I mean everything at this 0.6 now half months, but it sounds like you've got four months left here.
I'll come back and presumably that's actually going Uh huh.
Yeah on the screen on that seem to continue venture a guess on your GMI savings during Q2 and thereafter, given the essential stoppage of travel conference attendance or are you looking to maybe youre going size your office, a little bit how meaningful of a number do you think you can get Swift you know everybody working from home.
And how sustainable that you're thinking this please.
Not really had to lease and I'm not sure within their office lease our head office lease expires.
So what I can gather I mean people that don't mind working from home some of the time, but they don't want to do it all the time.
Are you still need an office assets, we have not investigator downsizing the office I know that Todd has been moved around because.
Familiarity people are getting with using technologies or worst remotely and.
Yeah, they haven't and I can't get even younger on Q2 or three as to.
Where we can.
The savings can might achieve.
Not at this time.
Corona extra someone else, who scooped up at the House works for let's hope we can all go back to an office someone that one is they say it's great. Thank you.
Thank you like us.
[laughter].
Next question.
Yes. Our next question comes from John Tumazos, very independent research.
Your line is open.
Hi, Good morning, Rob. Thank you for taking my call.
Did the gold bar charge wipe out all of the P.P. any but none of the working capital.
[noise] Mary.
Yes.
[laughter].
Yes of course, we haven't really finally I located a the charge between deep basically between P.P. acne and mineral interest.
But that's not we determined that the fair value Oh, I'm, you know property or net assets, let's say it is 47 million.
Well be fleeting you then allocating it up at a certain pointing kitchen.
Thank you.
Rob.
The issue with.
The bank covenants.
Reminds me of.
Training class I was and is this a graduate student for commercial bank lending officers at Morgan guarantee Trust company.
Yeah, and fellow named Charlton shot field the surge.
Gave it to our presentation on relationship banking and winning back Firestone account.
And I'm a little bit.
Fuse.
The blenders liked your company enough to alone your money.
And now it sort of an awkward time.
They are enforcing the covenants triggered a going concern.
It would seem a lot simpler stages charge to see.
To wave cabinet, which banks like to charge fees.
Or sat down with few privately to seek a remedy.
Before it sort of triggered all these different events.
[noise] are the lenders just fundamentally.
Hi, I'm comfortable with your strategy of assembling assets in drilling exploration.
Or do they like the managers to departed more than the managers place or are they just trying to make you write a personal check for 50 million to settle the alone.
It's just.
Serve a weird situation and to the extent you can make any comments.
If you understand the situation yourself I'd appreciate your insight.
Sure.
We're not that we haven't violated the covenant sounds a moment for the first quarter.
It's the second quarter that were concerned about and going forward.
The debt.
It was structured with a three year term.
Had a partial repayment of principal starting.
On the second anniversary.
So that's where we start getting into working capital issues.
At that and that would amount to about $2 million a month.
For a.
$10 million for the year principal read and then and.
They haven't.
Then there is.
Considering and they just had this covenant that you had to maintain a minimum $10 million.
Working capital at the end of each quarter.
[music].
So we're just looking ahead.
And that's where it seems.
Partially tight payment.
And the working capital implies that got the auditors to say, there's a going concern.
Over the next 12 months.
And haven't gotten just saying I should write a check.
We have talked to another party or too.
And there.
Editors I have half of that yeah, Accreditors put up 25, and I was another credit here for 25.
So.
Yeah, I've looked at it and says I think we're looking to refinance and if we can refinance a we seem to have some agreement at the moment that we could extended the term and lightning or light and extend the.
Personally repayment.
So.
That's that's very huh.
And as to that.
Credit here the half of it that they're just.
They like it but they didnt expect as [laughter], nor did we the problems that we didn't counter with gold bar.
So.
Thank you for the explanation the.
Grey Fox seven gram per tonne material.
Same is really good.
Given the need to do some development to ramp into it.
And other logistics de watering ventilation, you all the infrastructure to get into it.
How many.
Corridors are years out.
Hi, This is a seven gram material from.
Going through the mill.
Peter would you like to that.
Speak to that question is John.
Yes sold the resource just a just came out last week. So we haven't actually updated the open pit in underground scenarios.
For a the announcement you've you've just heard from Sylvain.
So I really can't speak to that yet I think what I can say is the new discovery of Gibson.
It's an exciting discovery potential in another open pit or third one today only up to 1.7, the contact and Gibson.
And then looking hard out you know how underground fit around those and transition.
And and doing those trade off too to look at what has the best margin them returns and what combinations of open pit and underground mining quite a bit of work coming out of us there.
Yes.
Do you think it's a year to figure it out.
Couple of years to get into it or longer.
Hi.
No I think it's it's you know, it's probably six months so work.
Mine planning, where it wont take that long.
Other other technical evaluations are we are proceeding with the grey Fox Pitt.
Permits.
On a one for seven and the contact and we're probably going to roll in.
Initially.
But I used to work on the on the Gibson pit.
Include that in the project description, so where our first priority would be the open pits.
And then making sure our footprint fits together and how the underground.
Together with those pit so that were not sterilizing.
Good good or so.
A number of trade off need to happen there, but we are proceeding.
The permitting for the open pits.
Yeah, so little bit like a basketball game, where you got your three point shooter on that.
Bench.
Let's see NYSE listing requirements into backlog on it.
All these different pressures on the company.
Seven gram material going through the mills sure three point at Ace.
The second basket.
[laughter] Yeah, we're very excited about it it is harder or so we have to be a bit measured in in how we bring in what quantities relative to the mill capacity.
But other parts of the trade off and how it Oh blends together.
With the rest of the feed but yeah. We're very excited about it I mean, very high grade pits and very attractive underground or.
We're certainly going to be going Oh, yeah as hard as we can.
Thank you.
Thanks, John.
Next question, Yes, and your next question comes lot of don't power private Investor. Please go ahead.
Yes, Thanks for taking my call, Oh, Hi, Rob and thanks for taking my call. This morning, and a a couple different questions, but am I guess, the first one would be at.
You said that in gold bar that the auditors.
We're using a price of.
14, 30 or something along those lines.
I would assume that it doesn't sound like they were using in the future strip prices going forward or any or anything along those lines. I guess have you worked out internally. If you use the forward strip of you know.
It's substantially higher as you I'm sure you're aware you know what the <unk> write down what hes been I it or is it materially different.
Oh, it started to get that I know I answer your question I don't believe they looked at.
Prices higher than 14 30 day employed.
Analysts' projections and apparently we had a union bank of America at $3 million, but they look beyond that and analysts were still down.
Around $1400.
Going into the future okay.
Okay, and if so as far as they then so basically they were using analysts they weren't using <unk> you know what actual pricing is in the in the futures market to it Didnt you did that didn't seem to impact.
At all not yeah.
And is that it is that traditional way of.
Doing right down to do they go to you know because this is kind of that's the reason I'm asking it. This is the second time in less than a year that they wanted to change the accounting for.
The yes, the end of life and the mine life and Mexico as well as they wanted to yeah. Like you eat like we had talked about made up a new categories put that into and it appears that by using analyst.
You know just seems as though it so it's a it'll oh, yeah, a little random too.
Not what you could you know what the futures market it telling you the pricing.
HM.
Yes, [laughter], probably wouldn't pick the higher I wouldn't pick that I have price.
Last night, Okay on the market, but.
Yeah, I can I make me right.
And that and that's fine I am.
It just seems as though it's a little bit Ah you know when you if I guess for other you know in other industries. You you know there is yeah a pricing.
Yeah that is very clear and well established whether its NIM comex or whatever but anyway to move on from that I'm getting to the black Fox mine I'm in the last quarter you had.
An average grade of 4.58 with a process grain of 3.53, that's down materially from the first quarter of last year, but yet you were still able to come in very well on cash cost and yeah. The the all in sustaining was at.
Actually lower how did that seem to how did you kind of come to those numbers. If you could shed some light on that.
[noise].
Just there that really hurting their operations a bit.
There were a lot of problems in the first.
A half of 2000 things.
19 that didn't occur we had a.
Yeah, the crusher fire.
And it was followed by a right.
Okay personally that was right recurring event.
That's why the costs are coming down.
Okay, and do you expect to return to a higher grade later this year and I guess are there further improvements that you can see for.
You know that the costs at least the cash costs coming down further.
Well, we hope to have better recoveries division.
Right.
It's been a problem at the mine our dilution due to mining and.
The ground control and they hopefully have some answers to that and Peter you want to jump in there.
<unk>.
Yeah.
Some of the dilution if you use or related to.
To a fault near the hanging wall.
So been discussing a lot with us like team.
Oh are implementing cable bolting, oh trials in different different techniques to try and minimize you know the restart and onset of at least one once once it starts it starts raveling up to that false about sort of been the historical challenge aspire.
Actually at the lower areas at the mine.
The up or areas that we're targeting and in the west flank 300. These are new areas at the mine.
I would turn around in old remnant mining and so another reason, where we're targeting and our development to get access to new areas should help the overall solution.
But have not been yeah [laughter].
Okay. So that sounds like you have it under control and are expecting [laughter] you know treatments on the at least a grade wise going forward is that a fair to say.
Yeah, we're targeting not you know I'm I think that's going to take on to prove it out in hone it so.
There is a good opportunity there to improve things.
Okay and last last question today I appreciate all your patience as I'm reading through the announcement on on a.
Downtick grey Fox worthy, a whiskey, Jack discovery or I wouldn't don't know whether that was included in the discovery, but there seems to be some it didnt. It wasn't mentioned specifically that it was included in the updated resource was but the drilling down at whiskey, Jack concluded or or is that something to be putting.
In the future.
Well I can answer dockyard. So much speaking good questions on yes whiskey Jack He is included in this revised updated resource.
We have for the first time into the Gibson Gibson, it's part of Grey Fox is to de Wes.
Oh stood in the different not post a horse rock a it's in the high night, but we know now and up the structures and the vein.
Not controlled monetization cut all units from May signal, Kim wont county to send them into a sign like all of those rocks I couldn't be potential the host and we merge and this updated resource contact Xome and we added which could you talk to it so.
It's part of what is shown as contact.
Zone in this revised the resource and as you know a wheel hub spectacular results. There 53 grams over seven 7.4 meter, which could joc itself. It's a new discovery with no just starting point, but enough to be included in this resource.
Okay, well. Thank you very much for all your answers. This morning. Thank you Bill.
And your next much much lineup Mike Hockey. Please go ahead, Sir your line is open.
Well Mike.
Hi, guys. Thanks, taking my call.
Some a few questions on ER on gold bar, given the comments about the mineralization being more structurally controlled at a cool pick.
Do you provide some high level guidance on what you expect the impact to be on mine grade and dilution strip ratio at least for this year I think there was some comment about.
Stripping similar but any comments on that would be would be helpful.
Peter do you want to talk about that.
Oh, Yeah as I mentioned, you know we're waiting on the resorts update in order to provide those numbers and those will promote so towards the end of the next quarter.
Okay, just but can you can you at least comment on sort of at least geometrically, it's more strictly controlled unless betting controlled so does that mean that they're they're narrower zones that have to be mined in a more narrow fashion or any commentary around that.
Yeah, I think the slide the Sylvain showed up all the drill intercepts could be a good good idea it hasn't significantly.
Change the the actual waste development required to access west pick.
So we have well how full oxos treaty or some of the drilling results that sylvan mentioned or outside of our current.
To my it shows so a with the old interim model. So we're anticipating.
Some of those waste blocks to transition into southwest pick or but.
Really I can't comment until we see resource modeling so for cones and do all that good stuff.
Okay, and maybe just a follow up on that it you know it just gives you the the impression given the reduction in order to I guess, the anticipated reduction ounces and the commentary around it being structurally controlled.
That does zones are.
It'd be different geometry, then what you initially anticipated I'm thinking narrower.
But the drilling that you showed.
Had some pretty wide intercept so just wondering if you could help me reconcile what's what you think is going on there.
Right, Yeah, there well the actual the three is on the west Central and East haven't changed all that much the drilling that silver I mention is confirming the mineralization in west pick and I spend most of focus for near term mining.
The majority the ounces were lost in the.
Right down or in the off what we called the hump area and it's the stripping program.
We move from West <unk> West pit toward these pick.
I think so back can give probably better or color on that.
Okay.
Okay. Because then could you speak to that issue.
Yeah sure a surrealism your.
Oh, Yes, a you know the cultural humanization, although we've been a both stratigraphic and structurally control structure across there right.
Oh, sorry, geographic or bedding horizon normalize the rock there the big differences the way that has been oh located to the bidding or hall stratigraphic control versus the structural control.
And this has impacted the of course, the way the model or the resource smolak them.
Oh, well designed in and from the past as we get a better exposure and to the pit them and of course, I love detail coming from.
Lustful and mining, we should we get better definition of what's going on.
We started with cabin overall, though the reconciliation was okay. When we moved to the west Big copper bench or we saw the less tons and depend less on says Penn and we decided to to go back with a drilling.
No just RC drilling, but also core oriented core to to look.
In more detail of the rock and better understand.
The control of them acquisition.
The drilling so far.
And because of this is showing the goal is there a grid is there of course.
We we have to waste as Peter said for our revised.
Resource updates and I'm or what would be the revised mine plan a base based on this global revision, but we are doing right now.
And basin on those.
You are a submission wouldn't see what.
Isn't that what where we stand up dot com bar.
Okay, and then could you comment on sort of the weight. So those structures that you see carrying grade versus what you saw you know in the betting controlled mineralization.
Yeah. There is there's a actually a lot more structures than what was previously or thinking there's a door understood.
More restrictive more we get them for mission more we realized the structural setting is complex.
Which is not necessarily a bad thing, but it's a it's different outflows.
Understood and then third further.
So we still are we still have significant in the with associated to Oh structures to multiple structures intersection the soft sure generating a water zone of mineralization.
The biggest impact we are seeing is that.
Oh, the model itself would be spreading less waste from the structure than it used to it to do as parts of the lost a submission.
Okay.
Right, Yeah and make it if it was.
<unk> line side I mean, it's structural interpretation was the foundation for the feasibility study in the mine plan.
And then.
It was built on that basis, and then the same party came along and mess it based on the mining and says Oh.
Well, it's not as laterally dispersed were spread.
It's more vertically churn child, then thank you very much.
Yeah, that's okay.
And maybe just one more question on on a on gold bar.
If I look at just the cumulative ounces placed on the pad and the the it as it had been produced I.
I get a cumulative recovery rate of about 52%.
Got it or after a little over a year of of Ah of leaching is that is that correct and.
Can you comment on how it compares the feasibility and how you think about recoveries going forward on the on the project.
Yeah.
Peter would you like an attempt that it is only going with it since April [laughter], So big where enough to Oh do my best.
I recall it I think we run the numbers in April it was about 55%.
A recovery, so where you were pretty closer.
And the actual recovery rates are slower than what the fs.
Forecasted so you're seeing a bit more of a lag in it takes longer to get up to I pass levels, but largely.
Yeah expectations to get towards the at best level by the end of mine likes and cumulative there are some impacts with a shoulder mine life.
Obviously less each time.
So you know as we update this resource model and we like mine.
We'll be able to understand not better.
We have done some leaching tests with 40.
And are in the middle of updating the recovery model.
For a flat combined run of mine.
Placement on the beach on Agglomerated.
Oh, and so far or production is.
Following those curves very well.
So court case, where we'll culminated complete.
In August Oh.
Three Dot study will we're also going to take the new updated model.
Which will include a claim model.
Hum they preg robbing model for the carbonaceous material.
Are going to feed all about into.
An economic assessment to find the best on net present value approach for Agglomerated personally brom versus a hybrid of Agglomerated wrong.
Okay and you do you understand what's what's causing the difference in recovery versus initial test work at this point as it is it that is it clay that's being placed on the pad or carbonaceous into or is it something else.
It was a combination and hence why a you know we've taken the model over internally and plan to.
Well create those models and refine them with her and mapping.
So we can you know that's what I was getting out of both blending and ER on in terms of the Craig robbing segregation, but right now we segregate oh, the carbonaceous material out.
But early on in the build there was a there was a sometimes placed on there.
I'm, sorry, I can't recall, the amount, but a small portion of the area.
Which has been taken into account in the model.
Okay.
Great Yeah, that's it for me thanks, very much guys.
Thank you Mike.
Next question.
I should this concludes todays <unk> session you have any further questions. Please direct them that tightly managed spinning off of my Forum I turn the call back on Instagram acumen. Thank you very much.
Thank you operator, thank you everyone for Chinese.
Hey, strong unhealthy.
Thank you.
Right.
And this concludes today's call Michael you may now disconnect.
[noise].