Q2 2020 Iamgold Corp Earnings Call
[music].
Thank you for sending died dismissed the conference operator, welcome to the I am gold second quarter, Twentytwenty operating and financial results conference call and webcast.
As a reminder, all participants and leasing only mode and the conference is being recorded.
After the presentation, there will be an opportunity to ask questions.
He joined the question Q simply press Star then one on your telephone keypad.
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At this time I would like to turn the conference over to indeed, Gopi not them Vice President Investor Relations and corporate Communications for you I Am gold. Please go ahead.
Thank you that's very much Claudia and welcome everyone to the uncle <unk> second quarter conference call. It 2020.
Joining me today on the call accordance daughter, President and Chief Executive Officer.
Carol Banducci Executive Vice President and Chief Financial Officer.
Well, let me, let senior Vice President operations and projects.
Craig Macdougall senior Vice President exploration and Jefferies cells, Senior Vice President business development and General Counsel.
Our remarks on this call will include forward looking statements. Please look refer to the cautionary language regarding forward looking statements in our disclosure documents and begin to realize that the same cautionary language applies to our remarks during the call with respect to the technical information to be discussed please refer to the technical information and qualified person slide.
Well I referenced on this call can be viewed on our website I will now turn the call over to our president and CEO Gordon topic.
Well, thank you Andy and good morning, everyone and thank you for joining us last night.
Yes, sure solid operating results for the second quarter of 2020, demonstrating strong operating cash flows on increased margins and further improvement to our already strong balance sheet.
Subsequent to quarter, we announced our decision to go forward with the construction of Coty, a transformational growth project.
And like all of you we've been adapting to our new normal what's called a 19 changing the way we work and for some where we work.
We will provide an update our activities with respect to cope with 19 in a minute.
Finally, we're providing updated guidance for the year taking into account the suspension of operations at Roosevelt and the resumption.
Of capital sustaining expenditures.
Before I move onto the next slide I wanted to note here that last night, we also announced retirement of two key members of our executive leadership team.
After 13 years with a company Carole Ben do that she has advised to support intention to retire from I'm gold on March 31st 2021.
Aero steadfastly seen the company through a bull market, a bear market and several transitions her disciplined approach to financial management is the reason we have the balance sheet, we have today and her success and building and outstanding Finance and accounting team has positioned the company exceptionally well today for both challenges.
And opportunities I, certainly wish or all the best in retirement and look forward to our continued work together over the next several months.
In addition, Jeff Snow well retiring from the company effective August 31st Twentytwenty.
Jeff has had a storied 39 your career at the intersection of law in mining and we will Miss his wise counsel and wish him all the best in his well deserved retirement.
These are both a big changes for the company and and certainly personally I was certainly enjoyed working with Carol since I came to I'm gold.
12 years ago, and Oh, we've gone through a lot of battles together and they had it says she's been a great teammate I started working with Jeff.
I think in the early nineties sitting around the head office in Toronto, and and he's I call them, certainly amongst my friends and certainly a valued colleagues.
Oh.
The second quarter was really about learning to live in a time a cold at 19 at the end of the first quarter, we proactively implemented a multifaceted response.
Putting screening physical distancing and personal protective equipment and sessional personnel policies.
In the second quarter, we were able to to read chain shifts at S. again, following the list, but the lifting of the local administrative quarantine.
Westwood came back online in mid April falling a placement care and maintenance in accordance with provincial directors and as you know we experienced cobot 19 cases at the Roosevelt site as we saw outbreaks in the region in notably, Brazil. Fortunately the cases that Rosa dollar now largely resolved.
We continue to work to enhance protocols and further expand the camp facilities to support social distancing.
As is the case at Roosevelt.
One of the more unique approaches that asset can where we've been using drones equipped with loudspeakers to raise awareness of the corona virus and are protocols to help ensure compliance and of course, we have also considered cobot 19 protocols in planning our construction activities for coating.
From a community engagement perspective, I'd like to share a couple of stories.
In may the females employees, the female employees of ethic and made a symbolic in kind donation to the vulnerable community surrounding log into the capital city of Burkina Faso worth.
2 million, a French Frank our Wesco West African Franks, approximately Canadian $4700. This contribution was the result of a front fund raiser. They initiated at the mine. The determination was made through the associates you know Fam Amash F. M and included 50 bags Rice 50 cans of oil.
Sugar and so for 55 households in the walk into the region.
In Suriname entrepreneurs for like community of Marshall Creek, located near the mine site had been engaged to supply 1000, nonmedical mild caps or masks for rosabel. This follows on a 2019 community initiative led by the community Relations Department to help develop marketable skills.
Since.
I am gold is committed to achieving high standards in environmental social and governance practices with which reflect our long held zero harm Britt vision.
I'm gold donations to local communities in response to the global.
But 19 crisis include cleaning equipment and supplies Handwashing stands in hand, what hand, sanitizing gel for the communities metal medical protection equipment, including Max gloves et cetera.
Well as life support equipment, such as ventilators and hospital beds.
As we know this equipment is essential in the fight against Cobot 19, and is in very short supply in all countries and especially in developing nations.
I am gold at our employees across the globe, we're proud to highlight through these donations, our true and lasting partnerships with the governments as well as our deep commitment to these countries and their populations.
Following the suspension of operations at Rosabel, we reviewed our 2020 guidance as a result of the this view we've lowered our 22 I Didnt 20 guidance for Roosevelt to the range of 210 to 230000 ounces.
This change.
Shifts attributable guidance for the company down to the range of 645 to 700000 ounces for 2020.
With this change to attributable production, we have adjusted cost guidance as follows.
Cost of sales between 900.
And $1030 per ounce sold.
Total cash cost of 940 to $980 per ounce produced an all in sustaining cost between 11, 95, and 12 $45 per ounce sold.
I would note here that all in sustaining costs in the third quarter. This year are expected to be higher than the second quarter due to the resumption of sustaining capital programs with similar production levels.
In addition costs are expected to be higher in the third quarter as compared to the second quarter due to additional cobot 19 related expenditures.
Our outlook for capital expenditures has also been adjusted and ask the can a reduction of non sustaining capital to 65 million from an original $80 million due to lower level.
Capitalized stripping and timing of spends.
At Rosabel, <unk> decrease of $10 million and sustaining capital, which reflects the day delay caused by the suspension as well as a $15 million decrease in non sustaining capital due to the display of capitalized stripping work again due to the suspension.
At Westwood and adjustment in non sustaining capital to $18 million from $15 million on additional development work.
At wrote Cotai, our development capital expenditures for <unk> for Twentytwenty, our $77 million increased from $45 million earlier and reflecting early works on construction.
At Boto planned expenditures in 2020 remain the same $25 million.
In total these adjustments comprise a net decrease of $10 million and sustaining capital and a net increase of $5 million in non sustaining capital.
Capital spending 2020 is planned at $340 million and that decrease of $5 billion.
While our 2021 guidance remains unchanged. We note that this continues to be under review given the current global uncertainty with respect to spread of Cobot 19, and the effect. It may have on the company's operations.
Following the major significant catalyst, which was our decision to proceed with coated construction.
Addition to the recent filing of an anti 43, one or one report for Westwood along with reaffirmed production guidance. Originally released in 2019, we see the following catalyst for the balance of 2020.
Roosevelt, we resumed long hauling saramacca or and work to complete the road, we expect to be at the target run rate for Saramacca later in the year.
The mill optimization project that ask again aimed at increasing throughput by about 10% is ongoing and we hope to get that online towards the end of the year or in early 2021.
We continue to de risk boto with investment in local infrastructure and an exploration. We're working on further resource delineation at various projects, including now again, the rule and project and the recently acquired failed property and come back.
<unk> coating and the New Korea discovery in Guinea.
When he was 21, we expect to see Westwood continue to expand production with supplemental feed from the Grand Duke open pit.
We also see rather Roosevelt production ramping up with Saramacca online for the full year and for an optimized asset can mail to demonstrate increase throughput.
In addition, the coated work plan is focused on major earthworks, while we continued to de risk boto.
On that note I will now pass it onto over to Carroll to review our financial results.
Daryl I think you're on mute.
Thanks, Mike.
I'm going to go off script, a little bit hearing I just want to thank God for those kind words. He said earlier I think it very much of the personal decision to retire and I'm confident that underscoring strong leadership and we had a strong path to transform means company and a great company. We have great people, we have a great future. So with that again good morning, everybody in turn.
Into the second quarter. The company continues the trend of strong growth margin in the second corridor with strong operating cash flows acquire also presented opportunities to execute favorable input cost hedge it on both currency and steel exposures. Okay.
With the development of co take I'm going to become a growing diversify Canadian company generating superior returns not prudently managing risk.
Good cheat this transformational strategy and in order to mitigate gold price exposure and revenue ramp over the construction period, the company intense under appropriate condition to hedge 15% to 20% of it total gold production between 2021 and mid 2023 through a combination of option enter callers.
Following our construction decision announcement on can take credit agencies, S&P, and Moody's reaffirmed I'm going to stable outlook.
Continue to prudently manage our balance sheet with cash cash equivalent short term investment and restricted cash of $866 million at the end of the corridor and our originally Undrawn credit facility, a $500 million as Gordon mentioned cope with 19 did impact us in different ways in the corner working.
Capital with higher into our intentional increasing supplies inventory as well as the buildup of finished goods due to timing of shipments and the higher cost of inventory.
We expect depreciation expense in 2020 to be in that range at 225 million to $255 million down $5 million and the previous guidance, our cash tax guidance remains unchanged at $30 million to $45 million.
Revenues in the second quarter $284.6 million due to strong gold prices well cost of sales were lower compared to the same prior year period and the prior quarter.
The adjusted net earnings for the quarter was $20.1 million or four cents per share net cash from operating activities before changes in working capital totaled $79 million.
Following the strength in gold prices are prudent management of the balance sheet, our liquidity, excluding restricted cash and including five or 500 million dollar credit facility totaled over $1.8 billion.
A $400 million in senior notes are not due until 2025.
The next slide highlights the strength of our financial position relative to our peer group a gold producers and as you can see we continued to be in a net cash position with parents eating liquidity.
Ill now pass the call over to Bruno to discuss operations.
Thank you Karen.
On slide 17.
We are committed to the health and safety award employees, and especially soldiering displaying global Covidien banking crisis.
The second quarter of Twentytwenty, we achieved this will be better than targets on the dark rate, which stands for days a week restricted or transfer de seasonal only 11.
We work every day to meet or exceed or safety goals, and Goodman thing and refreshing and number three the incentives to ensure a safer work environment, including a comprehensive Beaver base. These people.
[noise] [noise] this slide summarizes our results for the quarter with total consolidated attributable production of 155000 ounces.
Cost of sales of $1030 per home sold total cash cost over 935 daughters announced produced.
And all in sustaining costs.
Were.
$189 per ounce sold for the second quarter.
I will now review each operation in turn.
At this again attributable gold production put a second quarter.
Was 83000 ounces, we mine higher grade zones in the quarter, but also completed lives capitalized waste.
All in sustaining costs were 1100, and 23 daughters for the quarter.
By the lifting of the local and sets of current theme during the quarter.
Experience improved productivity.
We were able to proceed with the crew change the prior shift what's best for the long on some employees work on played for almost two months.
For the balance of Twentytwenty, we are expecting some terrific or which city keen to get to lead and Bexley coverage.
We anticipate those will no optimization project to be delivered late this year or early next.
In addition on the explanation from drilling at the C is complete and we are combining these results to assets to assess resource potential.
We continue to be vigilant with respect to cold in 19 with enhanced protocols in place to put pickle workforce from the Corona buyers.
These pictures, we highlight some of this and the some measures implemented at site.
Include any fleet couldn't clean and disinfection convenient and washing stations set up of isolation zones, I know drone equipped with the speakers to communicate awareness of critical.
Truesdell attributable gold production for the second quarter was 52000 ounces largely impacted by the mid June suspension of operations.
All in sustaining costs were higher than under than $50 warm.
The accordingly theme cases, we experience on sites are largely the result, with the limit the number of exit chases remaining which our current teams of site.
[laughter] operations resume on July 24, and we are processing stuck buys them high grade materials from Southern Africa.
Going forward, we expect slightly weaker third quarter production output will lose them, mainly due to their suspension of the operation on until July 24.
We have moved to one person on the per room that is the same for somebody in night, which from strain the number of employees. We can have on site.
This in terms of means that we will need to expense I see piece to ethane or pre suspension run rate.
Which we hope to achieved by the fourth quarter.
Q4 is fruit are expected to be supported by higher grade ore coming from sentiment.
From a health and safety perspective, we included a couple of pictures from Rose Bill.
I like thing or and hence physical distancing protocols, the lunchrooms and maintenance shuts configuration.
Slide 21 highlights a number of pictures showing our progress at Santa Monica.
I'm Gonna does that mean beneath the bridge, which is now complete I'm. There right is the inputs such are in progress, but something like on site.
[noise] Westwood resumed mining admit the pool, producing 20000 ounces into second quarter Twentytwenty, that's all in sustaining costs of 1100 $33 grounds tool.
We just filed our national instrument 43, one on one technical report full Westwood, which outlines a safe profitable and long life mine and we reaffirmed longer term production guidance originally disclosed in December 20, Mike.
Why the reserve ounces declined by 48 person over all resources, including reserves increased slightly.
It is difficult to fund under underground mine our guidance includes resource ounces can go so during those time development and it is based on historic operational experience.
We have included a few pictures here of or general manager meeting with deflecting physical dispensing photo books.
Just a couple of weeks ago, we've made a momentous decision to proceed with the construction of the who they go project.
We believe in could be because of the transformational value. It brings to I can go into all of our stakeholders. Skinny then project expense or production profile brings greater geographic diversity to the company and lowers our overall cost profile.
Good day is well advanced isn't as we made the decision to construct we keep permits and approvals in hand strong stakeholder relationships with our joint venture partner Sumitomo as well and didn't use commute communities Blaine goes in metric and then of course, our northern communities.
Third Coty as significant district potential with the Gossman and I'm trying them just causes.
We know tier that these highly levered to the gold price in fact that today's gold price of $2000 grounds. The projects net present value. That's a five person discount rate is $2.8 billion were to internal rate of return of 27.6 person.
On this slide.
Include pictures, we shared a couple of weeks ago or Chester construction cans, which then house 264 people and their view of the T.K. you compete that is here.
I will now turn the call her to Craig to discuss explanation.
Thanks, Bruno and good morning, everyone before I begin. Please note that the results. They talked about today have been previously disclosed in accordance with securities regulation and signed off by the qualified persons within the company reported.
The 2020 or planned exploration spend $52 million, excluding project development activity and study.
And we'll involved the completion of approximately 190000 to 210000 meters of diamond in reverse circulation drilling to support resorts development programs and exploration target devaluation.
Although we are maintaining our outlook on our exploration program, we continue to reassess the impacts of the code at 19 crisis.
Going forward and we'll adjust accordingly.
As we've said before in three <unk> reserves have been on to steady decline since 2012.
I am gold has been working hard to differentiate ourselves from this industry trend.
Beyond just replacing reserve ounces depleted from mine production. We have also achieved a significant increase in reserves over that time.
It's 2016, we have not only replaced everyones mind.
But also added over 8 million ounces more than doubling or reserve base.
This is the result of of a sustained commitment to exploration through the cycle and the tireless efforts of our exploration in mind geology.
We believe this is a significant others have advantage for items all in for future.
During the quarter, we announced further infill diamond drilling results from the RIN Gold project as we work to delineate maiden resource at the last Gamble zone, which we feel may have potential to provide satellite feet or west with operation.
Highlights include 9.8 meters grading 27.8 grams per tonne goal, which included 4.4 meters grading 58.4 grams per tonne goal.
And another whole with 9.8 meters grading 10.4 grams per tonne goal, which included a three meter interval agreed in 22.8 grams per tonne goal.
This along with you announced the acquisition of the oil project from 35 kilometers from with Wood continues to build on our hub and spoke model in the region centered on the Westwood operation.
Bill in Quebec, you will remember, we announced amazing mineral resource estimate that the Nelligan gold project in the fourth quarter 2019.
With resources on 100% basis totaling 3.2 million ounces in an inferred category had agreed a 1.02 grams per ton a goal.
I'm 2020, we completed nearly 5000 meters of diamond drilling before activities were temporarily suspended due to the code at 19 crisis.
This program was designed to infielder deposit two continents and resource model as well as test for extensions of mineralization beyond the existing resources.
Initial results reported during the quarter include 27 meters grading 2.86 grams per tonne goal and 25 meters grading 1.87 grams per tonne goal.
Both from infield intersection.
As well, we reported a 10.5 meter intersections rating 10.5 grams per tonne goal, which included 1.5 meters grading 69.1 grams per tonne goal and just from a step up all outside of the existing resources.
Although we no longer have the advantage of the winter access for which this property is well suited for summer drilling program has been designed and has commenced which will continue to advance the objective of this program.
But the nearby Monster Lake project, located 15 kilometers north of the Nelligan project drilling activity also resumed during the quarter completing an additional 1400 meters the diamond drilling.
Program focused on testing the any shear zone in an effort to then mineralization intersected Dream 20 Nike.
I see results from this work will be reported once received validated and compile.
Although our drilling program to evaluate the resource potential let her new Guzman discovery located 1.5 kilometers north east of the Coty Gold deposit was also suspended before completion as result of the coated prices.
For logging sampling on the holes that work completed as well as Dan and we expect new results shortly.
A major this program is being redesigned you utilizing a bright supported drilling program, which should commence in August.
In West Africa exploration activities continued during the quarter focused on resource conversion and refinement of the reserve model at the Boto Gold project in Sunnyvale.
As well as testing for extensions to the dioxin deposit located to the south in Maui and.
And exploring selected high priority targets within 20 kilometer radius of that deposit.
Taking into consideration the current favorable gold price environment, you can certainly see the meaningful impact. This has on boating project economics on a standalone basis.
Building on our exploration success, along this portion of the settled down Meli shear zone with several discoveries located within 15 kilometers of the Boto gold project in adjacent countries.
And he has initiated a strategic concept study.
Referred to as the bend the gold complex to advance resorts devaluation in delineation program.
Dr and create a project, which will support the evaluation of various potential development scenarios and identify read regional synergies.
Driven by increasing gold prices competition for access to quality exploration project is challenging for the industry.
I end goal has developed and continue to invest in a healthy pipeline of early to advance Greenfield exploration project to support our future growth.
Well support near mine brownfield exploration with a view to lengthen mine life leverage our existing infrastructure.
With that I'll now pass the call back over to Gord to conclude.
Thanks, very much Craig.
So from a strategic perspective.
Q2, 2020, it was really a milestone quarter for for the company.
With the announcement of co tape moving forward.
We remain focused on lowering our consolidated cost profile to improve margins and cash flow.
Increasing our gold production, increasing our operational flexibility enhancing the geographic diversity of our overall portfolio and of course improving returns to shareholders.
That's achieved this we believe we need to achieve self funding at each of our existing operations to ensure exploration activities corporate functions in financing obligations in aggregate or not a burden on our balance sheet.
Sequenced development of our organic growth pipeline, starting with the construction of Coty and continued de risking a bodo.
We will also be filing for another exciting future with the advancement of our rich district, brownfield and Greenfield operation exploration prospects, which include gossip <unk>.
Korea, and Diack as Sarah by along with Boto, and the bamboo district in West Africa.
Now looking monster Lake in northeastern come back.
Oh, along the Saramacca bruck alone could trend insert Suriname, and our Westwood hub and spoke model in the habit tibi.
Importantly, this all needs to be accomplished while continuing to be leaders and he S.G. performance through relentless pursuit of our zero harm vision.
We continue to guide our efforts in accordance with our vision to be the globe global leader and creating superior value for our stakeholders through accountable mining supported by our experience team of technical operational and financial professionals.
Thank you for joining us today, and I will now pass the call over to the operator.
Thank you.
We will now begin to question answer session to join the question Q. You May proceed Star then one on your telephone keypad.
You will hear the tone and knowledge in your request.
If you're using a speakerphone. Please pick up your hand said before pressing any Keith.
If you wish to remove yourself from the question can you give me press Star then too.
Anyone who has a question maybe Chris that in one at this time.
My first question is from 530 <unk> with credit Suisse. Please go ahead.
Hi, good morning, Thanks for taking my questions. Maybe first on Saramacca can you remind us what construction is left for this year and whether the lower growth Capex guidance for this year or what does that mean, there's some spillover of capex into 2021, maybe seeing it just gets them.
Context on what's left to do at Saramacca and what the Capex could look like for next year. Thanks.
Bruno can you I addressed that please yes certainly.
Hello Fab so the infrastructure that remains to be built is a watered thing.
Schuff and some offices and the rest is just finalizing the debating over the road.
The with the family framework and that's it.
So we don't expect wise.
As much capital to be extended to 2021.
As we speak right now.
Okay, Great. That's helpful and just one other question on on Westwood.
I know you reaffirmed the longer term guidance, but the reserves declined how should we be thinking about the mine lifestyle at Westwood.
[noise]. So we still expect a mine life, we own 2030, and and as we guided on December 20 like <unk>.
Oh, we were doing a slow ramp up from 100000 ounces to 125, and then to try to get to a.
Run rate of.
130 to 145000 gold downs.
And we're pretty confident the target is to to try to convert back the resources and.
Who are usually.
By adding a reading.
And at Westwood in the North Korea door and designed to.
Over the next few years and so we can upgrade in person resources to and skews in New Jersey Ben.
Finalizing the mine plan, so we can be.
To reserve and also we have adjusted or reserve.
Uh huh according to our ground conditions by adding a June technical risk adjustments I think.
Oh, Yeah, nothing Oh swing and changing the dilution in recovery factors associated to our or do you funded the to mine plan is if you.
However, we're going to come to you to work around these sectors to improve ore extraction straight each.
So we can.
But some of those ounces back into the reserves when you look at it all in all the resource base that we have in the conversion factor that we had in the past.
Well so looking also at the reconciliation history that we had some reserves to the deal.
We're price, we we are quite comfortable about probably guidance.
But I just described and to go beyond 2030.
That's helpful. Thank you.
Our next question is from Josh Wolfson with RBC capital markets. Please go ahead.
Thanks first question on Westwood I, just trying to understand what mining cost assumptions, we should be.
We should be incorporating longer term I did notice that the the technical report how to mining costs. After the mine plan of around $224 Canadian but the cut off for reserves was about $50 lower and 170 range.
What else can you.
So you know that [noise].
[noise] [noise] so for the.
We made I'm just so please.
<unk>.
The difference between just give me one second.
Sure.
I can give you back can you answer to provide the kind of great calculation, but steady whats ideas I'll come back to it because the mining costs.
And because we have trends one project can Westwood and also whereas a couple of grade mining cost wants me to the scale of the difference between the two so a comeback to another.
[noise] [noise] okay.
And I'm a capital aside.
So the Capex is that 200 million ish is pretty exists for the current reserve base should we be assuming a similar named no Amanda capital for reserves that will be added or is there a lot more development. That's required for the current reserve based that that's been defined.
It sounds like a.
I suffer westway.
Okay sorry.
Yeah. So in fact, a we.
There are going to come to new to to keep developing.
Westwood's all assets it to EPS you have a much older nothing gets cold and other its findings was true that needs to be associated with its when they want to model would be additional ounces so for that.
Okay, and then last question related to Westwood.
The shocked at one point that had been discussed historically I don't believe that's incorporated for the current reserves is that still part of the planned longer term there or is that needed to the access reserves that you would project out to that 20 2030 plus timeline.
Oh, right now and we believe that Oh Geez you. The main access is sufficient.
As we speak and again, he we what we need to do as we.
The speakers to further investigate a the we're in the eastern side of the mine and then we'll be able to develop the mine plan and access for <unk> associates with.
Okay, and then just trying to accomplish that every does as we've looked at it because of the depth of the deposit the shaft is starting to become a long ways at the bottom end or from the deposit. So we've evaluated putting a wins and we've looked at at some declines and and.
Yeah, we're sort of going through that analysis now.
No I either one of those solutions still supports the declaration of resources, obviously as we get into reserves will need to we'll need to.
Crystallize the the current flash.
Final plan, it's right.
Great and then one final question, sorry, I'm liking audit airtight here at first Saramacca.
One point there was a discussion about it at coming out with an undergrad study, which which would have been I guess most beneficial early in the in the mine life to reduce some of that upfront stripping is that currently the plant or should we expect the study on that you know staff upcoming.
Yeah, right now, we're still figuring out a the best option whether to pursue with the open pit that the current a price environment to assist the underground we keep we still have some indication.
To do for the underground.
We put around this then a the food there, but usually this auction so I thought of as we speak it's still a conceptual and we're so that's the thing or options that we are and whether to come to you.
Thinking more again.
[music].
I would be open pit or converting it to one but I'd be underground.
Underground potential with as we speak right now it's too soon for too [laughter].
Oh, great those are on a question. Thank you.
Our next question. My question is from Jackie TV Lucky with BMO capital markets. Please go ahead.
Hi, Thanks, very much a I guess I'll start off I noticed in the in the released last night, you didn't talk too much about the Sadiola sale. It was previously.
Forecasted I guess to be completed around the end of April. So I was wondering if you didn't give us an update on that I'm guessing there's some some delays due to coal bed.
Do you have any idea when that that my clothes.
So Jackie yeah, you're you're entirely correct, we have seen some delays due to coal that at most of everything has been inked up.
There is a little bit of a political machinations going on in Mally right now not with respect to two sadiola, but more just with respect to the overall politics in mally.
And and figuring out the path forward for the government everything as as is signed up and ready to go. We're just really just waiting for a new cabinet to be farmed and a new mines Minister and and finance minister to be put in place.
We anticipate that that may add a little bit of additional time as as a as the new.
Ministers familiarize themselves with the file but from a bureaucratic a point of view and certainly from a business point of view between ourselves and and Anglogold, Ashanti and and the and Allied a everything is ready to go. So we're we're we're just waiting on Finalization right now.
Got it and maybe if I could just ask a different question on on Rosabella, you lowered the guidance and it a lot of that looks like it's due to rosabel I understand that there was a strike in and that you've got a productivity hits from their social dismissing can you quantify.
How much of the a of the guidance revision this or 40000 ounces guidance revision how much of that is due to the strike and how much of that is due to the think going forward I'm proud to be hits and and I guess the question being like would you expect some productivity hits similarly to affect stuff.
2021 as well.
I mean I'll let.
Bruno answer I I mean in it from my perspective about 80% to 90% of it is due to the suspension a there are some some productivity hits in the near term, although we are seeing better grades or for the remainder of the year. So we are our we are able to compensate some of that.
But it's almost a direct one to one the the changing guidance with respect to Roosevelt being they the the suspension period.
HM.
You know that that's the amount of production, we would have had out a rosabel as we look to 2021 I, we're not anticipating any further productivity impacts.
We have a plan in place to to get back to our full complement of manpower through some additional camp construction.
And once we're at full manpower, we'll see full productivity I don't know if you'd what I want to add anything else Bruno.
That's correct Gord about a 90 person that's not the ounces are coming from the suspension those be operation under this is just a the ramp up to learn original run rate.
Okay. That's it for me thanks very much.
Thanks Jackie.
Our next question is from Mike Parkin with National Bank. Please go ahead.
Thanks, guys that most my questions are answered just one housekeeping ones on the cash taxes guidance or what gold prices that based off of.
It's 1500.
Like Okay, and a just a little bit on Westwood.
With the change here is there any.
Additional labor changes like I know you for your made some changes recently and we're seeing U.S. dollar operating costs come down just trying to get get a sense look like.
What we could expect going forward with the lower mining rates is back on the call for a further reduction and manpower.
Well.
Yes.
So we don't expect the a further decrease from their workforce, we did not just meant a year ago.
Today and.
However for now we believe it or do workflows to compete.
The life of mine, but Oh, we have design with a little but and are you become more.
The personnel needed accordion underground operation right now as we speak.
Oh, we believe that third one course, a is going to be quite stable, if not just increase a little bit.
To come back to the mine operating costs for mining at least when there was only 200 and a 24 daughters can you can become.
And then we'll milling costs and sekine costs be up yeah, or just because of the lower throughput yep. So 26, a daughter rule nine four milling and a 42 thought is 95 cents for.
Station Ginny.
It's okay one dollar.
Okay, well expand what we're saying like is actually with the additional rock that we're putting through from Grand Duke and we anticipate to put through from failed and so forth the administrative and.
And milling costs actually are lower.
For the complexes, we as we move forward on a per ton basis, its assigned to to Westwood.
No you guys doing owner operated or the open pits are those contract.
Contracts.
And in fact getting reported through Opex or is that.
Yes, yeah, it's getting its coming through Opex.
Okay.
All right that's it for me guys. Thanks.
Thanks, Mike.
Our next question is from carry my career with Canaccord Genuity. Please go ahead.
Hi, Good morning, everyone. Just had a question on 2021 Capex I'm. The press release notes around 250 million for 2021, which isn't too far out from the 2020 guidance. Once you strip out you know cocaine photo. So I'm. Just wondering you know with Saramacca spending expectedly down and I know there absolutely is taxed at lower stripping into.
2021, just how do we actually public capital that number relative to this year's number.
Bruno do you have a.
Thought on that.
Hey, Tim can you repeat the question is so which wasn't <unk>, let's just stick with the question it's around what's our capital expectations for 2021, given the shifts that we've made for 2020.
Yeah, I guess, that's all I'm 20, 21% 20 claim but again, we would assume that saramacca should be down a bit and that it notes that capital stripping JB Lowe and 20 to one so I'm just trying to understand that 2021, yes.
That assumption about assist any capex for the remainder of Twentytwenty as they increase in Q3 Q4 in some of the capital project.
In Q4.
Some of the capitalized stripping also will most likely some 22 into one right now.
The Privy to see the full impact of the Oh barrel envelope don't but he's that's going to be a.
That no material and we believe that we can keep.
Having some production level with a reasonable kipling low so.
And maybe I can add that I mean again. The 2021 is under review just given you know what transpired, but cobot this year and we did reduces our capitalized stripping. This year. So we'll have to look at the new mine plans. It through now has alluded to in so well have to look at updating that perhaps see Q3 that.
It is under review in just a it's something that where we're looking at.
And maybe just on the you know the mill <unk> de bottlenecking and that's again I'm just what the status of that as you know that's going to also flow as Linda mentioned one.
So I mean.
The current schedule, we have right now carry is is to complete by the end of the year. There is a possibility that gets pushed a little bit into Q1, mostly on on delivery of some of the supplies are again related to coal that arc are our capital assumptions that we put in place assumed that we run it out and.
It's it's up and running by the end of the year versus I mean, our original intention was to have it up and running in Q3.
But that was one of the the areas where we when we went into a reduced ur cobot impacted activities that we did reduce or the level of work on that project.
Got it that's it for me thanks.
Thanks here.
Our next question is from Tanya Jakusconek with Scotia Bank. Please go ahead.
Hi, Good morning, everyone can you hear me yes.
Great. Thank you I'm first of all just I want to say can Brad to add Carolyn Jaffa on every time.
I'll then maybe I have three questions on I wanted to talk about Oh people are quite easy maybe I'm far you Carol I'm just on the incremental called that maintain expensive that wasn't going to be included in other expenses going.
Before I am excluded from your total cash cost them all in sustaining Tal.
Yeah.
And again, we do a very detailed repeal of all the cobot cost Tanya so anything that we think it's going to continue will look we'll sit in cost of sales, but as those cost that we think there are one time like for instance, premiums that we pay Tim please when they're going through the transition introducing all day.
The the protocol or if we brought in some additional housing in order to accommodate a the a the employees and do that the at the end spacing distances. So anything that we've done on a one time basis has gone through other expenses. So anything to do with you know obviously productivity level because of all the.
Protocols, we have put in place that we're not excluding not so that's the way that you should be lucky now that it's the one time costs that were putting your other expenses and as you said they'll be they will not be included in a in cash costs are all in sustaining costs.
Okay and somehow what should we expect I'm going for like on the call, let's say the rest of this yeah.
Right I mean, I think we're hoping that the worst of it is over and Ah and so you know we had obviously last meeting care and maintenance, it's ramped up really quite nicely and ER and the same with with the assay can we have very specific administrative sort of corn team that went in place in can.
Great and again, where we're operating that's the Ken it's it's a I've been able to operate without any significant interruption and we've actually had obviously just we've just come out of this Ah Ah the suspended operation that really sit down so we're hoping that the worst of it it is behind us and so we're not expecting the same level.
Uh huh going forward in into the into then the rest of the or we are expecting some cost but not to the degree that we experienced in Q2, but I like like you know like you I don't think anybody really knows what might happen with Covidien mother, we see another yeah. It's an outbreak lately I think we've put.
All the measures in place anything.
Very very diligent and all the things that we've done and we worked with the various health officials in country. So like I said I mean, we're hoping that the worst it's over and and you won't see the same thing that we experienced in Q2.
Okay, and then maybe and on capital allocation Gord Carol you just that Pat Pat Gold prices, obviously, if any generating a lot more cash flow then you'd like to that.
Yeah, clearly the construction of propane you know that yeah. They are part of it about what is what are you thinking about intends allocation on any incremental cash flow that you generate did have a higher gold prices.
Oh.
You know for right now I, I mean, I'll I'll, let Carol chime in but.
Our expectation is well continue to conservatively manage the balance sheet Oh, you know as we look strategically out with with with Ah Ah with a co pay construction, a we're very very comfortable with <unk> the level of.
Cash flow we have.
And our internal models are using much much lower gold prices to ensure that would that that we get through a while maintaining or the the required cash balances and and our leverage ratios yeah.
Below the targets that that we've sat for ourselves.
If we generate additional I've, obviously that that helps us a worked through.
We are considering obviously the development of photo weather at a later date. So that that is also being factored into our analysis, where we go and you know obviously if prices continue to go up and in cash continues to to be generated we'll look at.
It was a little better redistribution certainly.
At some point in the future I'd love to be able to get back to to paying some some dividends back to shareholders.
And and help everybody sort of shared in a in a higher gold price.
You know beyond that where we're or we're happy with with where we're acting and we'd like to get sort of a year of coated behind us and really understand that that everything is truly a solid for us Carol we got anything else Yeah. No I'd just say you know as as Gordon said like that with me here.
At this company to generate superior returns and coating is so transformational, whereas a you know we kind of a you know a significant spend there at least the guy is be provided is $875 million to $925 million and so our first priority is making sure that we thought sufficient capital.
Good to get this project built and running and once that occurs we're expecting to being you know significantly generating I mean significantly gentry cash flow. So I think in the in term I think you know that's can appreciate everybody on the call answer can appreciate I'm, just a significant volatility around gold price and so.
Now I you know continues to stay at these levels. There continues to rise definitely no cost and take a look at synta, what kind of optionality that rehab.
But a you know it's it's a it's three and a half years and we just need to make sure that we protect the balance sheet in the interim but our goal is absolutely to to generate superior returns and returned a return that provide returns to our shareholders.
Well, what some minimum cash balance that you're going to keep on the balance. He doesn't next couple of years, you know 200 million.
Okay and then my my final question I guess that now for God drilling up you know just on my wife, what I I'm. Just so we had moved out 550000 ounces of that reserve.
And to me so I suppose what do you need to see to bring them back into those are.
[noise] kind of up to now this has been Oh, so again like I explained that we were very conservative assumptions or you want to offer a safe.
Sustainable and profitable mine.
So are we usually increase or or knowledge on those specific zones in terms of extraction extraction strategy.
Ah. So just said this momentum we prefer not to risk adjust or those are doing stopes, so they're not that content for them, but then as we speak. However, we are are you doing in New York City.
To be able to put them back and [noise].
So we need more Julie pick a drilling a modeling medical oh modeling on those zones.
And also to look at a the expectation of others Stokes and to see the behavior of the ground.
Because he the confidence that we have to extract the others have to them.
Just on this but specific zone.
60 season that apply to all designs at Westwood, It's only.
Very good it's a it because there's clearly is computed on either me.
But the main the central corridor towards.
Good.
We are we able to work to do to to them [noise]. Some.
Some more attributes that and we want to be comfortable with it before we put those ounces Bakken.
Okay. Thank you.
[music].
Our last question is from Anita Soni, we see I'd be see work markets. Please go ahead.
Thank you so first off but congratulations Jeffrey and Carol on your end pending retirement and then second question kill could you just go over I think you mentioned.
You have a policy of hedging going forward can you just mentioned those parameters as I'm sure I mean in terms of that's only a couple things the Anita so in terms of the inputs, we've already hedged all the not steel exposure for cocaine overtake construction period.
And Oh, we punch that [laughter] with an up 11 under $50. So we're protected at $50 and a on the bottom side. It's I think it's about 30 to 38 50 and ER and then what we've done is we're also looking to hedge the became dollar so weve hedged about 65 million of.
It in 2023 at 1.36, and we'll continue to watch the dollars. It's obviously much stronger relative to the U.S. dollar. So our intent is that we've got some internal thresholds that we're focused on and so we'll continue to watch it and then what we announced a this quarter is that you know just.
Given that the coating project and a land to make sure that we can execute on this transformational project and really minimize the a the revenue risk what we said it you know under the right circumstances. We may have or are we want we actually intend to hedge gold production.
We haven't done anything yet I'm, just watching the gold price they not a 26 right now so we would look at doing that and no more than <unk> I should say in the range of 15% to 20% over the next like I said three years, it's really focused on 20.
122, and half and 23 and Ah and so when we look at doing it through a combination of options in Colorado and as we look at the college not leave what would want to do our strategy would be to ensure that we still provided a substantial amount of upsides for shareholders and so we would look at what we're looking at doing.
He is right now and then possibly financing options like which again other than money a crane that floor plates on nickel price just because you know we just some of that it wouldn't make prudent to do that cannot protect the balance sheet. So that's our thinking Anita.
Okay. Thank you I'm second question I'm more for Gord I guess is.
So saramacca, it's been its been a while to see really delves a in depth centered on it you know kind of supposed to started about this time last year and I'm just trying to get a rough idea.
You know what the overall parameters were for the Saramacca in terms of tonnage and grade and what we should have been setting our goal close far because it's been allows if they talked about that.
Yeah [noise].
I think probably Bruno is more familiar with it with the current plan or we do expect to get up to pretty much a run rate by Q4 at run rate for Saramacca, yeah as in the neighborhood of about a thing it's three.
2.5 to 3 million tons annually.
Coming into the plant.
Yeah.
Can you filled out in a little bit more for me Bruno.
Exactly so HM we Oh, we expect to have close to a.
And between two quarter to a million ton of war.
Toward it.
[noise] per per quarter in this year was about 2.5 million like Oh, My goodness eluding to.
Again to ramp up is is going.
It depends on the yeah solution or lose them like I mentioned.
The constrained by the number of employees that we can have Uh huh.
That's a we have to add new facilities to increase the workforce on site. So some activities are going to be delayed, but again, we're going to prototypes.
The treatment of the stuff.
And the seven medical or [noise].
So we should see.
Affair or ramp up where these having like a mining.
Into Q3 in Q4, and they're getting tuna and the true or not.
Natural run rate.
That's right around three quarter them and then.
I'm sorry.
Per quarter. So once again for 2021 like a totally new that we were going to yeah from were guidance associated to the older years and either.
Okay, and then in terms of the [noise].
The or sorry, the stockpile levels would that direct ore feed from cinemark or was that was that or that you had stockpiles from South America.
Yeah, we stockpiled ore turn I could then get transferred and I'm old to tweak to the new so actually is.
Again, it's.
And every every month since January we've been Oh.
Yeah, I dig a on the football.
It's been a and as we we have just started.
Yeah, Yeah, we started the operation, though we already are taking that a part of that stockpile.
Ah two or to prove to be process or the meal and then the the mines will resume as though.
Okay. So what's the level about thought kobrite out some I guess.
No peptide him on a job.
Right how much.
Yes, I mean can.
Tonight.
Okay, and then I'm just in terms of the degrade going forward. It at at Rosebel. It was low because your processing stockpiles aren't that's kind of is that once we get through <unk>. Okay. So we should resume sort of more closer to the reserve grades well that you've been doing previously you know once once I'm sort of physical distance and she is.
It resolved.
And so that's the plan stockpiled and South America, and then you're going to to start money just talking pits to become a win win here.
The other pets, so that they laid should be improving.
And then the overall tonnage at the Rosabel is that it can process going forward I'm given that you've got you know they should have to streamline he turned back on what was Roosevelt copper be delivering huh.
<unk>, the probably around the 30000 some pretty.
A good number.
As we speak well it depends on them on the hardness of limits are older three running so it sounds good there that we're talking sort of 12 to 13 million tons annually, including Saramacca.
Okay sounds good. Thanks, I know last question just switching gears to co say just as we start to focus on I mean, you're you're going to this is full steam ahead on you're gonna be you know sort of kind of break ground on this in Q4 I mean is it.
Can you just talk about or sort of the construction build out like you P.T. I'm like are you guys managing the two who's involved but going on we would see we've seen a few bill that's the last few years that.
Yeah that weve given given the size of the capital it's gonna be spent but I. Appreciate you more details on how that's going to unfold.
So.
In our release and in a in July we sort of laid out the spend on the on an annual basis or at least the percentage spend of the total on an annual basis.
We are using any PCM contractor, we're using a would oh you know, formerly the guys from a Mac, who who helped US prepare the feasibility study in a bit involved in the detailed engineering that we've been doing as part of the de risking exercise.
So right now the model is he PCM.
Given the fact that we've advanced.
A lot of the engineering to such a high level compared to most projects. We're currently evaluating the opportunity to maybe do some of the packages GPC ER and lock in a the fixed price so that that Oh, we can we can execute those projects with with you.
Lower risk.
So there they are the main.
Driver of the project per Se, we do have a full orders team that that is looking after.
All of the main activities, we will transition a is as well to an operational readiness team. That's being built we we are eager to to really start our owner mining.
Towards the end of 2021 as as a.
The initial couple of benches, and they overburden will be strip by contractor, but once we get down to hard rock.
I will start with our own mining fleet towards the end of next year.
And the rollout is is as you said sort of breaking ground. In Q4, we are doing a few activities through the summer here specifically some we're looking to do some some fish salvage of of a couple of these.
A couple of the the lakes in the in the tailings dam area that would allow us to get into tailings dam construction or early next year.
And I I sort of leave it like that I mean, I couldn't we can certainly elaborate a little bit more one on one if you like a anita.
That's okay. Thank you.
This concludes final located for questions I would now hand, the call back over to Indy coping nothing for closing remarks.
Thank you very much Claudia and thanks to everyone for joining us this morning and for your continued interest in I'm Gold. We look forward to how do you join US again for our third quarter 2020 conference call in early November Goodbye.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and had a pleasant day.
Mm Hmm.
Mm Hmm.
[music] mhm.
Hmm.
HM.
Mm Hmm HM.
Mhm Mhm [noise].
Mhm.