Q2 2020 Yamana Gold Inc Earnings Call
All participants please stand by your meeting is ready to begin.
Thank you all for joining us this morning before I turn the call over I need to advice that certain statements made during this call today may contain forward looking information and actual results could differ from the conclusions or projections in that forward looking information, which include but are not limited to statements with respect to the estimation.
Mineral reserves and resources.
Morning.
Submitted future production cost of production capital expenditures future metal prices and the cost and timing of the development of new projects.
For complete discussion of the risks uncertainties and factors, which may lead to actual financial results in performance being different from the estimates contained in the forward looking statements.
Please refer to Humana's press release issued yesterday announcing second quarter 2020 results.
What was the management's discussion and analysis for the same period and other regulatory filings in Canada, and the United States United States.
I would like to remind everyone that this conference call is being recorded and will be available for replay today at 12 PM Eastern time.
Replay information and the presentation slides accompanying this conference call and webcast are available on your man its web site.
No dot com.
I'll now turn the call over to Mr., Daniel Racine, President and CEO.
Thank you operator, thank you all for joining us as a warm welcome to our second quarter Conference call.
With me two days days under the block our CFO.
There's only been a few months since the emergence of Cowen 19 don't which feels longer.
And then make us change our lives and the while there's no doubt that we will go get through this.
Uncertainty created by the virus, that's not been easy for anyone including our employees and contractors.
Our people that persevered and done in next on that same thing job through the first half of the year.
So I want to take a moment to recognize and thank our employees and contractor for their remarkable dedication commitment professional theirs and compassion.
To be or CEO.
Well go to 19 remain prevalent in Latin America, we have to full support of our employees and older communities to continue operating.
Grateful for the support and do that do not tickets for granted.
I have implemented strict brought on calls and be caution that dollar operation to protect the health and safety of our employees contractors and communities.
Physical just dancing use a phoebe and then cleaning and disinfecting and then screening procedures and the rapid contact tracing brought a goal or just some of the measures. We've implemented to contains service of infection.
Shouldn't note that in Chile, where we operate two mines.
Action raises declining and some businesses are starting to reopen.
While there is some concerned about around mining in the country.
It's primarily interest relation the copper industry, where some companies I've experienced high rates of infection.
In the town object will be though in north east in Brazil. The number of cases is limited and on the design.
We have from the earliest stage of depend damning been supporting our older communities.
Fight against school than 19, providing various the nation along with good it called equipment and supplies.
We will continue to work closely with our communities D partner to understand their need and everything we can to support them through this challenging for Ya.
Turning now to RC safety performance.
Our total recordable injury frequency rate in Q2 was zero point duty.
That compares to 0.6 in the second quarter of 2019.
During the quarter Canadian Malartic reach its collaboration agreement with Forney nearby and there seems to be first nations communities sitting out measured we increased training job in business supported annuities and environmental protection.
Well, several mobile and Canadian Malartic resumed mining activities in April following temporary suspension.
Due to government restrictions related to go with 19.
The ramp up at Canadian Malartic progress faster than expected with mills with both in May and June exceeding 60000 done Verde.
Just with within me often early 64000 done was a record for the operation a remarkable achievement considering that you talk or on did you have a suspension.
Several mo interfyl eventual traveled restriction.
Walton into reduce fourth forced into second quarter, extending the length of the rental.
Operation is implementing a new initiatives to improve efficiency and production.
Losing optimizing and mine sequencing improvement to drill and blast procedure.
And a review of the mine design lower costs and accelerated development of high grade zones.
And this is Steve will provide long term benefit to settle model that's far outweigh the short term in back over that travel restrictions.
We delivered strong operational and financial resort results during the quarter.
Gold production the harder than 664, 141 ounces was driven by exceptional performances from Jack will be the.
Binion, I mean, there definitely though in Canadian Malartic, which all exceeded their targets production.
So as our production of 2 million ounces refresh reflect a strong performance from L. opinion.
Well the price of gold, which is a nine year highs. This week is contributing to our strong financial results.
Myself silver is also up sharply in recent months and bringing upside to our margin and cash flows.
Joe production of 183 500, any due to on says was in line with plan.
Cash costs and all in sustaining cost of 715 bridge, you and 1125 or do you respectively were better than that.
By the Geo racial being higher at 100, then Fyfe 114, then guidance of 98 point 85.
Got worse positively impacted in the quarter by foreign exchange movements.
Adjusted net earnings of 63.3 million or seven cents for sure what cash flow.
For net change in working capital came at the harder than 18.1 million.
When normalized for cost associated with Golden 19 cash flow from operating activities before and that changes in working capital were 137.3 million.
That's free cash flow during the quarter was 60.3 million or 41.1 million without normalizing for the back of the temporary suspension standby and other incremental golden 19 related costs.
Despite these impacts gross margin in free cash flow on the verge yield basis.
Greece in Q2 over Q1.
Yesterday, we announced that we are increasing our annual dividend by a further 12% or seven cents for sure.
It is the fourth increase to our dividend unknowns in the past year for community of increase of 250%.
We will continue to take a gradual and progressive approach the dividend increases as our cash balances continued to grow from rising cash flows and successful in its yet to use the monetize our portfolio of Nonproducing I said.
Actual instrument.
The new annual dividend rate the dividend paid will be above $70, but do you.
Aligned with our target between 50, and the 100 bridge you.
We reiterate our 2020 guidance for 890800 90000 Geos.
Just a compromise of 786000 ounces of gold, but and.
10 points to 25 million ounces of silver.
All in sustaining cost guidance for the second half of the year is for 1020 and between 41000 21060 Bird's eye view.
Well the option is already tracking ahead of guidance with Q4 expected to be an exceptionally strong quarter on both production and cost.
As a result, we are evaluating an increase the current production guidance. We are also reaffirming our 2021 and 2020 do ought to look for production of 1 million Geo in each of those years.
Production as you can see will be slightly higher in 2022 at 885000 ounces.
As we age 73000 ounces in 2021.
Silver production will be S 11 million ounces next year, the beings with 10 million ounces in 2022.
Turning out to our operational result by mine Jack will be enough posted its six consecutive quarter of record setting gold production.
45646 ounces.
The record production reflect higher grade and increased with but which averaged 6850 sounds pretty well above the phase one target of 65 on distance Buddy.
Oh opinion delivered another strong quarter with both gold and silver production higher than planned.
Primarily due to processing higher grade or.
As mentioned to wrap up at Canadian Malartic progress faster than expected.
To wrap up at settling all what city, despite the back of travel distinction in Argentina.
But actually that sell them all in doing was almost 50% higher than me.
Sure. Let me now definitely the in Q2 was better than planned benefiting for higher agreed higher feed grade and increased done process largely due to continuing improvement in productivity.
As mentioned our overall production is tracking ahead of guidance and expected to be more heavily weighted towards the second half.
And with animals trend with Q4, or I guess production lowest cost water.
I will also add that we now expect second has to be higher than the 54% weeding. That's we had previously forecasting.
There were a number of positive catalyst during the quarter.
We delivered significant exploration update that support the mine life extension project will be the and they'll opinion.
You also provided an update on the face do.
The phase two Jack will be nice expansion plan announcing robust project economics.
A few key Q. I like as a reminder.
The plan as a modest capital costs estimated at 57 million using a conservative exchange rate of 4% in Rio one U.S. dollar.
I wouldn't know that capital is striking closer to 50 million dollar based on the current exchange rate.
1.7 billion dollar and cash flow into first 10 years under the expected extended case scenario, assuming a gold price of 1500 50 balances and the same conservative it exchange of four to one.
Rich gold production of 230000 ounces per year at an average feed grade of 2.4 grams for done a 31, 31% increase compared to the phase one read if I'm doing the 75000 ounces for you.
We are now doing a backfield study.
For 2000 done for the time.
We are starting to auction first option is I'd, rather like backfield plan that will cost between seven and 10 million dollar.
Face in the face fills that as a second option between 15 and $20 million.
We have bolt option very well study right now and its leaning towards the other all they feel again between seven and $10 million.
That's up we would accompany this study in the second half of this year and come back with the decision and more precise number in the coming quarters.
The quarter, we also announced an option agreement on the C., We I project.
We met with Council doors assessment regimen, a privately held portfolio management and capital market in Argentina.
He is an important steps that we believe we advance yes do matter related to the project.
Canadian Malartic, we have authorized the construction enough surface and sort talk <unk> infrastructure.
Exploration ramp into Odyssey and these might uptick.
Governmental approval already in and construction of the surface infrastructure and bortle in preparation for development of the rest is expected to began in August.
2020.
The budget of 6 million well the remainder of the year on the 50% basis.
Development should start in Q4.
Once complete than Europe will allow us to carry out the bulk sample of up to 40000 done before.
We advanced integration of agreed to with an umbrella to create the significantly de risked.
I don't <unk> integrated project.
Also continued to advance the permitting and physically do study for this long life low capital intensity project.
We completed internal studies for the advancement of money them and B as a high grade underground project.
I would love to plan for exploration, the significant don't Blige extension and satellite areas.
You may have seen our release earlier this week I don't see north and the intention. So this on the main markets of the London stuck exchange.
When the advanced stage of the listing process and expects to begin trading in the next few months.
London listing will improve our liquidity and expand our share of it just or in the large under served market for pure gold believes there's with assets in the Americas.
Our goal is to become the investment of choice in on the other see well those are looking for exposure of gold equities in the UK in Europe, and we believe our raising rising <unk> cash flow and dividend profile like while at the asset portfolio and strong balance sheet will help us achieved this objective.
She was also note that we that we do not intend to raise equity capital.
Conjunction with the Ed I see listing.
During the quarter. We have also completed the sale of their world people told you.
For total consideration closing at 64.2 million.
Losing a dirty 13% in no matter what no matter the wealthy.
No not as a strong balance a strong base outgrows mandate and it is already beginning to generate value for us.
With the share price appreciation that thinks the value of our stake to 102.6 million as of July 22nd compared to 64.2 million when the transaction closed in late May.
Finally, we completed the sale of 12 million units of Equinox gold for gross proceeds of 120 million.
Units structure, that's expected to generate an additional 81 million portola, we'll see that over 200 million.
I will now turn it over to Jason to discuss the financial.
Thank you Daniel and good morning, everyone.
Turning now to our financial performance.
Revenue in the quarter with $303.4 million.
Very good $463.5 million in the same period last year.
Aside from the inclusion of ship how to in last year's results. We also had the impact of coated on our sales levels. During Q2, mostly from minds that had temporary suspension during the quarter.
But as Daniel mentioned those impacts are largely behind US Malartic had a very quick ramp up in Cerro Moro how to steady performance since Q2.
Higher year on year Genie expenses, reflecting 11.8 million dollar increase.
Historical stock based compensation from the increase in the company's share price during Q2.
On a cost basis, however, GNS expenses were $14.6 million during the quarter in line with plan and lower than at 17.9 million in the second quarter of 2019.
Earnings during the quarter I've no per share were impacted by a number of items, including $19.2 million and coping related costs that will talk about more in a moment.
On adjusted basis net earnings were seven cents per share compared to two cents per share your earlier.
What are the other impacts from program has been an understanding on planned capital during Q2.
In future quarters capital increase more in line with the value you can see here for 2019.
That's just over 40 million up sustaining capital per quarter, and 20 million of expansionary capital per quarter reach a Q3 in Q4 this ties to our revised guidance for the year.
The same is true for exploration spending for the full year, we expect that $64 million a capitalized exploration and we spent 23 million here today, so that leaves about $20 million per quarter for the balance of year.
We also guided $20 million of exploration expenses for the year and expand to about 5 million today. So that's about 7 million per quarter remaining for Q3 in Q4.
Beyond our regular exploration program in years past, we announced major no additional January exploration program earlier earlier this year to advance our pipeline of prospective projects, mainly in Canada and Brazil.
It's primarily includes monument Bay domain properties in Manitoba and elaborate there what about <unk> you will not yet Jack will be in NRT properties in Brazil.
We've said our objective objective is within the next three years to increase to increase at least one resource base from our general program to 1.5 million ounces, which would represent the next mine in our portfolio.
Quarterly cash flow performance continues to reflect the impact and strong production in gold prices with cash flows from operating activities of $118.1 million during the quarter.
Normalized for the 19.2 million in outflows associated with Koby 19 cash flows on the same basis would've been $137.3 million.
Free cash flow before dividends in debt repayments during the quarter, but every $8.3 million in marked our fifth consecutive quarter, a positive free cash flow generation.
We also reduced our net debt during the quarter by a further hundred $1 million to $768 million.
During the quarter, we brought 120 million in treasury from the sale of Equinox called units, which consisted of one common share of equinox on by the company and one half warrant with each boat weren't exercisable into a further equinox here at 13 50 per share until January 2021.
As of today, the warrants were in the money if all the warrants were exercised that represents about $81 million Canadian.
In addition to there's likely warrant exercise. We also called a further 1.2 million shares of equinox valued at just under $20 million Canadian as well.
Daniel mentioned added 10 million in taxi treasury from our sale of our royalty portfolio during the quarter.
In addition to that upfront cash we also called Nomad shares in the current consideration back over $90 million I can today.
Finally in June we repaid $100 million under 200 million dollar you borrowed in March on a revolving credit facility after precautionary measure due to the uncertainty around the global pandemic.
We expect to repay the remaining hundred million dollars by the ended the year.
From a balance sheet perspective, you should expect to see if any reduction in our already low levels corridor by corridor.
[noise] I've mentioned, we incurred a had $19.2 million a corporate related costs during the quarter.
These can be broken down into two got two categories as follows.
Temporary suspension in standby costs, which include cost associated with placing certain minds and care and maintenance subsequent ramp up of those operations and the under utilization of labor and contractors in relation to our pre Kogan mine plans.
And incremental costs, resulting from koby 19, including community support if you know people eat higher transport costs and overtime costs, resulting from lower headcount level. This site to accommodate social gifting thing.
You can see this breakdown by site and by category on this slide.
We expect the temporary suspension and standby costs to be minimize for the balance of the year.
The mines returned to full production levels.
Incremental costs, we're also expecting to decrease prospectively over the rest of year, but this will ultimately be dependent on the path at the cobot virus.
Despite the impact of the pandemic in Q2, our free cash flow gross margin and all in sustaining margin per G.O. were all higher in the quarter compared to Q1.
It's that that's not for a strong second half from American perspective.
We expect lower unit cost for the balance of the year with the kicker that the gold price per ounce, it's about a $200 grounds higher than than Q2.
So with so both will positively impact the margins you see here.
As well our production will increase sequentially over Q3 in Q4, so that higher margin will apply to more units as well.
With that I'll turn the call back over to Daniel.
Thanks, Jason and closing all come back to my remark at the end of Q1 call and doubled down on them.
We believe our business baby, maybe in a better position that it's ever been.
The temporary headwinds at several model notwithstanding our operation, our executive exceptionally well and we add into the stronger second half of the year.
Net debt continues to design and cash flow continued to rise.
Giving us the six financial flexibility to advance our organic growth opportunities one further increasing shareholder returns.
Despite the gain in our share price in recent months. We believe we are in the early days of the cycle. That's how we're shirt remains undervalued religious art beers and does consider liberal and sustainable upside remains.
With that we'll be happy to take your questions operator.
Thank you Mr. <unk> well now take questions from the telephone lines. If you have a question.
Weaker phone please lift your handset before making a selection.
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In the first question is from a hot Terry from Credit Suisse. Please go ahead.
Hi, Good morning, Thanks for taking my question on Cerro Moro can you talk about the plans to increase throughput in the second half of the year in how we should be thinking about that it sounds like grades will improve.
From the underground mines, but maybe just talk about throughput and some of the efficiencies that you're seeing with the lower workforce things.
Good morning Fad. Good question. So yeah, we see well first an increase into it but you know we were quite affected by travels restriction in Q2.
Getting better in Q3, I know for these will be almost back to normal in Q4.
That's the first thing grade will effectively increase quite a lot in the.
In the Q3, and a Q4 compared to Q2 in Q1, and it's mostly in what I said during the.
The presentation is the the area, where we're developing right now with limited workforce with where we're developing with higher grades zone.
Hold on the on the underground and the on the open so we see a lot better second half for several selmo compared to the the first that especially Q2 was.
The affected by a travel restrictions.
Okay, and just as a quick follow up what what percentage of the workforce was there in July I think it's like 48% in June but what were where are you now in July.
Well, it's between 70 and 80% it depends on the shift.
The increase because we are also cap.
Limited capacity because of gold is 19, we have to respect social distancing, so where before we had.
You know two people per room now were limited to only one.
So we had to add some some room capacity at the cash at the cap. We're doing death right. Now. So this is why we're very confident that into Q3 in Q4 that that will increase.
Okay, Great. That's it for me. Thank you. Thank you.
Thank you next question is from Ralph Profiti from <unk> capital. Please go ahead.
Hi, good morning, Thanks for taking my questions.
Daniel on on Jack could be in a phase two timeline.
You know, what's your estimate on how long.
Do you foresee you're running at the phase one optimize rate before.
You know start thinking about optimization I'm, just wondering how much we should think about the decision trigger.
The feasibility study.
Good morning, Rafa good question.
No. The time life is quite clear for us that and Jack will be no. We have to complete the feasibility studies and we have the prefeas. We already know that phase one is achieving better than the 6500 tonnes per day for the first quarter, we achieve above.
So I'm sure you can all assumed that this year production from Jack will be now will be higher than what we.
Guy then it will be probably closer to the run rate of fees, one we announced before so we're going to run.
That level for the next.
Two years, because we're going to make the decision. After competed the feasibility study early next year than we have to order equipment and we have to go to the permitting as you. All know we have already applied for the permit those 10500 tonnes per day.
To Jack will be noticeable in that process and completing the feasibility study right now so by this time next year. We will made the decision to go ahead or not go ahead with face to face to construction that will take 18 months or by the end of 2022. So early 2023.
The than you.
Level is it maybe 8500 tonnes per day. This is what we going to see what will be phase one real phase one that we did 60 over 6800 tons for the in Q2. So we'll see in Q3 Q4 will that be Q1 next year and that will guide us to what will be the new tonnage for phase two is at 80.
Five or above 85, we have to see.
What will happen in the next.
Next few months so that's our timeline by second quarter next year and made the decision to go ahead and then we're going to run at the actual phase one until fees to construction is completed by the end of 2022.
That's great. Thank you.
On the back filled maybe to address on the backfilling that might arrive sooner.
Because it back feel there's a lot easier to as a process to do it the meal.
Especially if we go with hydro they filled we know it's only cycle owning the tailings to separate the the course or or of course or waste to send underground understanding so that project we're doing this.
The study right now will be completed in the second half and then we might decide to go sooner or for that one because it's going to bring extra own says to me that's worth living and others right now that we can recover.
With the backfill that yeah, yeah, that's clear.
Maybe.
Maybe for Jason on the dividend reserves with a stronger look for free cash flows right coming from not only operations, but stronger gold and silver prices.
Much more work needs to be done on the balance sheet before kinda, notionally, where you're <unk>, where you want to be.
Hey, Thanks, Ralph Good morning, I, Great. Great question that you as you know that way the concept. We introduced yeah, I guess about a year ago. You know, we wanted to get to get to a point, where we could backstop.
Three years of our of our dividends with cash.
Set aside on our balance sheet aside from that from a day to day need so we've been steadily progressing.
No towards that with free cash flow generation monetization up them out that's.
With the dividend increase or of today, you know that that three year dividend that was about $200 million is kind of what were what we're aiming for if you look at the balance sheet wherever you sit here today, you heard about a 325 million a cash on balance sheet.
You know 100 million and that was from the remaining revolver draw us if you're not that off your to 25.
You know, we've always run about $100 million and maintenance cash that leaves us about 125 or otherwise on balance sheet. So you know we see.
The Delta between 125 in 200, it's kinda like you know the cash flows are gonna be generating just down through the year alone but.
You know, both Daniel and I talked about it on the call today, we've got a.
Equinox weren't in the money that would come into treasury by December at very high probability on that right now that would take us above that level.
Not to mention or other other assets I, yet I guess you just read it says we feel very strong that we're going to fully backstop that dividend or reserve find a over there over the balance of the year here.
Okay. That's good.
Thank you.
Thank you next question.
Josh Wolfson.
Capital markets. Please go ahead.
Hi, I'm first offer for Jack would be not you know looking at that project and the capital that is required.
In the context aware gold prices are and where the you know do dividend level is it seems like excess cash flow would be still pretty high so knowing that the current permit still alive 7500 times today why not consider looking at advancing that project and accelerated rate again, just kind of looking at the capital required.
In the gold price today.
Hi, Good morning, Josh Good question.
Sure we have the permit to 7500 tonnes per day, we going to push the.
The actual phase one to see a to see where we can reach this it's completed.
We had already bought some equipment for phase two mostly on the gravity circuit.
So we're looking into installed music with men.
Yes, we have different him. It's like I mentioned to 75 that might continue to increase mostly recovery, it's already I, but I thought that the truth, but also it will be difficult to events.
It's more than that because.
The.
I have to wait for it and then.
Construction a phase two.
So much we can do you know we have to order a meal. We have time to right size of them is one that we have to two companies. Because every two study we have to look at the crushing.
Oh, so capacity and that that takes some lead time long lead time to order. This is equipment. So.
And then that's we're going to try to push.
With that to a BLA 7000 at least one though and see all goes we can get to that 75 to advance phase two faster.
By the permit one and then the ordering of the equipment and installing them.
Okay. Thank you and when you're looking at the the melodic underground ramp, but that's now been approved.
Is there any ability to use this ramp for future production and would you be that position can do that maybe as early as two years' time.
[noise], we'll see what we're continuing to study shorter map will be an exploration around but at the same time the potential production ramp and then I already mentioned that art.
Permit gave us the a the option to do $40 and done enough of a walk samples. So you can best we gonna go.
Right around go see the three zones. The school these seeking an odyssey.
The next couple of years developing a best friend or Apple starts in Q4 like I mentioned the right now we're doing I know.
Overburden excavation we have then to last a couple of that wrong into bolthole installed a portal.
Take a few more often than it is continuing to fully Ah.
But the portal ready for the excavation it will start and.
Fallout or a and indeed the winter so we have to be ready for that it will take at least two years to develop that trend to be ready. So yeah. This potential that some of the production like.
In the 2023 2024, we're not there yet we're studying first priorities to drive that trend and drill from underground so with that.
We mentioned it will open up big Big Unfortunately, due to drill over 40000 meters from underground and it will be a lot cheaper than drill very long hole from surface does that mean.
No. It's to go underground establish a diamond drill down into a drill.
The school deposit deficits.
All the time.
From from the underground.
Got it and maybe one last question looking at the the London listing.
You know, which is a I guess it could have a surprise and you would be 80 habit advantage I guess being one of the first I North American companies. There what do you see is being either underappreciated are not properly appreciated.
Current listings that the second the secondary listing would be able to.
You know to just surface value from.
Well, we're very happy with the tool. This thing we have here in Canada in the U.S., but we have quite a lot of shareholders coming from the UK and Europe and then we spoke with them about about this and also our board of director of the director.
You didn't lead by our executive Chairman Peter This is let's discuss about this now for a long period of time, we I spoke with people.
It makes sense we.
Got you got told by our actual sure order and potential.
Shareholder in the UK and some of them as you might know cats.
Ferrous off of companies if they're not listed in the in the country in UK. So that's another advantage its wall Street.
And many of phones.
And people that are not invested in business gold.
Two investment.
And then like you said there will be want us to first on major companies. There and then yeah. It's very positive comments since we did the announcement and before that with a or actual shareholders and then the people we've met in the past few months.
In London.
Great. Thank you very much.
<unk>.
Thank you.
Question is from Jonathan to from Berenberg. Please go ahead.
Yes, thank you very much guys.
Congratulations on a good quarter, just a question around the restrictions in in Argentina and Brazil.
Have you got any sort of time lines from the governments in governments and <unk> in Argentina around how restrictions will be Easton, what's your expectation on over the next quarter in half a return to the full operation bear in intends to Brazil, obviously, the <unk>. The current situation seems to be side are we even worse than it was previously that have you how did he said.
Official communications around a grade restrictions being imposed in <unk> cost. So you should we assume a temporary suspension standby close another coast to coast, but for the next quarter in the second home.
Good morning, good afternoon, Jonathan.
ER for if I start with Argentina, So Argentina would thing.
No traveled restriction will stay for the rest of the year.
We will be able to bring more people that we will have more caf capacity.
We assume that it did it will continue to improve.
Traveled restriction will will stay in place, but I believe diesel Q3 and pulled out of the two for so we don't anticipate.
It's going to get worse.
Probably get better, but if not then we know what will be able to do with the that people were bringing more and more people need to each shift change we're doing a quite good into process right now that we need to permits will all the employees. Each 14 days were doing a shift change and it's getting better.
In better and then we we even move some of our employees from other provinces. The problem is to move from auto provinces to Santa Cruz.
As we mentioned many times over 30% of our manpower is becoming from is coming from all sides of sensing who was in some of it.
These people that key roles at the mine on blasting and stuff like that so we even move.
People are temporary with their family incentive accruals imports will just due to make sure that that travel restriction is not becoming a bigger issue in the future. So we only see an improvement going forward in Argentina.
On Brazil, you know, Brazil is like Canada, the U.S. any other country. This provinces and then it depends where you are in Brazil. So if you go to.
So Paulo.
Cities like that.
Infection rate is high but do you go to but yeah. We are it's really the and then you can look at this statistic. It does vary though and then the tone of Genco Beano, where we are you had only a couple of cases and then they came from outside of the town, where the Donetsk what's still a big stone of.
80000 people living there it's been limited we had no cases at the mine. So so businesses running it isn't basically almost no im back.
Small him back you saw in cold and we'll just we'll be in a is this some restrictions and like I said case from outside but people that needed to come to decide that couldn't come that generate some some of that some cost well done Jack will be an all you can assume that from NOL and there will be no cost, we don't see anything going.
Bad in Brazil.
For for Jack will be not like I said, where we are so remote location and noise, Susan and the state.
Also as no problem is more well you have big Germany deep big cities, that's it seems to be or bigger issues.
Thank you.
Thank you.
Next question is from Richard Hatch from Berenberg. Please go ahead.
Thanks, very much and good morning, and grew about summit <unk> dividend and go to questions. The first one is just on I believe we can't Allen brothers I'm, just with regards to the feasibility study which comes next year I'm just I think the loss [laughter] Capex was around the 2.4 billion number and.
The junior staff, which used to talk around any opportunities to slip on the GE style or how do you see it about that number is there any I mean, so with that and then there's something wrong, it's and it's just one on the potential for increased production in the second holliston that based on your guidance really talks about how so more a you'd expect the street better grades.
It's come through them say jacket, David benefiting from the street as well is there anything else, what's kind of backing out that way, we can expect to see onto it I'm not jumping grades just as we know that.
The next couple of whose thanks.
Good morning, good good afternoon, Richard a good questions. The first one of a on that where we got yeah. We mentioned on the Prefeas study. It was for 2.4 billion dollar or group led by.
Are there and then this or was that the leader for the company on that that study. The study. The fee study will be competed to late next year. As you know we had the leaves because of school is 19.
Regarding death, and also being able to do some depending on the.
On the and on the to the project, but we got the permit no. So it works should start soon or we haven't done to fight many opportunities with the pre feed study and then we'd thing.
The we'll see.
I can't see will be for sure less than 2.4 billion dollar, but we have already increase.
The reserve resources at site.
By mining so that will be up loss for the project there was lot of opportunities to reduce costs on the conveyor on the teetering on the meal on different areas. So so we'll see you want to final number comes but yes, there are opportunities to reduce debt the capex.
You know, we owned 56% of that the Capex, we'll see what will happen in the future.
On the second [noise].
Guidance, we said and I said many times during the presentation.
I'm confident that we gonna do better than what we guide in April. It's just right now we need to take the time to properly assess.
What did we will be.
Sure several moral I was clear just a few minutes ago, it will get better, but it will still be challenging so they don't expect that several moral.
Achieved the guidance that we said in April even achieved that guidance will probably be lower.
But all the others you saw Q2 I mentioned that all four of the other operation did a lot better even minera, Florida, where we were expecting to be just on budget. Because there was some restriction there I'm traveling so people from outside of either way.
My name is the Dol is all the other town around we have employees they couldn't come to work now the cat. So it was a it happened during the end of the second quarter. They were at all into come back to work. So despite there was some you know travel restrictions on mine achieved way better than that.
The big difference I think in the second.
Where we will see an increasing guidance. It's all these four mines, especially you can you didn't malartic I should mention because we did the for shut down and we mentioned in April.
We we are located about eight to 10 days for the shutdown that that's metastatic.
To happen because of restriction again on the amount of people, we were able to us to bring up the the site. The first shut down with it in July. So early this month when a lot better than planned also so we gained approximately two to three days of production.
So assuming around a six to seven days a shutdown instead of Stan.
So that brings another two to three days more per quarter of production for Canadian Malartic and then as I mentioned, many time at uptick is producing about between 15 onto into 2000 ounces per day, So double Alberta production. If I don't see project will be no you like I mentioned before because.
<unk> tonnage.
The grade was also better than planned.
In Q2, and then what assuming Q3 in Q4 will probably be those same so jacoby novel produce more opinion outstanding two quarters Q1 in Q2, so we're assuming that it will be better and and then they'll get us should be.
Also a bit better, but similar to what we've seen achieving at least the guidance for the year. So.
Yeah, if three are above what we said in April.
So they'll get the about the same several mobile a bit lower than globally, and we should be higher it's too early to see a number.
Q you can feel in my voice and what I'm, saying, we're very confident that will be better so will come.
This quarter in Q3, we won't wait until the end of the water.
To put the annual guidance so stay tuned.
We will announce into coming weeks, a revised guidance for a 40 m. enough with the rest of the you bolt on production and on costs. We already mentioned at the cost will be the war.
We establish it's hard to get already with will come into production.
Thanks.
That's.
You didn't get good to hear I'm talking just one follow up and teapot sort of at least that's one system the economics and attention to it sounds like I said just can you just remind us from the I'm on the tax impacts on that one and then secondly, just on the on the west So I'm, just saying that they didn't that second core that actually yet just because.
Great to see any any kind of flight back attach when my working capital movements into the second huh.
Yeah sure Richard why don't I addressed through that's your question are there I guess I'm equinox pretty straight forward.
No not tax not no tax impact on almost a monetization or yeah. We've got we've got shelter and corporate level for those Ah for those sales and and as I said, it's got a expiry date on the was supposed to warrant in January it's Uh huh.
$2 a in the money right now from a probably would have probably only perspective, you know I probably tag that at about that.
75% probability if you work through the math from an option perspective, so high probability, though that cash is if we can come into treasury and it's not just the.
At $81 million or we do also all the residual equinox position worth about $20 million as well, so some significant value or there from a working capital perspective, I think it was.
We wouldn't look back to started year, we would have been flat in Q2 years I again, another colgate impacting the first.
You know just very straightforward with the reduction in overall mining activity everything slows down in your basically not you know turning over here.
Invoices faster, you're you're paying them. So that's the primary impact here. We just saw that flow and then similar effects from from Q1 in terms of speeding up 18 to suppliers building up inventories over the balance of year you know.
I will become conservative and say, it's gonna be a flat slot profile over over the balance of here.
Thank you. Thank you.
Thank you and the last question is from Jackie principal asking from BMO capital markets. Please go ahead.
Thanks, very much for taking my call I just wanted to follow up on the question Josh asked earlier on Malartic underground.
Daniel You said you said then maybe you know production could come as early as 2020 320 24, Oh, it's their ramp isn't finished fall fully.
Constructed until 2022 or are you talking about basically just a production from that exploration ramp for a couple of years well you're looking at other options like a shaft is that sort of the way you you guys, you're thinking about developing a underground right now.
Hi, Good morning, Jackie Thank you for the question good question.
Like I.
I mentioned the main targets right now is to derived around four exploration sure. We can use their robbins future. We were studying that right now what we can do as you all know for each school do you were going to need a shot.
So that will take a few years to do this study for that and then order the equipment to start the shaft sinking <unk> biggest advantage of their ramp also after exploration will be to use that around two to raise the shop instead of sinking chef.
As many of you probably know raising a chef is a lot less costly so a lot more efficient than than sinking a shot so that will be a purpose into future. This is what we're studying.
The the underground production if it started in 2023 and 24, we don't know yeah. It's like I said, we're doing this study English will short if we have to round up yeah that access to these zones why not mining some of them.
Production will be a lot smaller than a shot for sure but any tons that you can come from underground will be better grade. Andy you opened bid to we're studying also potential open order open bid on surface. We have you wish Nands property, we had some success on on exploration on surface or.
Studying old area, where there was mining before so there's so many things going on right now with with metastatic that can change into future.
We're focused on.
I think that trend down.
Well that they use it at some point.
Ah two to two or two.
To produce from underground doesn't know really need because the hoping bids can supply the mill for the next seven years, but anything is coming from undergo <unk> underground can extend.
The mine life of the you have been bid. So this is all in this study a this is very good potential to to use it and do it.
Assuming what we know from Austin, our partner is this potential to bring higher grade ore on surface a little that's a good cost we were going to evaluate this and then that they're right time to do it so.
This quarter and next quarter, we going to continue this study that pretty well advent study that our group in metastatic isn't doing our technical service, we're quite impressed by the job they're doing at the mine.
We mentioned already before and and we hope this quarter, we're going to come with a an exploration update domestic that will show a growing of resources at the school D and that will be put into our P. study done internally and then help us to make decisions so don't be surprised before the.
This year or with the release of the year end that we come with a very good then on all we going to develop the underground.
Mine, all we weren't planning to gold mine underground what will be the timing for for everything.
Okay that sounds great. So I guess when you're when you're looking at designing the exploration ramp a you've got all this in mind, so where the ramp should go in order to help facilitate things like a raising their shops in the future that's sort of all part of that designing it yes.
All part of their design, so so like I said before.
Before to Josh we have already start discussion of overburden. So we know exactly when the weather event portal will be a and the next few months. This is what we gonna do prepare the portal install trailers on surface Oh, we we got lucky there our partner just close at mine last year or.
Those of us up a so we do we will be able to use the surface as Russ infrastructure they had their to install that a the.
The project to go underground. So so this has already started as soon as it was approved the mine was waiting for the approval from the partners to go ahead and do it so.
Are there they are moving fast.
And then again the rappel starting in Q4 and then.
Sure, it's going to go well in advance pretty good in the in the coming months.
And if I could just maybe not as one another on really quick one I answer on the same topic. You just mentioned that there's there's a lot of information that you're hoping to put out either later this year or with the Q4 earnings results in the MD any say there's a further update in this third quarter. So is that something do you expect something in India.
The intermediate I guess timeframe to put us something a little shorter and then add more extensive update like you mentioned a little bit later this year or early next year is that something that the idea.
Well I think in the short term it will be exploration so success on exploration.
No. We got news, we told you a September last year, when we announced the discovery. We came back in February we went to an increase a resources on you School D. As you all know we closed for the announcement of the resources in February we got to close the drilling.
October so we drilled from November up to now so we have a lot more.
Information on on these Goldie as we have to really for the past.
Oh, a nine months or so this will meet the main I mean topic is the increase in resources at these goldie. It's it's quite impressive would then you would really we have extended design win on media direction.
We have our target is to bring some of this into.
You know indicated resources and by the end of.
This year also so the news will be mostly focused on exploration, but also giving some detail on our plan on the short short are done. So what is our plan with their wrapped into next a couple of years and then and then maybe indicate that type of a shot.
And stuff like that but this the full study you won't be completed but we'll have a pretty good idea. So this is the interim probably announcement and with the Q4 result in February and we'll see what talk partner, what we can't seem Orla, we know already that we can ever these higher resources and then pulled out of the even some into <unk>.
So that will come in in a in February and then April next year.
Perfect. Thanks, so much for the color that's really helpful. Thank you.
Thank you and the last question is from Tianya Jack.
From Scotia Bank. Please go ahead.
Hi, good morning, everybody.
That's one it.
Daniel and go from just on your your dividend policy, you have that Tom $5200 <unk> gold equivalent ounce that you would like it can't pay out.
Well, what do you need to see to increase that lateral.
Good morning Tanya.
Good question.
She is all related to that that's reserve fund so we ask bill now.
That's really respond to be able to be that seven cents per.
For sure. This is all we see it with increased cash flow from the operation.
Sure also with the increase in metal prices that brings more cash lower than anticipated. So thats reserve foam is building a this is building and we know quite well the capital that's when we'll need to spend it's very small that Jack will be no. We know roughly what it will be in may.
I'll stick in the next seven years and big capital would be even not that big for the two companies when we speak the two together. So we this is all we manage it we know what we don't have any debt repayment until 2022, so we manage all Jayson cans.
More but because it's the one doing it but.
But as we reach target on that a reserve fun and then we reach targets on putting aside money into would be down the debt in 2022 with the capital investment need and then next few years. This is all we decide so with with our board that we saw that.
We have reached a the them money to be able to pay that a seven cents. This is why we have decided to to go ahead.
And then the next time, we going to do it just because we have reached a next level.
To see okay, if it's eight cents or whatever the number it's because we have the reserve following a valuable we see our planning or target our no cash coming into our treasury to see oaky no. We can be that that that you amount and then we made its they're very a year ago with was our target and then the work.
Following on that target I'm happy that we have almost reach I solved or our target. So that that's why didn't quite good and quite impressive.
Okay. So is it safe to assume that I mean, you have all of these out there.
It's coming in by year end from these warrants.
Well continue to add to cash in addition to be higher gold price in the free cash flow generation.
It appears you said you know what your capital spending is going to me and the next couple of years from Dr. being in Canadian like Whats really how you're only <unk> <unk> functionality capital. So you know it could be something that you can quickly get to your upper limit on the 100 dollar Crown and then continue to grow that cash.
Can you know made that adjustment.
At a fair statement.
So Fred then you want to put some color on your own yeah. I think it's a fair statement. Daniel you know we start with a you know when making sure that dividend sustainable a nearly that first and foremost is backed up by a you know what we would consider on an unencumbered cash flow and that's that's cash flow that we we generate and it doesn't have a home we don't have a lot of.
Capital intensity over the next numbered years, so we can invest in the business.
The hold onto that cash flow in the company and you know the outlet for that unencumbered cash is gonna be is going to be dividends. I think it just gives are not much more confidence that we can put a reserve find didn't like in places like we have then you know the the monetization to then you know a you know he might actually last that number.
Good years, though at the company, that's gonna going to continue on that we hobbies.
You never know disc.
Options in the portfolio to monetize in two to increase the level of that reserve fund so.
We think that $100. There's a his line of sight over the next couple of years here.
Okay, and maybe just one other question right Bonnie all I guess.
I know that got Paul I'm going to like football told that caused that part of $6 million <unk> are small I'm just kind of trying to understand what do you believe are there Paul that aren't going to be totally unrelated but that doesn't lend itself to the business that we are gonna have to pay till our cost structure.
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Yeah, maybe Daniel we.
As I mentioned I think it's we've got an idea, but obviously this is going to be a can be driven by you know the Pat Corydon, we're going to do it all goes right things to make sure. We got the protections in place I think the highest intensity of that spend has been early on here.
We've learned how to calibrate that spending most appropriately. So it's it's gonna go down you know we were $19 million across all categories in.
Q2, and then I think conservatively I'd say over the next couple of quarters it'll be a third.
Third maybe a little bit more than not in terms of total cost associated with colder than normal if its round them. The cops are gonna stay around as well so that's going to be clear.
Yeah I was just more interest that you now from from you know looking at the bonus is gonna be some color I I know I think you divided the category into like 6 million, which are like coal that like the other one north Carolina and send them like nine up correct comp I know there not a large number I'm just wondering what do you believe.
Some of these costs that I, just kind of all right now, but that does not yeah. I think we've we've said it before anything get it costs over the longer term would be you know low single billions of dollars. So I think yeah, right something very manageable, but be you know, we see opportunities to offset those those costs and I think there's still early days to implement.
Some of those lessons learned in the business, but I think full stop will offset it you know you look at something we've been.
Moving in that in the Geo ratio in shorter term, that's more than compensated for any rent corporate costs for us I think that's kind of the unique docs given out of the exposure to silver and this place and we've been waiting for some time to see that.
That mean reversion in that gold equivalent ratio, we think that times upon us.
You should have.
I have a pretty favorable im talking back to our business because of that and I don't know more than covered that corporate costs, a multiple times over <unk>.
The bottom line is that the cold because they're going to be net minimal and they are all that.
Yeah, I think that's very fair attendees, yes, okay, all right great. Thanks, so much.
Thank you no further questions registered at this time I'll turn the meeting back over to Mr. Racine.
Thank you operator, so thank you everyone for joining us today.
I hope you enjoy the rest of your summer and we look forward to updating you on our third quarter result in October these take care and Stacey. Thank.
Thank you another good day bye bye.
Thank you. The conference has now ended please disconnect your lines at this time, we thank you for your participation.
Thank you.
[laughter].
Good for sure.
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UK.
Yeah.
Because then it.
Okay.
Okay.
Well there was two questions for I'm very well.
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Oh.
After joined the call though.
And.
Yes, I think.
This conference is no longer being recorded no issues.
The modest single family homes that there won't be.
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<unk> office people.
Please note that this conference call has ended please disconnect your lines at this time. Thank you.
Okay opinion, not because it had been.
Okay.
[laughter].
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I mean, I thought process, even though.
At this conference call has ended please disconnect. Your line at this time. Thank you.
Okay opinion.
No it doesn't mean.
She went pending.
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