Q2 2020 B2Gold Corp Earnings Call
To be to go see cold water on first House 2020 financial results Conference call.
No I like to turn the call also mistook life Johnson, President and CEO you May proceed Mr. Johnson.
[music].
Well first thing is we've got the beach gold executive team either here in Vancouver, and the board.
[music] here to talk about the.
Quarter results for 2000 collection results for 2020.
30%.
[music] publishing another very strong order for us.
Records for both revenue and operating cash flow quarterly records, we had a good lead.
For a budget are.
[music] carbon cash costs ropinirole sustaining cost approach.
We are announcing and that's why we're doubling our dividend.
Again from two sub supports I'm sure that reflects the remarkable.
Well I can start but actually the should we find ourselves obviously gold prices.
But we are very strong position and were announcing that we intend to fully repaid or.
Our.
So many third quarter the year, where they were done that positive cash position today.
Great place to be up given our projected buckled protected.
Oh gosh operations.
I think.
<unk> increased the dividend.
We are set so sure so before I hand, it over to up to like some of the give me a rundown on the patch results from and then we'll have a quick update on the call expansion.
For any questions that you're not just others talk a little bit about to cope and we thought extremely well.
Actual results or their operating results.
So just a last couple of quarters. Despite covert I think there's a couple of reasons for that.
So one of them I think the personalized experience no one other things about our group script starters.
About experience, we thought that this industry does not only in the industry are working together.
Through the B the years into the beach called here so.
What do you do that internationally you heard what you learned a lot about things like jurisdiction living people.
<unk>, there's a lot of challenges over the years, we welcome the challenge that we took it on very early and took a pretty seriously very early but I think the experience of our our team and experience of our.
People on site, I really can't afford rather terms or ability to.
To adjust to manage I'm sure that problem solved turned colder.
The thing is key I think there's a culture, we talk a lot about.
Endeavoring to treat people wouldn't fairness respect from transparency.
When we 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 are 99 employees and also the governments in the country. So much work and I do think when you two people were premise respective transparency I think when you run into a tighter crisis I think that could really pay off because our employees 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 column.
Voice governments shutter shops company, which was to could you just keep buying if we can do it safely trick cogent undertakes various necessary steps in each with different countries. They all have different challenges.
But also uncovered a couple of different challenges, but we lead up I think that.
That ability to work shortly our with government and with our employees towards a cover cool safety mining was most of whats really important part of the success here. Obviously, we've made significant donations to help with colder than the countries at random including here.
That cover as well.
But I I picks up so [noise].
That's common trust is never an important part or 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 may have appeared to trend.
But on the other day, we want to be in countries that what does no might be interesting ideas and the countries, where they don't have a big safety that like some western countries. So.
Could you do the gold revenue.
Hugely important in these countries a kitchen of the jobs, which usually important so the government's we're very open to listening to how we could work together with them that are poised to observe and safely. So I think that one of the there will be some positives to come out of the next in the future when people look back or what have I think one of the positive still have become much looking back and say, which industries will go to have and you can.
At the type of Koeppen electrical mining industry is going to be one of those industries and looks really good perhaps it will either 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 one on our on our treatment or are dealing with a cold it.
I'd now like I, just wanted to touch on some of the bigger picture reasons, why I think we continue to succeed and 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 coal expansion, which is going extremely well and then we'll open up for questions.
Thanks <unk>.
With varying statements.
Okay.
Revenue for some 442 million a quarterly record for FY two on sales of 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 your name results in both north.
2050 per ounce, it's quite amazing the north bright statement, that's hard to say that number.
So and also the commented on the sell side, we actually sold 70000 ounces are close to something that lots of more than we produced.
That was mainly due to the drawdown of some for coal closing inventory that we have at the end of Q1. If you recall yeah. The Q1's, just when the Indian impacted pandemic was first being held for the number than sites.
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 let down in the current quarter an entire gold prices.
Moving on up to the production site so for me.
Production from our continuing operations, our Threeeight operating margins 240000 ounces.
Thousand ounces as budgets led mainly by for coal North Dakota with my body broadly in line.
And then if you add in our share equity in buckets, which you would serve that the our share of calibrate ounces that they report our share with 2000 ounces for a total.
242000 ounces production report at the quarter.
Well call. It was a was the main component of 147000 ounces six out of my budget.
And just can and continues as very strong operational performance.
Process throughput recoveries from better than budgeted had great 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.
I'd like to say, it's going well and you've seen the benefit of getting that fleet expansion fleet up and running early in the year and seeing those.
The fact that hasn't stockpiling strategy and also on our building that might pens and mill throughput.
And with Batty 49000 ounces pretty much straight on line with budget and and that's even despite being limited by averages were forced you 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 process them internally and budget no help feed grade was 1.94 grams per tonne slightly lower than budget and net 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, great with slightly lower than we planned for you expect that impacted to disappear as.
We move slightly deeper into Montana and into the harder or is there.
I would you called out 43000 ounces once a month ahead of budget and I know you probably just continues to take a long another solid quarter.
Gross profit recoveries were slightly better than budget, but pretty much in line and.
A minor two is higher than last year, just because we're into the higher grade ore from will check that this year.
And then looking at what that bodes for on the cost side.
Cash costs for the quarter $390 Crown.
$42 per ounce Watson budget for our our continued operations, our three mines and driven by strong operating performance at all sites.
Colgate $300 downside six bucks, an ounce slightly higher than budget 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 cobot cost. We had about 4 million Bucks worth 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 products and slightly higher co. Because we came in pretty much on line, but on the cash crop site.
Recall that body $610, an ounce $91 Watson 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.
Mind tonnage was lower than budget, and we as 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 or shorter haul is businesses.
And then processing crops in the quarter were lower than budget due to lower HFO pricing.
And I'll comment and fuel generally again, once I talked about which quota.
Total $421, an ounce $64 announced less than budget.
Just strong performance all around slightly higher than budgeted ounces lower fuel costs in the weaker than budget in the mid dollar.
And we saw that Namibian FX front end through to the bottom line in terms of cost.
Overall on fuel, we didn't see significant declines against budget.
Both men's battery and energy Cotto.
As for coal is slightly different story agent diesel was lower than budget slightly lower but 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 under and the other two operations.
And if you added the impact of the system very small production that we had from our pickup from Calvert and the quarter. The total total cash cost front for all operations.
We're threeninety.
40 to lessen budget.
And moving the all in sustaining costs from our operations $714 an ounce.
93.
Bucks per ounce per consolidated lessened budget.
Mainly driven by overcoat opium significantly under budget.
And Audiocodes 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.
The next anticipated in the quarter and some other sustaining capital expenditures.
We are below budget.
By approximately 8 million Bucks and just.
But how about you the timing and half of it.
We don't expect to be incurred through the balance of the year.
Then if you add in caliber to results. Our total all in sustaining costs were $712 now hundred seven Watson budget.
If you will 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 Golan saw costs are almost exactly mirrored in the six month numbers as well so but it's really saying is that we've had two very good solid consistent quarters, what's even more remarkable when you think about how much cobot impacted second quarter versus the first quarter covert was.
We started seeing it started operations in March, but we still commencing come all the way through the second quarter installed. They on the same tracked with very comparable results with first quarter.
They could comment a little bit on the income statement, just a few comments as to highlight there.
Our further down the income statement. So on the DNA side, you did see lower DNA talked in the prior year by about 3 million and the majority of that is due to reduced travel obviously with covert being in place we've got a moratorium, although the essential business travel, but also lower consulting fees again as a result of less activity.
Also in income so you'll see 3.7 million, serving some of associate that large thats, our pickup from our share of Calvert.
In the period and just to comment and other types sort of alluded on it there is 3.8 million and other expenses in the TNL. The majority of that 3 million as our co donations that we made.
During the quarter.
Pretty much donations that all site.
Including in Canada.
And the other I know I comment on that.
On the on the taxes were fully taxable all sites now.
Any accelerated capital deductions and being used up.
At all sites, so we're fully taxable.
82 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 dollar go it will be slightly north of 200 million. If we stay at these.
Okay that we're seeing right now and also reminded that that doesn't really reflecting increased from for core Texas before taxes repeat almost one year over year. So so.
We're paying taxes this year for for coal based on last year's installments and that will Trued up early next year.
When you move down into earnings net income for the grew to 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 both cash flow and again quite much until it's a it's a record number first in the operating cash flow side 238 billion.
And.
Year to date is also 454 million operating cash flow again a record.
So for the quarter kind on the cash flows turned a 38 million translated to 23 cents per share.
And maybe as well, we usually give a little bit guys as what we think it looks like the higher oil prices to 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 in terms of.
Gold price so.
Equates to be and lots of free 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 the 250 million in the queue that we drew as approximately measure on on that or.
Evolving credit facility.
And now is due to repay that in fact repay 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.
At our sites that every site has been impacted including Canada. However, we managed to maintain your operation and actually the prospering as you can see from the result, so 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 decisions repay that revolver, so that will be 425 million.
In total that Weve currently drawn the revolver will be repaid this Q.
Couple of things dimension to cash flow statement, you'll see.
In there that interest expense.
A lot lower than it was.
In the prior prior year not just we had we started the year will lower our revolver balance we we've been pin that down ever since we got buckle up fully run and that's the point now in this quarter, where weve repaid all that revolver that kind of like we got to the end of the second part of our strategy overall for coal, which was to build it and using cash flow and that well.
So it's kind of up a milestone first on the financing sites to be able to repay that revolver.
Also note there was no dividends paid adding cash and the second quarter was declared that was subsequently paid just early in July it'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 to consensus or translates to somewhere just up 170 million per year.
So it's about right now it's about a 2.22, 0.3% dividend yield, which I believe as puts us right at the high end.
But at the top of our peer group.
Let's talk a little bit about investing activities. We spent 70 million in the Q on 182 million on Capex year to date, I worry about 38 million lower than where we budgeted to be at this point.
I know that 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, we got stripping savings of a formula and 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.
But basically it's just the timing of the cash flow.
And then we also saw savings of about.
4 million on that for call. It tailings facility that 4 million that but less than we budgeted completed and we don't expect that to be incurred.
As a result, so in terms of the balance of that 30 milling, 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 plan to occur 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.
Although we ended the period with 628 million.
And again, it's quite that put us in the net cash position of somewhere just south of 160 million when you take into Canada, 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 what 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.
That 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 cost of 18 million that we struggled for this year pushed out into next year, but overall the project on schedule.
On.
Gramalote say maybe to highlight that we took over as manager Pamela.
Effective started this year.
The commitment in order to do that maintain it was the spend so fun groundwater for 30.9 million.
10.9 of was to get us back to a 50 50.
And trust in the project with our partner.
Great and that was funded.
For the ended June.
And then the further three mailing mr. commitment. So we would remain as measured thereafter and that I can confirm if that has now we funded so all of this whole funding the gravel up to 13.9 million as we incurred.
And the feasibility for the project is expect still expected to be available by the end of the first quarter 2020.
And with that I'll wrap up the financial cycle presentation.
Before I pass a little below this maybe talk a little bit about.
Strategy, where we are where we see ourselves going forward, we're feeling pretty good about our long term strategy.
At least over the last 12 years and that strategy was to continue to look to grow production.
Accretive acquisitions and have exploration.
Your perspective of the market at the time Opex at the time, where 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 at times when you look back at.
Combines rebuilds converge things we did over last 12 years. It was often done the types of growth was out of favor.
Got it speaks to the fact that where we sit today, because we persevered without onto our strategy.
At we're one of the appears to be building going on with less number of years. So thats 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 good purchase of that will be like at the prices are up today frankly.
As an end of the day, 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 what time.
Very good projects with 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 with the Kelvin and.
Great relationship working with the team.
18 of we've combined with the Graham onto so we look forward to continue that start relationship physicals Repeatability next year, we clearly think we're going to end up with him 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 November logic. So just so everyone is aware it is adjusted to get to joint venture, but but neither party can stand in a way of the Pritchard going forward.
And it should be application.
In other words, if we come up with a positive feasibility study.
First quarter last year at any Jade decided that they did not want to fund their 50% of the estimated capital that we have we have the.
Going into our agreement the opportunity to purchase their interest.
Fair market value based on the feasibility study economics and that goes both ways. So thinking about the development plan that we did want to go ahead of sourcing of five we also have the option to 2030%.
Instead of 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 respective right now is the infill drilling which is going 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 completed them. Then we'll have a new resource out and that all come together with all the hard work at all detailed work that was done a lot of were Meiji over the years and engineering ethanol model we've.
So as well metallurgy et cetera. This was a very adapts project.
Shifting them Slagging pipe was the drill spacing. So we're proving that out so the cash for example, I think is 400000 ounces are little over about a year out of the gate.
The most recent projected more Sydney cost of around $650 amounts based on the economics that we put out on the preliminary economic assessment.
So.
Attractive project there aren't many of those in the world Riddick comfortably.
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 our engineering side looking at some different sources of power were.
Vessel, we've learned a lot about solar course between Namibia Molly.
So that's interesting others natural gas and other potential sources, so looks like those things might improve the project and of course.
Go press helps a lot. So we'll be looking at the next few months of an arbitrary ACA running into geologic model redoing The July planning.
And coming on ultimately when the new feasibility study for the project that whether its ourselves or whether it's in partnership with so what else are well go look at various ways over the next number months here to unlock the value mostly.
Jacket deposit, which is 4 million ounces.
And.
Were laid out.
Sources that are it's pretty solid project. So our body. So we'll see where that goes as well. In addition of course expiration we have one of a very successful gold expiration.
Our successful exploration teams will continue expiration or other sites. We have great results can we have a cardinal will be in the west for coal idling of of course, but the snake Santa Claus area to the north will get back to drill like that 20 kilometers north of Oracle is really good results there very encouraging both in the surface near surface material separately, but also.
The so by.
Some pretty exciting opportunities there, so we'll be hitting that hard and drilling again, some sarepta cargo as other drilling looking around the world.
Yes.
That's an interesting places.
So in terms of.
M&A, we will keep looking as I mentioned that we find ourselves in that fortunate position of being our credit because what we help fuel we need to do.
Position by any means I.
I think you're going to see more M&A, hopefully, we're not going to get back into the silly season. So about 10 years ago from now with people overpaying for commercial assets with a higher gold price seat of into the we'd never put that gave are we going to start playing that game now just a couple other points before I pass along to Bill I do what I'm going to show that I talked about.
Recall that I want to do a shout out to all of our employees 4200 place just incredible work that's going on with people working.
Extra hours difficult circumstances.
To keep these mines running and running well create more out throughout the company Thats really rewarding as I mentioned earlier.
We like to think that speaks to the culture.
The company great credible.
Yes.
Good job.
[music].
Top to bottom.
So what you'll see from us over the next so next summer months more drove results more attrition results come out of Cardinal and also are moving further drilling and other locations including.
And the condo.
I'll mention we.
Officially launched the ridable bar initiatives through Kipp coal, if you want to buy of Brio gold bar to help save the Blackrhino Namibia.
Beautiful bars, our for sale on Kitco or you can go to our website.
Basically it's.
Our way of donating 1000 ounce of gold towards helping save and the danger species in the maybe it was very good creative.
A contribution of philanthropy as very well received worldwide and that's really important today.
Recall that we're seeing many affects one of the effects you see in Africa doses demonstration of the tourist industry part of the tourist industry in Africa as what helps protect endangered species. So this contribution will go to helping the communities that help too.
To to monitor and see the rivals from.
Switching activity. So it's a great initiative, we're proud to be involved.
And then some Scott.
A new approach, which.
Which is good garnering a lot of attention that gives us additional ideas for how we can get back into the future as a response will produce.
With that I'll hand, it over to build it was a quick update on the Nicola suspension, yes. Thanks, Clive I won't really go too much in production to the persisted great job, putting it out but there is one thing actually which you haven't asked me to I'm going to do on a state and we've had.
Continued amazing run the safety side, frankly, even with the 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 could you tell you 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 and our employees.
Also shows this is 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 of is 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 double our mining production rate. We got the first two tranches of equipment in ahead of schedule Green.
Commission of undercover 90, and those are in operation and working Fabulous, we've got another tranche coming in before the end the year and we don't see any issues that.
Like it's on schedule and the team is rated commission so on the mining side.
The schedule.
On the on the mailing 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.
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 commissioning Pete has arrived on site.
They've done they've gone through the mandatory quarantining, they're just coming out of quarantine now I'm getting ready. So our plan is the middle of 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.
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 the third part is the tailings facility, we did a double lift and thats not primarily to make sure that we could handle the expansion tons in the 10, so that we actually looked at the historical productivity out of the mill.
We are concerned that maybe what we might get caught upside if in fact, the mill run better than than even advertises, we want to make sure we need additional capacity. So we did a double lift on that which takes us into 2023 and 2020 human beginning 2023.
That was completed ahead of schedule commissioned before the rainy season and Thats fully operational at this point and then last one is a solar plant.
This is a solar plant to you. If you remember we went to an island type configuration Agricola.
We were basically brought all of our employees on site to protect the site and the populations against any spread of Coca 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 probably had higher priority. So they stepped off upside we took them out.
But the project has continued to go forward. We've continued to receive all material. We continue 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 has done and leave side, we've got them few don't 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 mid conservatively might bill.
That's still the plant we opened Rob operational and just remember so plan not needed for the expansion.
It's just an additional cost saving measures that we see over the life of mine.
So we see no issues with getting that up and operations in kind of Q1 2021.
Mike mentioned I'm, just quickly talk about future for wonder ground.
What 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 contractor when taken hold ourselves.
With that contractor isn't country, they've gone to quarantining now during the process hiring all their managers in getting their team ready note and we see that project is completely doable pump.
Existing schedule, so new issues there 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 called the Q1.
Well first question comes from obese Habib of Scotiabank. Your line is open.
Thanks, operator, who had been.
Congrats on the Guardian.
Thanks.
Question.
Thanks.
My first question.
Again, it's really great to see that between net cash solution.
And you also looking to appeal by the end of Q3.
On a couple of that Youve your dividend has been increased as well. So the question is how are you looking.
Allocating the strong free cash flow going into 2021, especially.
Gold prices persist.
More higher dividends.
Looking at the construction of I'm not going to exploration I mean, it can you give us a little bit color on capital allocation.
Yes, I can I can tell you they kind of things are going to consider we can't really talk of too much in detail about yet so we get the decision point.
Obviously the dividend.
When you bump up a dividend like that it's whether given that you're going to maintain and obviously so I think.
[music].
Our last from what we're doing this quarter and then.
On the capital side.
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'd need for gremolata in whether we want to go.
The indicators to go heads clubs that are good.
And then we're looking at Jack as well now, it's having a revisit that.
That might look like and what might want to do there.
And then also.
With the drill programs that are ongoing for coal at buckle up for that for the snakes and the Cardinals loans.
We're starting to turn our attention to based on the positive result, there what what that might look like in the future as well and thinking about what capital allocations maybe.
So those are really the primary thing Okay. I think I would say with lives just out of its about the leasing a lot of companies that are any dividend based on a percentage of free cash flow, we have a call there yet an interest rate, whereas as Mike said, we're at a time of.
Understanding soon our capital requirements going forward now when you look to drive a lucky that we don't need to we can clearly we're going to generate a goal for sustaining linear where they are we're going to generate over a couple $1 billion in cash from operations over the next with five years or so why did we build a girl objects. So you can clearly do it.
Cash flow, but there's no.
It would take a little bit of project debt along the way it was that as walkers because of something 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 going to stage of understanding where cash requirements are going to be in terms of.
Capital syndrome improved expiration you can probably so we're going to continue to spend somewhere around 50 million Bucks year I think.
That would where he told what we see in sustaining capital going forward the work so that detail.
On the call.
Sounds good and just changing gets a little bit than and my question next question is for Bill.
In regards to become an expansion.
Mentioned was supposed to increase by approximately 1.5 billion tons random.
In 2019, the men was already running at over 7 million tons random without expansion. So.
I mean could you see the go legs, achieving approximately 8.5 billion tons Brandon instead of 7.5 and then.
Yeah. That's again this week sustainable and how do you see the rents mill wrapping up once it's completed at the end of Q.
Yes, 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 can do when it became kind of fully fully production wise, John I've had a lot of discussions on its hard or soft or but the other thing which is a really interest but she keeps bringing up is it when you're running these things so hard if you're running up at the top end.
And then 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 to think knew that we're comfortable saying that we're all made rate half I think I think the million.
And a half.
Plus what it was originally designed it is what we're comfortable saying and.
Maybe a little conservative and John you want to add to 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 money.
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 now is because cardinal as a potential to.
Two.
To to bring into additional orders by close to 500 meters or thereabouts away from a cost. So you know that with some of that's going to be softer ore. So if that continues to set 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, which you bring up quite work.
Looking at Cardinal but.
Other things are 10, we now.
Realized the Anaconda area that satellite and bring it down put through the now are these are hard sources. There that we can bring down and add through them all that although studies are going on right now based.
But certainly we I think we all acknowledge.
The mill has absolutely outperformed what the design to spend for and we see that there is the potential.
And it goes according to plan in the second that could continue into the future.
And yet.
All the ramp up I mean, do you see that thinking.
Quarter or is that longer ramp up.
No I certainly in our budget by the end of September were going to we're going to be up an operational Jana I mean, it out a line, saying that certainly by the end. It's a temporary lies at full.
Hi, I agree with Bill will be will be ramped up to design throughput by the end of September.
I was just going to add that yes, when if we if we do blend in a satellite.
In the mill feed we can't we will be able to achieve higher than the seven and a half million ton frown on throughput.
Sounds good.
Okay.
Thanks, So based.
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 quarter or is there going to be any sort of commissioning related downtime should expect.
Well, we have 10 days put in for that free for all final tie ins, but.
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.
Kind of four quarters evenly spread out I think it 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 end to end the dividend start to be paid from from that asset at a steady state ongoing basis.
Oh, you're you're asking when the get when those are the initial investment the loan that we put in to the Bill will open pit up I think yeah. I think now a vehicle places you're looking into next few 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 within 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 done for any kind of could that be the case or is it is that not sort of the case for maybe a made 2021 timeline for gramalote taste decision.
Yes, I think it's hard to measure that bumping grab a lot the out of the Q because one of the invest stage of its out there was a permit there's a permanent and we're closing it on that but at least abilities. We said.
And also just really got some as we said we'd like for looks at the 30 50 goals. We've got other can shop. So.
I can't see anything, but we get out of the Q kiaka.
Not as not as robust to project as we see it today has potential to get better as we said.
Some of things, we're doing fuel carquest et cetera.
So I don't think Jack will likely bump it up a few 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 it looks interesting. After this next round number months.
Updating that we might very well look to lift to partner and.
With a responsible industry partners is that as one alternative ill turn it would be that.
So as an asset.
Cover the fastest unexpected appreciate that to get developed they have a REIT to my bid and if its economic somebody should building, so but I don't see it pumping Timewise also quality wise I don't see something Graham hockey of Q and a cause definitely we're really talking about a potential for the coldest authorization. There. There's so much so we'll be.
But once again, there may be a situation, where some worst being trucks from.
The call the area potentially now to the mill some of the separate material, but I think you've actually to actually look at building Southern region facility. If were successful in finding another multi than us deposits.
Commentary that would become after gum launchings my expectation tourism.
Build another major mill and may be sure that.
So our plan et cetera.
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.
The announcements jumped in this in the dividend loves it.
My oldest continuum seems with steel Smith.
I know you see.
On on Sokolik Salon, and can you remind me of some.
Still polling strategy earlier total sees that you're implementing the.
This is what are the reserves included or usage.
It was.
And resources accrued for total CCC any sort of wiggle room in terms of.
Looking at modem flowing still polling strategies to accommodate where you coaster trees wheels.
Medical cost.
Yes permit Randy just come from sites are these probably the most appropriate to right now if you want to common to comment on that Randy.
Yes sure so.
Let's start selling strategy for coal is that number is different stockpiles, obviously the high grade.
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 pile that today's gold price is definitely.
Economic.
We are currently looking there.
Yeah, the different cut off grades and are stockpiling strategy, it's been hard to keep up with this quick.
Increase in gold price, but that's that's what we're doing and that's kind of the strategy.
We're pretty good shape Cola already in what we're stuck willingness of economic.
Okay. Thanks.
So 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 the scale what you've been doing there on the on the drilling given.
Given what the two then its books.
Totally on track.
Yeah, George <unk> right now.
Cardinal.
His.
Got it minerals mission over 800 meters.
And then down plunge.
The strike length of it as a couple of almost.
And we're we've drilled so for close to 26000 meters on it.
21000 meters original 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.
Hi, good Cardinal to do some decent my planning, but it remains open at depth and I'm also a little bit to the cells. So it's 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 so mineralization is that a different styles.
Metallurgical work.
Yes.
We are 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.
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.
Yes, 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 will confirm that through the metallurgical test program.
Okay, great. Thank you.
Krishnan Kiaka.
We see a given the scale the original so the plan to 12 week granted.
So you can get a potential too.
To do is done its energy coaching sold them as well in terms of essentially doing something school and ramping up or the time <unk>.
Let's see where you're going to those balances on power availability in close.
Let me little turbo setting a journey, but I think you're asking about would disappear potential to start something smaller gross.
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.
Thinks about it but in the day, we don't see a high grade.
Starter pit there and so when we acquired at for I'd also like $25 million was actually the actual acquisition cost. When you go back to with both the we always felt that are needed a better oil price, but we thought for exploration success. We have such mission success, it's weighted but it was too far away to help yacko. So when we did a deal that as you saw so.
So we don't see.
So you can't because being started going to be done this.
Large scale locate opened.
Our view, we don't see a wrap up the assumption there.
Okay. Thank you.
Thanks Terry.
Your next question comes from Gary Macquarie I'll kind of caught your line is open.
Hi, good morning, everyone.
Maybe a bit early for this question, but just looking back to the feasibility on the coal into 2021, then given what you've learned there this year in terms of greed and how the plans performing and obviously you got the expansion coming.
Around the corner, but I think production was expected to dip into 2021 in that feasibility studies I'm just wondering what's the opportunity for flat production or even higher production in 2021.
Okay.
Good question is.
First is versus 2021 to production at the pool, yet, but it's really want versus 2020 was supposed to division will be solutions with get Woody.
Yes, 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 or the 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 in our phase positions during the year.
Can we prioritize and bring ounces for what I will tell you don't continuing looking at the best ways to bring ounces forward. So 555 years and that does include any to 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 in 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 talked about too much.
And how quickly could you bring those sort of ounces in like is there any permitting requirements there or is it pretty straightforward.
Yes, its strength for we remember we own the license we own license to the north as well most of the stuff we're talking about as it is in the amended Andy permit license, which is where the full part of that so that would be relatively easy like 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 government's already come to send their 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. Thanks, Thanks, everyone for your your time.
Thank you operator will.
Look forward upping your guess is.
Thanks.
Ladies and gentlemen, this concludes todays conference call. Thank you for participating human cell disconnect.
[music].