Q2 2020 B2Gold Corp Earnings Call
<unk> to go see cold water on first called 2020 financial results Conference call I would now like to turn the call Watson mistook life Johnson, President and CEO you May proceed Mr. Johnson.
[music]. Thank you all for unless they get caught the beach gold executive team either here in Vancouver, and the board.
Or other.
We're here to talk about the.
Second quarter results for 2000 collection results for 2020.
For the for sale.
[music] publishing another very strong order for us.
Records for both revenue and operating cash flow quarterly records, we had a good deal.
[music] budget are.
We are announcing a as well, but we are covering our dividend.
Again from two cents supports I'm sure that reflects the remarkable.
Well I can start production or should we find ourselves obviously gold price.
We are very strong position them, we're announcing that we intend to fully be they are.
[music].
Third quarter, two year, where they were done that positive cash position today.
Great places to be up given our projected.
Buckled protected.
Oh gosh operations are shown expecting.
It's hard for me to increase the dividend.
We are set so.
Sure so before I hand, it over it up to like sentiment that give me a rundown on the financial results from and then we'll have a quick update on the call expansion.
For any questions that you have just there's talk a little bit about to coal, but we thought extremely well less than 10 actual results or their operating results.
Just a last couple of quarters. Despite covert another I think there's a couple of reasons for that we felt so one of the by I think the first one is experience no one other things about our group.
Extraordinarily.
Sure, Yes, we've got to this industry, but only they must you're working together.
Through the B, the yourselves into the beach cold here so.
What do you do that internationally you learn a lot and you heard a lot about things like jurisdiction living people.
<unk>, there's a lot of challenges over the years, we welcome the charge, we took cobot I'm very early and took a pretty seriously very early but I think the experience of our our team an experience of our.
People on site, I really can't afford rather terms or ability to.
Just to manage I'm sure that problem solved turned colder.
The thing is key I think there's the culture, we talk about about.
Endeavoring to pre people with status respect and transparency.
When you run our business.
And I think the fact that we've done so well was partly because of the.
Mutual trust the we've developed both our employees.
Our unions in Argentina place and also the garbage in the country. So much work and I do think when you treat people will start with respect to transparency I think when you run into a ton of the crisis I think that can really pay off because we are poised on the governments, we work with they they trust us I think they know world looking over their best interest.
So we all that something a common.
Voiced government set ourselves company, which was to could you just keep buying if we can do it safely to covert undertakes various necessary steps and each with different countries. They all the different charges.
But also uncovered dealt with different challenges, but we we up I think that.
That ability to work shortly our with government.
Our employees towards comical seeking the mining was most of whats really important part of the success. You. Obviously, we've made significant donations to help with cold weather the countries at random including here.
We're as well.
But I think that a cut that carbon trust has been a really important part and our go to deal with it.
First we hear a lot of people talk about political risk where in some countries, where traditionally sometimes other people down there to trend.
But in the other day, we want to be in countries that what those nobody in countries that leaders and the Cadiz wherever they don't public safety that like some western countries. So that gets you to the gold revenue was hugely important in these countries should continue to the jobs, which usually important.
Governments, we're very open to listening to how we could work together with them that are poised to him to run safely. So I think there what are the there will be some positives or come out of the next in the future.
Back or Colin I think what im positive steadily become much looking back and say, which industries will go to having your country at the type of Cowen.
I think on lighting industry is gonna be one of those industries looks really good perhaps it will even be that there'll be more countries in the future moral dividing because of the fact that we could do at these days, so responsibly I'm not yourselves many others in the sector as well.
So we can after specific questions. If you have the bond on our on our treatment are dealing with the cold it.
A Democrat just wanted to touch on some of the bigger picture reasons, why I think we continue to succeed the challenging environment.
Without having to pass it over to Mike sentiment to give you a rundown on the financial results.
And then as I said Bill will give us a quick uptake RMB.
Cool expansion, which is going extremely well then open up for questions.
Thanks <unk>.
Starting with Marriott statement.
Revenue for some 442 million a quarterly record for be too on fills up 257000 ounces.
At an average realized price in the quarter 1700 $19 per ounce.
It's remarkable let's say that you know please state today, we've sold in both north.
2050 per ounce, it's quite amazing the quite bright statement, that's hard to say that number.
So and also the commented on the filter we actually sold something.
Offices are close to something that lots of more than we produced.
That was mainly due to the drawdown of some for coal at closing inventory that we have at the end of Q1. If you recall in the Q1's, just when the Indian impacted pandemic was first being felt that a number than sites.
Most significantly with the timing and charters and commercial flights in out so we had a little bit of gold built up at the end of the quarter, but we will sell locked down from quarter, an entire gold price.
We're going on out to the production sites So for me.
Production from our continuing operations, our Threeeight operating margins 240000 ounces.
8000 ounces as budgets led mainly by for coal numbers you go to with my body broadly in line.
And then if you add in our share equity in Boston switching what sort of fits the our share of calibrate ounces that they report our share with 2000 ounces for a total of 242000 ounces of production reported at the quarter.
Okay.
Was there was the main component of 147000 ounces six I'm I'm sorry, the budget.
And just can and continues as very strong operational performance.
Process throughput recovery from better than budget head grade was was in line with budget.
And again I think bill is going to run down on how the expansion for coal is going after this presentation, but.
Suffice to say, it's going well and you know we've seen the benefit of getting that fleet expansion freed up and running early in the year and seeing those.
The fact that hasn't stockpiling strategy and also on our ability to my sense and mill throughput.
And with adding 49000 ounces pretty much straight on line with budget.
And that's even despite being limited by reduced workforce through to cope with my team. We are the just workforce through sort of half of the second quarter comment.
For came back up on that pretty much full strength by mid may.
And inline with budget.
During the second quarter processing with John Wayne budget No no feed grade was 1.94 grams per tonne slightly lower than budget and that recoveries were higher than budget.
Recoveries were higher due to more my more oxide than we had planned or model and that very much slightly lower mainly due to the fact that we're in we're into Montana, now and and due to sort of prior artisanal mining activity at month has that that's the surface level, Greg was slightly lower than we planned we expect that impacted to disappear as we.
Move slightly deeper into Montana and into the harder or is there.
I would you caught up 43000 ounces 1000 up ahead of budget and no jobs continues just take a long another solid quarter.
Gross profit recoveries were slightly better than budget, but pretty much in line and as a reminder to is higher than last year, just because we're into the higher grade ore from project this year.
And then looking at what that does for on the cost side.
Cash costs for the quarter $390 per ounce.
$42 per ounce Watson budget for art are continuing operations, our three mines and driven by strong operating performance at all sites.
The goal of $300, an outsized six bucks, an ounce slightly higher that was pretty much on budget and.
They were.
Mike Thats customer a function of higher production as I just described.
Total production costs, which were broadly in line with budget and and and then slightly higher than anticipated co. Because we had about 4 million Bucks.
The corporate related costs, mainly payroll related and some transportation.
And in the queue approximately 30 Bucks an ounce.
So putting all that together with higher production, it's like Arkoma custom came in pretty much on black bison on the cash crop site.
Colin as body $610, an ounce $91 less than budget.
And that's a function number of factors.
As I said before we had we were on budget in terms of production, but we had lower than budgeted mining and processing costs.
Mine tonnage was lower than budget, and we had less waste stripping them we budgeted.
But the and also average fuel prices for the fleet, where a lot lower due to lower unit fuel costs and also lower ours shorter always businesses.
And then processing costs in the quarter were lower than budget due to lower HFO pricing.
And I'll comment on fuel generally again, once I talked about which quota.
Total $421, an ounce $64 known slept and budget.
Just strong performance all around slightly higher than budgeted ounces lower fuel costs in a weaker than budgeted in the mid dollar.
And we saw about that and maybe an FX running through to the bottom line in terms of cost.
Overall on fuel, we did see significant declines against budget.
Both mezz batting unless you coat.
As for co a slightly different story agent diesel was lower than budget slightly lower but is your goal was.
Just slightly above budget.
And just a reminder, as we as we put out in Q1, it's really due to the factored in West Africa, and my question West African States that fuel prices are sent one month and event by the government and so they don't flow directly.
With what you see happening the underlying oil pricing in the world and so generally what we've seen as is the fuel prices have remained relatively static they did come down a little bit in Q2, but we're pretty much.
On budget overall in Mali on fuel significantly younger and the other two operations.
And if you added the impact of the just a very small production that we had from.
From Calvert and the quarter. The total total cash cost front for all operations.
We're threeninety.
42 lessened budget.
And moving the all in sustaining costs from our operations $740 an ounce that's 93.
Bucks per ounce per consolidated less than budget.
Mainly driven by always jacoby and significantly under budget.
And I would you call. It is really a function of those lower cash costs as we talked about but also lower capex.
They did see approximately I think 4 million lower pre strip.
And that anticipated in the quarter and some other sustaining capital expenditures were below budget.
By approximately 8 million Bucks.
But how about you to timing and half of it.
We don't expect to be incurred through the balance of year.
And then if you add in caliber to results. Our total all in sustaining costs were $712 now hundred seven Watson budget.
Moving to a comment on.
The impact for the year I think I think year to date, so I think what you'll see those results we reported.
In terms of cash crop going saw costs are almost exactly Meredith.
In the six month numbers as well so what is really saying is that we've had two very good solid consistent quarters, even more remarkable when you think about how much cobot impacted second quarter versus the first quarter.
Okay.
We started seeing it start to hit operations in March.
We still commenced to come all the way through the second quarter installed they own the same tracked with very comparable results with first quarter.
Hey, good comment a little bit on the income statement, just a few comments to highlight there.
Our further down the income statement. So on the DNA side, you did see lower DNA cost the prior year by about 3 million and the majority of that you had reduced travel obviously with code.
Places.
Got a moratorium although in the central business travel, but also lower consulting fees again as a result of less activity.
Also in income so you'll see 3.7 million share of income of associate that large that's our pickup from our share of Calvert.
The period, and just to comment and other types sort of alluded on it Theres 3.8 million and other expenses and NPL. The majority of that 3 million as our cobot donations that we made.
During the quarter.
Pretty much donations at all site.
Including in Canada.
And the other I know I comment on that is gone on the taxes were fully taxable at all sites now.
Any accelerated capital deductions that being used up.
At all sites, so we're fully taxable.
2 million corporate income tax expense for the period.
We've also given some guidance on what we think are cash taxes will actually have to pay in the period are there close to 180 million no. No. Those were guided at 1700, boingo it'll be somewhere slightly north of 200 million. If we stay at these.
And the gold prices that were seeing right now I'd also remind you that that doesn't really reflect any increase from for corporate taxes before taxes are feet almost one year over year. So so.
We're paying back this year for for coal based on last year's installments and then we'll trued up early next year.
When you move down into earnings net income for the crude 138 million.
Our share aren't sure attributable to shareholders.
124 million or 12 cents per share GAAP EPS once you take into account.
Some of the significant non cash items in there such as derivative gains in deferred tax credits, our adjusted EPS for the period was 11 cents per share.
I'm going to talk little bit book, the cash flow and again quite much until it's a it's a record number personally operating cash flow side 238 billion.
And.
Year to date is also 454 million operating cash flow again a record.
So for the quarter on the cash flows turned up 38 million translated to 23 cents per share.
And maybe as well, we usually give a little bit guidance is what we think it looks like the higher gold prices go up 1900 dollar go.
We were expecting we'll see operating cash flows.
North of 900 million and obviously right now were even above that so.
So cash.
Gold price so.
Equates to be and lots of Threeq free cash will be in January.
And with that I guess moving on the financing section, we you'll see in there you'll see that 250 million in the queue that we drew as approximately measure on on our broker revolving credit facility. Our plan now is due to repay that in fact repaid the whole drawn balance of the revolver in this third quarter.
We're very comfortable with how the operations are running the impact of coated.
Our site.
Everything has been impacted including Canada. However, we managed to maintain our operation and actually the prospering as you can see from there was also strong cash flow coming from each of the up.
And given that in the higher gold prices that were seeing.
We think it the right decision to repay that revolver, so that will be 425 million.
In total that Weve currently drawn the revolver will be repaid this Q.
One thing you mentioned the cash flow statement you will see.
In there that interest expense.
A lot lower than it was.
Prior prior year, not just because we started the year will lower our revolver balance we we've been pin that down ever since we got for co up fully run and that's the point now and this quarter, where weve repaid all that revolver that kind of late we got to the end of the second part of our strategy overall for coal, which was to build it using cash flow and that the whack.
So it's kind of a milestone for us on the financing sites to be able to repay that revolver.
Also note there was no dividend Pete adding cash and the second quarter was declared it was subsequently paid just early in July that's just a function of the timing.
The ATM and when we were able to pay the dividend and is climbing up if you look at how our dividend has moved that we declared our maiden first dividend in Q4 2019. It was one cents per share.
We doubled that for the last second quarter two cents now it's up to four cents per share and not four cents per share.
On an annual basis tipping sounds preserve translates to somewhere just up 170 million per year.
Cash flow through both right now it's about a 2.22, 0.3% dividend yield, which I believe as puts us right at the high end.
The top of our peer group.
Let's talk a little bit about investing activities, we spent $70 million into Q on 182 million on Capex year to date were about 38 million lower than where we budgeted to be at this point.
And I've got 38, I mean, a bunch of a lot of is timing, but I would say maybe $16 million.
Is not likely to be incurred in the second half I.
I don't recall that we got stripping statements about 4 million, which we think are permanent locked in and then we've also got.
Costs related to the Wolfshag underground development and the installation of a parliament conexus national grid.
Total of 8 million, which we think.
Are not going to be incurred earlier in 2021, rather than 2020 I should highlight we don't we don't think thats going to change.
The struggle timing to get the only going up and running.
When we expect I think built some comment in a little bit after those but basically it's just the timing of the cash flow.
And then on we also saw savings of ago.
4 million on that for call. It tailings facility that formula that less than we budgeted thats completed and we don't expect that to be incurred.
As a result, so in terms of the balance of that 30 going we're still forecasted to be spent the rest of the year, but we certainly have some softness or sensitivity around the timing of something.
Difficult solar plant when we when we read case, there and get that up and running.
Exploration is down.
Against budget, so far just because our ability to access sites.
Across the different operations. So we are still planned for later in the year, but obviously it depends on site exit.
And Graham allotted again.
Timing of finishing the exploration there and get the new model in place means that right now we're buying budget, we are forecasting spend that through the balance of the year.
Well no we ended the period with 628 million.
And again its claims that put us in the net cash position of somewhere just south of 160 million. When you take into countered that so well placed to repay that that and also in the mentioned on the how we see the cash flows on wind for the balance of the year, we expect to being a strong cash position when we get to year end.
And that pretty much winds up.
I was going to mentioned result, a couple of just project related things that will highlight as they sort of high end discussing capex apropos of said Bill is going to talk about the expansion and where we are in solar.
Project Otjikoto.
Things are going well and.
The Wolfshag underground as a reminder of the total project is estimated to be about 57 million and like I said, we are going to see some of the costs of 18 million that we struggled for this year pushed out into next year, but overall the project on schedule.
On.
Gram a lot say maybe to highlight that we took over as manager Pamela.
Effective starting this year part of the commitment in order to do that maintain it was the spend so fun groundwater for 30.9 million.
10.9, it was to get us back to 50 50.
And trust in the project with our partner.
Great and that was funded.
For the ended June.
And then the further 3 million musser commitments. So we would remain as measured thereafter and that can come from.
So all of this whole funding the gravel up to 13.9 million as we incurred.
And the feasibility for the project is expected to still expected to be available by the end of the first quarter 2020.
And with that I'll wrap up the financial cycle presentation.
That's right before vessel the bill as maybe talk a little bit about.
Strategy, where we aren't where we see ourselves on forward, we're feeling pretty good about our long term strategy.
At least over the last 12 years.
That strategy was to continue to look to grow production.
Through accretive acquisitions and have exploration.
Your respective of the market.
Time, Opex to Taiwan, the sentiment in the market.
We are ready we look back now and we're very pleased with effective we stayed with that strategy and it was quite contrary and at times when you look back at.
Combines rebuilds and things, we give us 12 years it was off and other types of growth was out of favor.
Added speaks to the fact that where we sit today, because we persevered with that.
Strategy.
And we're one of which appears to be building going on.
Number of years. So that's one of the reasons why we published on such a fortunate position, but also gives us a benefit or the luxury being quite ambivalent about M&A.
We don't we don't see luxury projects out there, but we like and we don't see a lot of difference or something like at the prices are up today frankly.
The nibble today, we are going to be very focused on continuing to grow.
From our pipeline Gremolata, a feasibility study the first quarter next year I still think you learn understanding gremolata, yet I think that will come with time.
Very good project, so much greater attributes to loss, we've obviously seen a change in leadership in AG eight.
Recently was on track sorry, sorry.
We've had good working relationship.
And the Kelvin and.
Great relationship working with the team.
EG team, we've combined with the Graham onto so we look forward to continue that start relationship.
Those are feasibility next year, we clearly think we're going to end up with them project Thats.
Clearly financeable on an economic in today's call department, we'd like to quite a bit 50, cold So I would hope season.
Second quarter next year getting moving towards a development decision of Cryptologic. So just so everyone is aware it is a jump into the joint venture, but but neither party can stand at away at the project going forward.
Which I think should be publication.
In other words, if we come up for the positive feasibility study.
First quarter last year in any Jay decided that they did not want to fund their 50% of the estimated capital that we have we have the.
For the two our agreement the opportunity to purchase their interest.
Fair market value based on the feasibility study economics that goes both ways. So I'll take you up to develop a plan that we didnt want to go ahead and sourcing of five Bill said the option to 2030%.
So at a 50% so so.
We can just project.
Unless something really surprises in the in the near term will be.
And by that should be built.
The respect right now is the infill drilling which is quite very well results not surprising to us are very good it's a pretty opportunities our body, where digital drilling but that would be done very shortly and completed the minimum revenue resource out and that will come together with the all the hard work at all for detailed work that was done a lot of were Meiji over the years and engineering ethanol we.
So as well metallurgy et cetera. This was a very adapts project.
What becomes lagging behind was a drill spacing. So we're proving that out so the catch for example, I think is 400000 ounces are little over about a year of the gate.
The most recent projected more sustaining cost of around $650 amounts based on the economics that we put out on the preliminary economic assessment.
So.
Attractive approach across many of those in the world Rick comfortable.
Over the next steps towards development get developed ultimately Kiaka Mckenna vessel becomes or addressing these kind of gold prices for sure.
No that we're looking at Dennis and take some good work on on our engineering side looking at some different sources of power were.
So we've learned a lot about solar course between Namibia Molly.
So thats interesting others natural gas and other potential sources, so looks like those things might improve the project and of course.
Gold price helps a lot. So we'll be looking at the next few months what are the jackup rig running into too much model redoing the July planning.
And coming on ultimately with the new feasibility study those are projected whether its ourselves or whatever is in partnership with so what else are well go look at various ways over the next number months here to unlock the value closely.
Jack deposit, which is a 4 million ounces.
And.
Before made outs.
Sources that are it's pretty solid project so.
So, we'll see where that goes as well. In addition of course expiration we have one of a very successful gold expiration.
The most successful bullish teams will continue expiration or other sites with that create the results coming out of Cardinal will be in the west for coal out Weve of course, but the snake Santa Claus area to the north will get back to drilling that 20 kilometers north of for caught with us with the results there very encouraging both in the.
Near surface material separately, but also.
And so but.
Some pretty exciting opportunities there so we'll be getting that hard and drilling again as soon as wrapped up the cargo as other drilling looking around the world for World class.
Deposits and interesting places.
So in terms of.
M&A, we will keep looking as I mentioned, but that we find ourselves in that fortunate position are being or credit, but we don't feel we need to do a major acquisition by any means.
Thank you have seen where M&A hopefully, we're not going to get back into the silly season. So about 10 years ago now with people overpaying for marginal assets with a higher gold price see them today, we've never put that given we don't need to start playing that game now just a couple other points before I pass along to Bill I do want to give a shuttle I talked about.
How we've done with cobot I want to do a shout out to all of our employees 4200 placement just incredible work that's going on when people working.
Extra hours difficult circumstances.
To keep these mines running and running well create more out throughout the company, that's really rewarding as I mentioned earlier.
We like to think that speaks to the culture.
Okay, great credible group of employees.
Good job top.
Top to bottom.
So what you'll see from us over the next so the next over much more drove results March results coming out of Cardinal and also are moving further drilling and other locations including.
Condor wells.
Well I'll mention leave.
Officially launch the write off will bar initiatives through kit coal if you want to buy of prior full BARDA help save the Blackrhino Namibia.
Beautiful bars, our for sale on Kitco or you can go to our website.
Platelets.
Our way of donating a thousand ounces of gold towards helping save and endangered species in the maybe it is very good accretive.
A contribution in the latter beat us very well received worldwide and this really important today.
With Covance, we're seeing many effects.
Actually seen Africa's demonstration of the tourist industry part of the tourist industry in Africa is what helps protect endangered species. So this contribution will go to helping the communities that help too.
Two larger and saved the rivals from.
Switching activity. So it's a great initiative were property involved.
And then some that's kind of.
A new approach, which.
We just get garnering a lot of attention and give some additional ideas for how we can get back into the future as responses will produce.
With that will have it over to build it was a quick update on the Nicola suspension, yes. Thanks Clive.
I will admit go too much in production to the persistent great job, putting it out but there is one thing actually which you haven't asked me to up and I do want to stay that we've had.
Continued amazing run on the safety side, you had that with a background of the Coca 19 and people working long shift we had we had a quarter with zero lost time accidents and our operations net for the entire year that gives us one across all three operation. So we're seeing certainly.
Our best statistics ever which once again reflects I'm just talking about the culture and the dedication in our employees.
Also shows us as an industry leader in some of things are doing for sure.
And with that I'll turn my attention to.
Coal.
As we talk after last quarter is really kind of four pages of the expansion as quickly go through on the mining side as Mike pointed out we continue to be ahead of our of our development schedule with the plan was really to.
Our mining production rate, we got the first two tranches of equipment in ahead of schedule.
Great job Commission of Undercoat with 90, and those are in operation and working Fabulous, we've got another tranche coming in before the end year and then we don't see any issues that it looks like it's on schedule and the team is raising commission. So on the mining side head of schedule.
On the on the milling side.
We had previously announced that we would be ready to bring that thing into production full scale at the end of Q3. It looks like we will be at or ahead of that schedule. At this time. We are now in the final phases of getting our commissioning team in so were more than 80% done with all of our tie ins and the commission.
He has arrived on site they've done they've gone through the mandatory quarantining.
They're just coming out of quarantine now and getting ready. So our plan is the middle August really spend those guys up and certainly by the end of August we think we're going to be in pretty good shape to start commissioning of the commissioning and implementing that expansion. So we see the.
End of Q3 is a very real doable.
Target and maybe even a little bit early if we get some get some get a little bit a month and then in the third part is the tailings facility. We did a double lift and that's not primarily to make sure that we could handle the expansion tons in the 10, so that we actually looked at the historical kind of activity out of the mill.
We're concerned that maybe what might get caught off side. If in fact, the mill runs better than than even advertisers. We want to make sure. We have additional capacity. So we didnt double lift on that which takes us into 2023 and 2022 men beginning in 2023.
That was completed ahead of schedule Commission before the rainy season, and Thats fully operational at this point and then last one is a solar plant.
This is solar plant to use remember we went to an island type configuration as Nicola.
Well, we're basically brought all of our employees on site to protect the segment and the populations against any spread of coking 19 in order to do that we had a free to free up additional beds to say the solar group agreed that some of that some of the production team from we had higher priority. So they stepped off upside we took them out.
But that the project has continued to go forward. It we've continued to receive all material. We've continued to put the batteries in place. We've continued to work on the design make sure that Thats all finalized the detailed engineering and I'm happy to say that as soon as the.
Mill commissioning team is done and leave side, we've got them cued up like a hockey team there on the board ready to come into we're talking really mid September mid to late September those guys can be ready to go and we think that within six months and once again maybe been conservative.
Thats still the plant, we opened Rob operational and just remember so plan is not needed for the expansion.
It's just an additional cost saving measures that we see over the life mine.
So we see no issues with getting that opened in operation in kind of Q1 2021.
Mike mentioned I'm, just quickly talk about future for Wonder Graham.
And you're going underground as he indicated is on schedule. Once again that contract was awarded on schedule. We brought in and we brought in the contractor the portal development will be done by contractor and at that time will make a decision on whether we want to continue with the contract you won't typical ourselves.
But that contractor isn't country, they've gone through quarantine now during the process hiring all their managers and getting their team ready to go and we see that project is completely doable.
On the existing schedule, so no issues here whatsoever.
I will turn.
Okay. Thanks.
I think with that will.
Operator, we'll open it up for any questions.
Well take questions you will need to press star one on your telephone.
So we draw your question please press the pound key.
Please standby why we compile the Q1.
Well first question comes from obese Habib of Scotiabank. Your line is open.
Thanks, operator, who had been.
Congrats and good evening.
Thanks.
Yes.
The next.
My first question.
Again, it's really great to see that be do that net cash position.
And you also looking to bill.
By the end of Q3.
On a couple of that Youve.
Kevin has been increased as well. So the question is how are you looking at allocating the strong free cash flow going into 2021, especially if current gold prices versus is it more higher dividends.
Looking at the construction of I'm not going to exploration I mean can you give us a little bit color on capital allocation.
Yes, I can I can tell you they kind of things were going to consider we can't really talk too much in detail about it yet till we get some decision point.
Obviously the dividend.
When you bumped up a dividend like that it's going to view of that you're going to maintain and obviously so.
Sort of.
For that from what we're doing this quarter and then.
On the capital side that the big decision points that are coming up.
First one gram philosophy with the feasibility by the end of March.
We'll know.
What we think we need for Graham lots in whether we want to go ahead.
Caters to go adds clubs that are good.
And then we're looking at Jack as well now, it's having a revisited that what that might look like.
Why don't you there.
And then also with the drill programs that are ongoing and Mccullough buckle up for that for the snakes and the cardinal loans.
Starting to turn our attention to based on the positive results there what what that might look like for the future as well and thinking about what capital allocations maybe.
So those are really the primary thing, okay, I think I would say.
Just out of this or that the you see a lot of companies that are paying a dividend based on a percentage of free cash flow, we have a call there yet and it's just a right now, whereas as Mike said, we're at a time of.
Understanding soon our capital requirements going forward, how when you look at Graham Lucky that we don't need to we can clearly we're going to generate a coal prices stay anywhere near where they are we're going to generate over a couple $1 billion and cash from operations over the next five years or so why should we go the gravel objects. So you can clearly do it.
Cash flow, but there is no succeed with tick up a little bit of project debt along the way it was that as walkers because it's out there that's kind of extremely cheap. So so we're out that's why we have defined it as a percentage of professional yet because we're at a stage of understanding what our cash requirements are going to be in terms of.
Capital set me straight expiration you could probably so we're going to continue to spend somewhere around 50 million Bucks year I think.
Okay.
Where he told what we see of sustaining capital going forward.
So that detail.
The call.
Sounds good.
Can you guys little bit then and my question next question's for Bill.
In regards to difficult expansion for the expansion was supposed to increase by approximately 1.5 million tons random.
19, the middle was already running at over 7 million tons by them without expansion. So I.
I mean could you seem to go legs, achieving approximately eight need from 500 tons, Brian instead of 7.5 and then.
Yeah. That's the case is this sustainable and how do you see the rents mill wrapping up once it's completed at the end of Q.
Yeah. So I'll answer and then John can you help me afterwards.
So if you remember we always said it was going to be 1.5 million plus what we think it could do when it became kind of fully fully production wise, John I had a lot of discussions on its hard or soft door, but the other thing which is a really interest, but she keeps bringing up.
When you're running these things so hard if you're running up at the top end.
And you really risks the really risk the additional maintenance costs and everything else that goes with that so what we can say that we're very comfortable with a seven and a half and probably above that little bit, but I don't think until we get a commission in really see what this thing can do that we're comfortable saying that we're above eight rate half I think I think the million and a half.
Plus what was originally designed at it is what we're comfortable saying and maybe a little conservative I don't know John if you want to add that.
Well I agree with everything you said there bill.
It was designed for seven and a half million tons, a year on on hard or with softer or we will be able to.
Achieve a higher production rate, but that'll depend on the melty blend coming from the mine.
So after we run it for a while a lot of a much better idea.
What the ultimate throughput can be.
On a softer feed blends.
The other assuming nothing just others.
Drilling the reason, we're one of the reasons were extensively drilling Cardinal though is because cargo less potential to.
Two.
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To to bring in some additional orders by close to 500 meters or their bums away from a color. So you know that with some of that's going to be softer ore. So as that continues to pick up that could have an impact on production or could that could be positive ups and throughput built fair to say that yes, it's actually it's actually if it's actually upon exercise would you bring up quite work we're not looking.
Cardinal but.
Other things are 10, we now.
Realized the Anaconda area that SAP related bringing down put it through the now our is are hard sources. There that we can bring down and that through them. All that all those studies are going on right now based.
But certainly we I think we all acknowledge.
At the mill has absolutely outperformed what the designed to spend for and we see that there is the potential.
And it goes according to plan in the second that could continue into future.
And.
Oh, the ramp up I mean, do you see that thinking.
Order or is that no longer ramp up.
No I certainly in our budget by the ended September were going to we're going to be up an operational China I mean, it I outlined saying that certainly by the end of September.
Yes, I agree with that bill will be will be ramped up to design throughput by the end of September.
I was just going to add that yes when.
We if we do blend in a satellite.
In the mill feed we can we will be able to achieve higher than the seven and a half million ton per annum throughput.
Sounds good on that you may.
Okay.
Excellent.
Your next question comes from Josh Wolfson of RBC capital markets. Your line is open.
Thanks.
Continue theme on the Sokolik questions for the third quarter should we expect.
Steady state production over the over the duration of the quarters are gonna be any sort of commissioning related downtime, we should expect.
Well, we have 10 days put in for that period for all final tie ins, but.
We are expecting a full production for the full production for the quarter I mean, that's all factored in the budget and the way we're running right now so I.
And that kind of four quarters evenly spread out I think it's actually slightly less but it's really it's within the margin of error, what we've been doing.
Okay, and then ask for this to call a mind license.
I guess switching which slightly adjusted for the solar project.
And also looking at where gold prices are today when do you expect.
Capital to have been repaid and the dividend start to be paid from from that asset down at steady state ongoing basis.
Oh, you're you're asking when the got when those are the initial investment the loan that we put in to the build time, we'll have been picked up I think yes, I think now a vehicle places you're looking into next two years initial investment will be recoup.
Okay. Thank you and then last question on.
On the commentary for Gramalote Kay.
And looking at.
I guess, what would what looks to be optimistic outlook for that project.
Is there anything else with in the portfolio today, which could potentially sort of come up as a higher clarity opportunity or it's safe to say that that would be the number one project I ask just because the commentary on Kiaka was I guess more constructive in the current environment and then.
Potentially if theres been more work Dan for Anaconda could that be the case or is that not certification for maybe a meat 2021 timeline for gramalote taste decision.
Yes, I think it's hard to measure that bump in gremolata out of the Q because one of the invest stage of its out some permit there's a permanent and we're closing it on that but at least abilities. We said.
I'd also just really got some as recently, we like it looks like.
Gold, we thought at a good shot so, but I can't ceiling bumping it out of the Q kiaka.
Not as not as robust a project as we see it today has potential to get better as we said.
Some of things, we're doing fuel our cost et cetera.
So I don't think Jack will likely benefit of the Q, but we've always said, we one of our keys to our successes our focus that our accountability and are doing things ourselves. So we're not going to suddenly start building two significant go much in the same time, so therefore ACAC as a goal as it looks interesting. After this next round number months.
Updating that we might very well look to bring that to partner with.
The responsible industry partner investments as one alternative ill turn it would be that.
So as an asset terminal.
Unexpected, but first if I got to get developed they have a REIT to my bid and if its economic somebody should build so but I don't see it pumping Taiwanese and also quality wise I don't see something Graham hardly have you had a quarter definitely we're really cheap potential for coal. This authorization thereafter, so, but so we'll be drilling.
Once again, maybe a situation were somewhere is being trucks from.
The area potentially though to the mill some of the separate material, but I think you've actual to actually look at building. Other major facility if were successful in finding another multi than us deposits.
Cost area that would become after cryptologic spikes mutation tourism.
Build another major mill and may be sure that.
Solar power plants.
Thanks, That's all my questions and I appreciate the upgrade on the conference call service this quarter.
Okay. Thanks.
Your next question comes from Joe Demarco Haywood Securities. Your line is open.
Good morning, guys. Thanks for taking the cool.
Now, let's turn to Miss in the dividend.
I'll, just continuum seems steels <unk> until eventually.
On on Sokolik Salon, and can you remind me of some.
Still polling strategy earlier today, you'll see that you're implementing the.
This is what are the reserves included or usage.
And.
Results as a catalyst and if you see any sort of wiggle room in terms of.
Looking at modem flowing still polling strategies to accommodate where youre coaster trees, we will soon.
No go close.
Yes permit Randy just come from site, but he's probably most appropriate to right now if you want to comment and comment on that granular.
Yes sure so.
Let's start selling strategy for coal is a number of difference.
Hi, great.
Color or down 2.8 grams per tonne right now, but will also stockpiling much lower down to 0.65.
Grants, which on.
In a sub economic power that today's gold price is definitely.
Economic.
We are currently looking there.
Yeah, the different cut off grades and are stockpiling strategies.
Sorry to keep up with this quick.
Increasing gold price, but that's that's what we're doing that's kind of the strategy.
Pretty good shape Cola already in what we're stuck willingness of economic.
Okay. Thanks, and also on the if we look at Cardinal for instance, I mean, it's obviously three proximal to the existing piece I mean can you give us an audience scaled work even doing there on the on the drilling given.
Given would have to then its brooks.
Totally on track.
Yeah Jordi.
No.
Cardinal.
As a.
No. It's gonna have been really mission over 800 meters.
And then down plunge.
The strike length of it has a couple of homeowners.
And we're we've drilled so for close to 26000 meters on it.
21000 meters regional plan was 20 and because of the drilling all go we'll probably get close to 30 30 35000 meters drilled on that this year. So we've shifted our focus trauma mambo right now to get Anaconda to a point that we can do some peace in mind.
Oh, sorry, not get Cardinal to do some decent mine planning, but it remains open at depth.
And I'm also a little bit to the cells. So it's.
Sort of developing situation, but it is does have some size potential for sure.
And we can extend on that one. Thanks is the same talking some cold socialization is that a different styles.
Metallurgical woods.
Yes.
Well, we're doing some metallurgical test work right now and.
You know it seems I would suspect this can be very similar it's it is slightly different but.
That's just minor differences I would suspect metallurgically, there won't be too much difference.
John if you could add anything more with the results to date.
Yeah, all we received so far had I'd say.
On the samples that we're going to be testing, but so we'll know within the next week or two metallurgical results, but as you say, Tom we're expecting similar results, but we.
We will confirm that through the metallurgical test program.
Okay, great. Thank you, Tom and could Krishnan Kiaka.
Yeah, obviously is given the scale the original so the plan to 12 million to aggressively.
Looking at a potential too.
Do you have done its energy coatings, Cisco and Miss but in terms of essentially doing something school and ramping up or the time <unk>.
See really going to bring those balances on power availability and cost.
Let me little trouble understanding the journey, but I think you're asking about would disappear potential to start something smaller growth.
Frankly, that's.
So far that's not something we've seen as a as it really viable alternative it's kind of a very pretty consistent kind of one gram ore body. It's.
Good things about it but in the day, we don't see a high grade.
Starter pit there and so we'll be acquired for I'd also like $25 million was actually the actual acquisition cost. When you go back to with both that we always felt that are needed a better full price, but we thought for exploration success. We have such mission success its way to but I was too far away to help yacko. So like we did a deal that as you saw so.
So we don't see.
Mostly GECAS being started going to be done this.
Large scale locate opened.
Our view, we don't see wrap up the assumption there.
Okay. Thank you.
Thanks, Rick.
Your next question comes from Gary Macquarie of Canaccord. Your line is open.
Hi, good morning, everyone.
Maybe a bit early for this question, but just looking back to the feasibility on the Cola into 2021, then given what you've learned there this year in terms of greed and how the plan is performing and obviously you got the expansion coming.
Right around the corner, but I think production was expected to dip into 2021, I mean that feasibility study. So I'm just wondering what's the opportunity for flat production or even their production in 2021.
Okay.
The question is.
First is versus 2020 once in production at the pool Yep.
The one versus 2020 supposed that we should be solutions.
Okay.
He said it was.
Yes. It will certainly I think we are going to have if you want on improved slightly less production in 2021, but when you have to memory, we really have a bucket there.
A pretty consistent bucketing five years, when we're talking about.
500000 ounces were that almost five years.
Sorry, five 550000 ounces almost five years and were pretty consistent with that where where they actually fit within that bucket. Obviously it depends on where we end up interface positions during the year you know.
And we prioritize and bring ounces for what I will tell you don't continuing looking at the best way to bring ounces forward. So 555 years and that does include any that potentially from cardinal more from.
Yeah, that's actually very valid 0.1 on one of the things were looking at now this is how do we even if we as you know we don't know.
How the mills going to outperform.
So we are we are now making some wild swings in defense to see is there additional capacity there and how we feel that if there is and whether it's from cardinal or interim.
Or even maybe some of that some of the northern zones, which I have just to be.
We talk about too much.
And how quickly could you bring those sort of ounces in like is there any permitting requirements there or it's a pretty straightforward oh, yeah. It's straight for we remember we own the license we own license to the north as well.
Most of the stuff we're talking about is in the mid Andy Permian license, which is where the pull out of that so that would be relatively easy I like the cardinal area.
If it is committed to the north we would have to do some work with the government to get it I.
An agreement with them as far as how they're going to share in our we told them, but all those things are I mean, the commentary Kendall said, they're completely open that and they want us to develop as quickly as Bob.
Okay. Thank you guys.
Great. Thanks.
There are no further questions at this time I turn the call back over to meet the Clive Johnson.
Okay. So thanks, everyone for your your time.
Thank you operator will.
Before dumping you'll get so.
Yeah.
Ladies and gentlemen. This concludes today's conference call. Thank you for participants you may disconnect.
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