Q2 2020 Endeavour Mining Corp Earnings Call
[music].
Greetings and welcome Tim that were mining second quarter and half you're trying to check the results webcast.
At this time all participants are in listen only mode. A brief question and answer session will follow the former presentation.
If anyone should require operator assistance during the conference lease spreads far in zero, one yet and that's on Keypad Actually reminder, this conference is being recorded.
It's now my pleasure to introduce your host Mr. Sebastian they'd like to see seal off endeavor mining Corporation. Thank you Mr. didn't want to Sue you may begin.
Thank you operator, Hello, everyone and thank you for joining or Q2 2020 operational and financial results presentation. My name is Sebastian's I'm sure I'm the CEO of another mining and it's a pleasure to be talking to you all at once again.
Before we thought I'd like to ask you all to please note today's call is covered by all disclaimer and notice on forward looking statements.
The format for todays call will follow our usual foremost full quarterly results.
We'll provide an overview of the results, including a response to come in 19, our interim CFO. All he will review, our financial performance and Mark and Patrick will provide the review of our operations and exploration.
I will conclude the presentation and we then take your questions.
For those of you who don't know our interim CFO. All he has been our SVP for people culture and the ITC since October 2016, and has been instrumental in building the endeavor culture revising our values difficulties managing our Kobin mentioned response and most recently closely involved in the same AFFO integration process.
Oh, he has a previous year for experience and I would like to thank him for stepping into this role until we conclude our CFO search, which I expect to be done in the next couple of weeks.
Starting on slide six we have included.
The usual recap of highlights across our key pillars for the first half of the year.
Look at this law they realized that we've had the same lay out for the past few years. The fact that we always have different key achievements across our pillars on a quarterly basis is I believe testament to how fast are business keeps evolving.
This has been particularly true over the last quarter, where in spite of the additional challenges presented by covert 19. The team has done a great job delivering and continuing to find ways to improve our business.
We have much to be proud of as the team has quickly adjusted to this current operating environment to ensure business continuing we remain on track to achieve a full year production and audience sustaining cost guidance in particular due to the collective efforts of our team and partners to obtain the mining permit and commence mining operations or the high grade carry pump.
The posey that wouldn't it.
On the project development front, we have made significant progress that fit to grow with an updated mineral resource due to be publish shortly and the P.A. expected during Q3.
It has also been at full steam ahead on the exploration front as we completed H, 5% of the guided full year exploration spend during each one.
As you know exploration is a key value driver for us. So we are pleased with the progress made ahead of the rainy season, and particularly out two recent announcements at when Dan EG and more is expected later this year.
Finally, we completed the semaphore acquisition shortly after quarter end with the integration process now almost complete.
Regarding the balance sheet, we aim to fully leverage it in order to further de risk the business and in the coming quarters, we expect to move to a net cash position.
Each time, we will begin paying dividends as you see it is exciting time ahead.
Turning now to slide seven.
As we look at our could be 19 response, our team local communities and our host governments have managed extremely well in responding to this crisis.
As you can see from the slide that we have three levels of response plan as part of our business continue to plan.
Our operations are continuing to operate at level, one which is near normal operations with a range of enhance preventive measures in place such as temperature checks restricted access to sites, social distancing increase the Asian standards and mandatory quarantined periods for employees arriving in country.
Level two is designed to be initiated should covered 19 become more prevalent and under the circumstances and never mind would be isolated but mining operations on the shipments of gold would continue.
And level three involves the full or partial suspension of mining and processing operation.
Given 19 has presented values challenges that each of our mines in different ways and Mark will talk in some more detail about what we have done at site to mitigate these challenges.
On slide eight after priorities the safety of our people, while our safety record remains better than industry standards.
Happy to see the slight increase in LTL is over the last 12 months.
We need to continue to be prudent our largest threat is now fatigue management and we are taking appropriate actions to ensure roster changes and proper rest period, alongside a regular safety briefings and tool box meetings.
Before diving into our results I want to give you a brief update on the integration of the simple asset as it has been the significant focus of the management team over the past several months is.
Shortly after the transaction announcement in March we started working with the same effort team on the integration process as endeavors developed a robust operating platform in West Africa over the past decade. It has been relatively straightforward and quick to slot in these new assets.
Our operating model and philosophy are very different to that of simple as you can see from this all chart. Our gyms are empowered and placed at the center of our business, which enables them to be as hands on as reactive as possible.
Our supported by strong technical and support functions and the network of experts across our business.
Put simply for every function that site level say mining or supply chain. The local manager can rely on the group expert to leverage synergies and experience.
We're not trying to reinvent the wheel every time, we have a new mine and this helps to integrate the newly built assets such as EG and Hyundai and also newly acquired one such as we were manner.
We already starting to see the benefits for Malibu I visited both sides last week and spend time there to welcome the teams to the end of a family.
We're pleased to see everyone wearing the endeavor shirts with our values to fortys, which stands for performers partners' share in years and proactive.
I could feel on side, how everyone was extremely enthusiastic about joining the another family and being part of building a leading African gold producer.
I also spends about 36 hours in Ouagadougou, the capital city or book enough vessel and met with five ministers.
Minister of mine Minister of Finance Minister of infrastructure.
Minister for NFS.
The Prime Minister and also a one to one meeting with the president during that period, which I believe shows the quality of the relationship that we have in country and a stronger partnership we have.
As we move to slide 10, you can see that we are on track to mid full year guidance for both production and all in sustaining cost we expect the second half of the year to be strong and we will explain why other next slide.
The similar assets also performing well and are on track.
We have therefore maintain both endeavors and same AFFO guidance figures and Greg it that aggregated them to obtain our pro forma guidance overall, we expect the combined entity to produce over a million ounce at below $900 for almost all in sustaining cost.
On slide 11, we see the production and all in sustaining cost trend for the quarter.
Following a stronger than expected first quarter production declined slightly in Q2, although overall production for the first half of the year is broadly in line with our expectation and we're on track for a stronger second half of the year as initially guided.
For reference we Havent circuits more charts on the right hand side of the page tourist rate expected outlook by asset and as you see the arrows, we expect a stronger performance across all mines, but Mark would run you through the mine by mine detail later in the presentation.
Now on Slide 12, you can see the trend of our all in margin over the last four and a half years for referenced the Odeon margin in revenues less all in sustaining cost and less non sustaining costs.
Our margin increased by over two times compared to the same barrier in 19 due to the benefit of higher production and a higher gold price.
As you can see last year, we had a very strong second half of the year and this year, we expect to have a similar pattern.
On the right hand side of the slide we have outline why we have reason to believe that age two will be very strong.
First we expect an increase in production at lower cost as described on a previous slide second as we had guided our non sustaining capex was largely H, one weighted with already 65% completed.
Likewise for exploration, we have already spent 85% of the full year budget.
And lastly, we will be better place to take advantage of the higher gold price environment as nearly half of our production was capped at 5100 per ounce under the hedging program, which expired at the end of June.
On slide 13, we should the evolution of our balance sheet and leverage as.
As you can see our net debt has steadily decrease over the last 12 months.
After we completed our investment phase. We currently have a very healthy balance sheet as shown in gray, which is the pro forma amount with semaphore and the launch of placement included.
Given our stronger than expected free cash flow profile, we expect to transition to a net cash position in the upcoming quarters.
Which funds, we intend to stop paying a dividend.
Turning now to exploration on slide 14, you can see a breakdown of our exploration expenditures for the first half of the of the year, the largest spends where at Hyundai ATM for the growth.
We recently published updated resource phone, then EG and are working to convert these two reserves, which will publish shortly alongside the dated mine plans.
As for fit to grow we expect to publish a new resource in the next coming days.
I will let him comment on critical later in the presentation.
The next slide shows our evolution of exploration success over the last several years and how we have created value through to drill bit.
In 2016, you might recall, we set the long term target of adding 10 to 15 million ounces of additional resources over a five year period. Since then we've added 7.1 million ounces and we expect to add additional resources in the second part of the year.
Particular with Citigroup.
With the opportunities identified to date, we continue to believe that we are well on track to achieve our target at the very efficient exploration cost of less than $15 per ounce of gold discovered.
Indicated.
Many of you will recall ignite on slide 16, the bottom axis is mine life and the right and axis is all in sustaining cost while bubble size represent production.
With the addition of Google and manner, we now have for long life low cost assets that are underpinning our business and we are focusing on extending mine lives of each of them.
Boom go in particular has the best opportunity for a positive impact in the short term as we aim to restart mining operations in Q4 of this year, we're making good progress as the strip is completed to be constructed.
And we are well advance with discussion we his contract miners takeover the mining operations.
That concludes the overview and I'd now like to hand over to already to take you through the financials in greater detail.
Thank you Thats Gen Hello, everyone on the call.
The financial summaries of to this presentation starts with the key financial highlights for the quarterly and Alastair result, which I will go through on the following slide.
The key takeaway niche one twentytwenty begins the being much stronger versus the same period last year and this is mainly due to the IR gold price and the startup of our Plenti RTT in late Q1 last year.
As you recall Q1, this year was a record quarter for us in terms of operating cash flow.
This level of came down in Q2 fully expected lower level of projection payment of taxes and the company capex being weighted in the first as of the year.
It's fair to say that we haven't seen the full advantage of the gold price environment get due to our hedging program, which funded idea June as I mentioned earlier.
Turning to slide 19, we have analyzed the number included in our in our all in margin.
And if we go straight to the bottom line, we see that on our althea busy.
We are up $85 million compared to the same period of 2019, while on a quarterly basis, we are down 7 million compared to Q1 this year.
This is mainly driven by three factors production gold price and cost.
Interest of summer, we will go through the etch one comparison, but there's some logic apply for the for the quarterly or annually.
So in the second rule, we presented on sees of gold sold which are up 32000 ounces.
In the in the Roby Lou you see the realized gold price, which is 340 world owns higher we have then provided the cost analysis in dollar up their own to see exactly how this all translates into an improvement of 238.
Yeah.
For oil for the all in margin.
You can see that the benefit of the gold price was offset by higher royalties on iOS extended deal assisting and loan certain capital expenditure.
Regarding capex I have cost was guided for and particularly the fact that was weighted to the first out of the year.
We have already incurred 65% of the non cities sustaining capex guidance and on a standalone basis, and 85% of of our exploration budget as mentioned by production.
If we move to the next slide you can see the evolution of our net free cash flow compared to the first out of 2019.
Overall, our net free cash flow before repayment or proceeds from long term debt increased significantly from and not flow of 126 million dollar into first as of 2019 to an inflow of 42 million.
In the us off Twentytwenty.
There are couple.
There are couple of items that I'd like to speak to in more detail as we look at at our free cash flow resulted from our own in results.
Compared to last year, we other smaller investments in working capital and long term asset as you can see in 0.1 on the right and side of the state.
Moving down the page on our cash outflow related to a decrease in Texas, which is the result of installment payment approach now in place at home the.
Interest payments increased slightly while cash settlement on the hedging program. Let one twentytwenty include the 5 million dollar fee for the gold color Forgone and 20 million dollar Floyd SSC settlements.
Moving on further you will see that the growth project capital as single large decrease compared to last year. The result of the condition of the Tcl plant during Q1 2019.
Moving on.
In terms of M&A restructuring and asset sale and purchase this includes the $12 million inflow relating to the sale of the countless mining fleet and necessity step up resulting resulting from a switch to contract mining a $7 million outflow reach into M&A fees and $5 million outflows of contingent payment.
For the increase yield of ship agreed between 2017, and which is better on ounces found.
Finally, as we discussed previously 120 million data was Jones in Q2 of the out year for doctors of our proven business continuity with both.
And given the better outlook and inline with what we have seen from the industry. We have decided to reimburse the similar following the conclusion.
On slide 21, and moving on to net debt.
We have prepared the variation analysis of our cash position with the end of the year cash balance and arriving at our pro forma position to show the impact of the seller for production as well as well as the one of the levels of financing that has closed.
Soon after the end of Q2.
As you can see here, we generated $183 million from operation in the first Alf while investing $105 million in that business and adding a net drill down on our available financing of $84 million, including the 120 million dollar drawdown on the revolving.
As we discussed earlier.
On a pro pro forma busy disposition of the 100 million dollar investment for lung cancer as well as enough with excellent twentytwenty cash balance of $93 million leaves us with approximately $545 million of cash at the start of of this semester.
Combined with our pro forma Dept, we're left with a pro forma net debt of $309 million, which unknown to zero point 44 times.
So reducing our leverage as being a significant focus for us and we continue to be through the rest of the year.
In the world.
Slide 22, you can see how we arrive at our as adjusted net earnings for isn't we have.
Equity the later.
Through the two to address the line active items.
We scroll down the page you can see that the largest item relates to the loss on financial instrument, which is mainly driven by the unrealized accounting loss on the convertible bonds and to a lesser extend the realized.
Of the now expired gold color for them.
So overall, our adjusted net earnings per share strongly increase compared to the same period last year two zero point 78 as shown in the second in the second to last line of the table.
I would like to close the section by taking a closer look on slide 23 at our adjusted Oneq their shelves assigned and we're pleased that our adjusted EPS has grown steadily over the past five consecutive quarter. Andy said it seems like Europe on 48 cents per share.
We'll now and over to Mark for.
Have you in body does have the of the settlement of the of the site.
Thanks, Andre and Hello to everyone on the call.
Hi, all managing well given the current situation and all of the berries restriction that has been put in place where if you leave.
At least to gold prices might be interesting minerals.
Starting on slide 20 charge this craft compared to six month performance. So this year, which clearly benefited from the start up of the ITC.
Which is only in operation for three months corresponding period last year.
This was offset by lower prices.
The net result was a 10% increasing production to 321000 ounces for the period.
Illustrated purposes, we reported manner in which.
We show a pro forma production of 471000 ounces.
There is half of this year.
Sean Boonville recommit to the processing and stop problems.
Especially mentioned we have maintained their production guidance. Despite the challenges presented by the hybrid environment.
This is their collective goal and commitment to our cycle.
All bus have had to make significant changes to while we operate.
The hardest to target uncertainty.
In Spain and highest priority.
Back to their workforce and surrounding community.
We have lost some efficiencies along the way which is to be expected.
But while we really appreciate the leadership and ingenuity shown by all to overcome any challenge presented.
Nick colleagues have extended Boston's on thoughts Camtek quarantine ocwen and travel restrictions.
I would like to thank semi pick will not just from endeavor contracting.
Hi, Scott and local communities to will be correct or tested support throughout.
Turning to slide 26 operational review south to DC.
As you can see in the China production decreased over the previous quarter as Reprioritized Weiss extraction and the completion of the launch of version.
And chase enterprise, which now provide to increase operational flexibility.
The two key sectors for the production decrease was recovery right and penetrate.
As mentioned on our last call we were predicting that recovery rights would decline due to the guide the proportion of declare transitional and special prices.
Regarding straightforward, we had some issues with the Google stay draws on the news, which required at Goldman Sachs default on the lightly.
Technical experts in Europe.
With longer air freight times to bring in Spain.
Well the Ghansham Amazon should bring in a non targeted bond.
Impressed with the wind, which have changed up to the task results issued.
From a modeling perspective as mentioned the focus was on making additional wise to source symbol material for the construction of the downstream walls of the chasing.
We also commenced morning columns would fit to provide additional all source optionality.
Overall, we expect each have a stronger second half of the year and in particular after the rainy season.
Our handbag appreciate to Patrick to talk about exploration efforts at 80, which have been keeping SBC as we are working on converting to look block resources to reserves.
We expect to publish an updated reserve estimate along with last month signed during the quarter Patrick.
Thanks, Mark and Hello to everyone on the core.
We were very pleased with the newly published space will start to look black Cucci. The I remind you are located on the six kilometers away on the processing plant.
We are leveraging the same strategy of didn't see recognitions, leading before ramping up to resource delineation, well Winfield reading that we applied to GT complex prior to 2018.
Time, the priority was to quickly delineates resource to justify the construction of the CIA plant and so we focused on infield reading to give age that knowledge that has been acquired produce reconnaissance, bringing these party GE resulted in the discovery of.
More than 1.6 million ounces.
We have indicated resource.
The during two at the end of 2016, and the 2017 years at the cost discovery cost of 15 Dropdowns.
On the floor license each sales to date.
We 65% of that read the old.
When the aim at making a new discovery, which has led to save all target being identified I know Lisa T. 5% of older drilling has been the dedicated to delineation of resource at the block so far our resources have been outstanding both in terms of the high grade nature often nowadays.
We shouldnt accenture.
Look block indicated resource recently increased by 43% to nearly a 700000 ounces Andy no long except to say.
Second largest and how you as a great deposits. Looking ahead. We are excited by your upside potential observe looked like the positive sales, which remain open at depth and need save all direction and also by eats neighbouring targets. We expect to continue to delineate the resources and remain on track towards.
The five years exploration targets, which we said late in 2016 mock back to you.
Turning to whom day on slide 28, it is interesting to see that the months production price all has been stable over the last four quarters.
All in sustaining cost has increased as expected due to the guided higher life capitalization activity.
This nation that quarterly production and all in sustaining cost were better than initially anticipated as we delayed a portion of the should replace capitalization activity until later in the year.
This was done to focus on opening up all blocks enjoyment.
We've already started shimon carry pump deposit and expect a stronger second half of the yet due to the contribution from day in quarter four in particular.
We're very proud as such as we went from discovery to production number three years, there's been a collective effort from the exploration team to move quickly to indicated status and then completely initial grade control drilling program.
All such where technical training for completing appropriate tests, where some studies to reserves conversion in the public affairs team for their efforts in obtaining the money payment on time to spot checking launching.
Patrick are the G. for exploration update as there is a lot.
As we work on upgrading the newly added carry resources to reserves, we expect to publish maiden reserve release in quarter three along with an updated lost more planned for one day.
Correct.
Thank you Mark.
As you saw a few weeks ago, we publish the resource increase all prolonged let's say 550000.
On sort of indicated resource following follow resource delineation of the county area. We are very pleased with the additional resources. The DNA third in all the Savi Alcoa number or reason, so obviously, the very probable mineralization characteristics.
A large portion of the resource is quite high grade this fisher.
Those are carry waste a lot for portion of these you also oxide unconditional material what is the VW, we'd say deposit itself being mined guaranteed menu price oil.
These deposits also I'm unable to open pit mining with potential in place you're seeing it becomes below well that Q on Q being seen out there in the who the proceeds and more rung out for those are the I grade carry palm deposit.
Lastly, the parties May WG provides a cop four foot for put entre gold recovery rates above 90%.
As we continue to bleed into carry out later this year handled tool. Indeed in 2021, we're confident that we continue to delineate and that the resource for longer correct plant, which remains open to date.
Taking a step back in our five year exploration plan, we will be optimistic in the sense that we thought it would only take us a year to believe the untied carry out.
But given the larger than expected the success in take us three years.
We are super keen on and impressions to know proper reading, although I priority targets that were delayed due to all very high success in the carry out all these targets are quite close of the meal and each we also means that we need to revise oak wild all these currently owns targets the global one.
For all the they are real marked back to you.
Thanks, Patrick.
Moving back to cut the clock in AG operation on Slide 30.
Production decreased due to lower average price, it's great and throughput or recovery rates remained flat in.
In addition money data elevations in the north and South fit was impacted by lower equipment availability. This was due to a combination of the time taken for the mining contractor to get a central Pops, just thought NK maintenance personnel stuck in nine countries for a number of months due to type of launching restrictions.
These issues have been largely as account.
As we think body.
I was progressively shifting to a higher proportion of fresh ore in the new phase.
Which results in a reduction in tripled.
Decreased over the previous quarter due to the high contribution from the lower grade so Pete and the use of lower grade stockpiles to supplement.
Looking ahead to the latter part of the.
Continue to operate in hot official although the average head grade to the mean is expected to increase.
Morning volumes have increased back to normal levels and as such we expect to meet Todd.
Turning now to talk to anyone for an update on council.
For the quarter production decrease compared to Q1, mainly due to lower grade stacked and an increase in colgan ticket.
The declining price was expected as a higher proportion of all with sourced from the lower grade and lower recovery TG one pit.
In terms of the do not controlled on heap Leach pads.
We estimate there to be a progressive increase of approximately six to 7000 ounces.
There's a number of reasons for this and an action payments being developed indicates these issues.
We expect to be able to recover some of the scope in the coming quarters.
During the quarter, we also transition to contract money as we believe this is the right strategy for comment at this time in order to limit investment its assets, which are not cornerstones within that portfolio.
Following a well coordinated tender process.
The contract was awarded to West African contractor is 58.
It was purchased the money slate and space and taken on almost the entire money and maintenance crews from endeavor.
The transition was fairly smooth and lots of thing everyone in the process.
Looking ahead, given the additional gold we expect to recover from the Golden Circuit.
We expect commit to meet the bottom in full year guidance.
Turning now to slide 32, and I'm excited to be able to talk to the first on about the minute goldmine, but in fact site as it joined in the portfolio.
Although we only two full control of the mom at the start of July.
Working closely with seven sites, saying since we announced the transaction not placed aside integration process has gone well.
I was that man after a break fees at last week to meet the team and for too long.
Pete.
Underground and the price if you plan.
All of which are performing well.
It was great to see everyone wearing endeavor sheds and I really appreciate it.
Our discussion.
The operation its main set up well, we trust set through on going exploration success.
There will be a key asset for us for many years to come.
Turning to the quarter's performance production was slightly impacted at the early days of launching.
As most of the underground mining same was placed in a 14 by current chain preventative measure after some positive cases were recorded.
This resulted in a temporary hold the underground operation, which limits in high grade ore.
In addition, the mill experience downtime following staffing shortages due to initiate initial corn chain periods.
Acting existing where crossed.
Looking ahead, we will continue with the integration of system and prices.
As we prepare for I've guided last month plane and 2020 on budget.
During the second half the year, we expect underground mining activity to ramp up with more start production and.
Mining activity to focus solely on the liner.
On spawning exceeded complacent.
So the guidance, we've retained published by simplifying earlier this year.
Moving to slide seven sorry in the second operation, we're calling from outside the boom Goodman.
I was also bouquet last week to make the team there and to the plants and infrastructure.
Yes, sure construction is progressing well and we expect to have 620 aircraft. According to the site in quarter three.
As many of you know who is currently processing stockpiles.
And we plan to restart operations, they probably in the year.
I was impressed by the way in which the team.
Just got on the block following last year's incident, and I are looking forward to full scale operations quarter pool.
I have been busy they worried.
Hey, good morning, some of the Brexit stop.
So its equipment to supplement drop bombs.
Production for Q2 decreased slightly compared to prior quarter.
Lower prices grades from stockpiles were partially offset by increased mill throughput.
As expected the prices decreased due to this decline in grade profile about so although.
Looking ahead, we are busy working on erased not planning, which includes awarding a new money contract.
Crisis is going well and the contract will be awarded the coming like.
We have had a thorough review by mine and regional security and it can make some money right where it stood the regional access right, whilst we finalized on between plant.
Lastly, we have recently appointed West African General manager, we previously managed out 18 months to be the knee GM for booger.
And so the guidance. We've also maintained published by signify any at this year.
Turning now to the next slide for at projects review.
Sebastian mentioned, while their minds focus for 2020.
Cash flow generation.
We have been steadily building optionality within that portfolio.
Which now comprises four development projects as you can take from the type.
We're very excited by after their credit property.
Where we completed Skype and study on the previous 1.2 million ounces resource base.
I look forward to completing a P value based on the larger result.
Which we expect to possibly slightly this year.
Patrick without giving too much why would you like to get a quick update.
Yes, Thank you Mark.
Okay. They call Oh, we almost spend $8 million.
During the third semester of 2020, either on the 78000 meter well believes that since we published the loss peaceful date back end of October 2090.
ER and update on Lucky they put it. This talk shows is planning to be published a very soon actually we are working on need right. Now we are very happy with also the reading compression result, they'll and we look forward to publishing the result in the coming weeks I believe that we are.
Okay and critical mass in just one deposits or the lucky they position, which we discussed before which is justified a project to date and we're excited to stop running or they'll nearby targets.
We are for a quarter. He's here on Green also in 2021 are using now on the over to say about capital the conclusion before I say too much on the critical.
Thank you Mark and Patrick as we look to the second half of the year, we see a number of catalyst that we expect to be important to our business many of which will occur during Q3, and we've already commenced mining and the carried them. They put it as we received the mining permit much faster than planned as I mentioned earlier will have.
But they did reserves are both he can't Monday as well as associated mine plan to date. We've also got boasts an updated resource and the P.F. forfeited grow which is shaping up to be a strong contender for development and finally in Q4, we've got the restart of mining operations are booming.
We're excited for the present, where soon we'll be generating very strong cash flow as well the future with our ability to generate near term gross while also adding to long term upside through exploration.
As I mentioned earlier these are exciting times for endeavor, we all know million owns producer and we have solidified our position as the go to name in West Africa.
You are all in sustaining cost and production guidance continue to extend our mine lives and portfolio optionalities through exploration deleverage, our balance sheet and move towards the financial position.
Given where we can begin to return cash to shareholders in the form or the dividends and share buyback.
Thank you for taking the time to listen today, and we will now open the lines for questions.
Operator can we take our first question please.
Yes, Sir thank you, ladies and gentlemen, we will now begin the question and answer session and if you wish to ask your question. Please press star in one on your telephone keypad anyway training to be announced if you wish to cancel your request. Please press the hash key once again Saar in one if he wished asking question.
And we have questions that came through Sir we will now take our first question.
The first question comes from the line, though they share how do you get your line is now open piece still had an ask your question.
Thanks, operator, and a high specimen team congrats on a great quarter on and thanks for taking my questions.
So it's a question a couple of questions from me number one looks like the integration with the summer fill assets is going well.
And you seem to be getting close to closing the contractor for Bongo.
Can you give us a little color on how the discussions are moving forward with the government looking up I saw in regards to security in the region, especially on the go to bundle.
Sure sang surveys, yes, I can say that the a the integration is a is progressing well as you know since the announcement in March of this transaction.
We've been in already working on the integration pre closing on the first of July So a lot of things have been a have been so far a already achieved a the new organization has been put in place synergies already.
Starting to come in and a and we've identified over $20 million of.
Savings that we are expecting through this transaction on our cost structure.
And in T. IND in the last week I spent a.
Two days, a boom, who in two days at a at manner to welcome the team and those will be able to a review some of the plans and progress that that we've been.
Asking and I think that you know things are progressing very well as I mentioned that spend 36 hours or so in a in the capital city in order to rule, where I was able to me to five different ministers and the Prime Minister and the president.
To advocate for a different improvements that we are expecting on our side and I think the the quality of the relationship. A you know were shown wasting a number of meetings and also the attention that the government has paid to a different request one has been on improving our vicki recovery and we would be expecting or something.
A strong payments on inflows in Q3 from the government on the on VHP credit.
The second one was continuing to discuss and finalize the security plan for the restart of the Abu mining operations.
I must say that the discussion went very well in particular with the a with the president.
Not in a position to describe to you know the security plans that we are putting forward I would only say that a in a will be very happy in September when hopefully, we'll be able to announce the restart of the mining operations were beginning of Q4, and we'll give some more details at a at this point in time when I was on a boom COO.
We saw the a the strip, which has now completed and we are expecting the a and act. So the approval of the local authorities to come over the next time, an extra day. So this will give us a lot of flexibility in the short term. We've been also discussing the a the work that needs to be done on the our 20 Eightth Road that you were referring.
To a which is the road between would like go to a to move a and interestingly. The I'm. The government has just to prove the or with the financing of the African development Bank for reworking a domain highway between find out to the border of news.
Yes.
For for companies have been awarded the contract that will start a in the beginning of September. So it will be a very interesting for us to start a same a work on the junction between the a gay for NDR 28 at about the same time and this is why I met with de minister of infrastructure.
Which is very open in the including a this work as part of a of their continued work on the on the a four so yes overall I would say very very pleased with a with the progress we have been a we've been making and I think that you know this integration is going into right direction and progressing quickly.
Thanks for that Sebastian and that just moving on I mean, you guys have a lot of a catalyst coming in Q3 regarding resource and reserve updates.
And it at a one day, but that the one that's really intriguing means that practical now in terms of coming up with the resource and coming out with a few years.
What would be Youre cut off one for this year in terms of drilling.
And do you think now practical the fact that it's moving forward into a study like now are you seeing pedicle, becoming your next project that you put into construction.
Sure.
Thing that a you know I'm all of US are quite excited with ER, which would fit decor and as you probably here with respect to take a it doesn't want to say too much about about the results that we will be publishing probably next week, but you can expect a big jump in the.
For Dick will resources, we always said that a in our objective was to ensure that Oh, our projects could reach a 10 years mine life at a inno 200000 homes on your production and a and I think that a you know physical is heading into that a into that direction. So based on the very strong campaign that was done on the first half.
I think that we'll have a enough indicated resources on the book to be able to come up with a an attractive PA and that can meet the criteria that we are looking for a project for us for endeavor and then you know anything else that will come after that we'll just be a plus to continue to optimize that turned up.
Project, but yeah, I think that the market will be a very excited by a the results that will be providing and the quality of this this potential project.
That's great Oh, so that's an i. I leave out here and maybe a lap some follow up questions David.
No problem. Thank you very much a life.
Thank you and we will now take our next question and this one comes from the line as James Dallas. Your line is now open. Please go ahead and ask your question.
Yeah, good afternoon than Ben Thanks for taking my questions, maybe two or from me. Firstly, we've seen one of your Toronto in New York listed peers Tonight's decision to proceed with a secondary listing in month and.
Do you think a an additional listing destination looks more attractive notice have high transaction is closed and you've got that materially larger market cap and liquidity.
And if so you know what would you see as criteria when youre, considering a potential destination for an additional testing.
Thanks, Jim So as a thing you completely right or the objective for US was first to to close the a the transaction with same AFFO and progress on the on the integration.
I believe that you know things on our into a into the right place and we always said that a in or the right time, we would consider second relisting. That's something that we are currently investigating I would say that we're balancing between a UK listing London listing and a and the New York listing, but we will do.
Definitely proceed with a one of the to a in the a in the coming months is I think that a you know that there are some pros and cons on the on on both sides on both listings, we need to do the to finalize because we've been in fact working hard on this subject over the last the last few months or so are we just need to to close up this.
This approach a there are some pros and cons on both as you know management is based in London, and a and I do believe that you know London would be a natural lending for a for us but a in on New York has also some some interest. So we just need to finalize that work we've been sharing a yesterday with our board of sorts on a.
On the on the options between there between the two and I wouldn't be surprised if we come up with a formal recommendation decision over the next time. The next two three months.
Okay. That's that's very interesting and then maybe just one on on the kind of gold price I look into an how you think about the business I mean, obviously where were at record highs when you're looking ahead to reserves and you know reserve prices and prices. The planning for mine plans next year you know what what are you thinking in terms of where.
That might come I, maybe as an extension of that you know are there any changes you're making in terms of underlying mine plans, given where prices have moved to in the short term.
Thanks, well you know for the timing and Oh, we might have a difference you during our next a budget session in a in November December but for the time being we want to remain a very a very discipline a thing that the good thing of having assets, which are able to produce at.
Below 900, 800 850, all in sustaining cost is that your maximizing your your cash flow.
So we're not anticipating to change our cut off grade Oh, we've been using so far sitting under gold price for our reserves and I think it will be important moving forward in particular on new projects I mean to keep a very low gold price in order to and to maintain a very disciplined approach and then sure I would say strong return on capital employed.
So at this stage, a you know not anticipating to to change cut off grade ore or to change mine plan and true up to take a high advantage on volumes, a with a with a higher gold price.
Okay. That's great and then maybe just one more quick one if I can just on the dividend.
When you're taking a dividend up to the board for critical do you think you'll be trying to benchmark yourself or feel TSX heads or do you think you'll take a more global I look in terms of targeting payouts and yields.
[laughter] I like I like the question. It it's a very it's a very fell one thing we need to look at the or the overall market than the overall peers and not just the TSX.
But no obviously I'm not going to take the a the UK appears as a reference I think that you know if you take 'em. If you take run gold and the were run gold was operator would you probably have an interesting you know PM that a in a fits very much into the type of business that we're running a and the and I think the probably a good a good benchmark on.
What we should be doing.
Okay. Thanks. Thanks.
Thank you and we'll now take our next question and just comes from the line for high I take your line is now open. Please go ahead and ask your question.
Hi, Good morning, Thanks for taking my question I, just one for me.
Talk a little bit about the synergies that you're seeing with semicircle on the operational side, whether its procurement or logistics you've had some time now to do some integration work maybe touch on the opportunities to lower the all in sustaining costs going forward. Thanks.
Sure well so we've got several years I would say if a of synergies a you know the the first one obviously is on the on the on corporate DNA, a and the and as part of the review that that we've done a you know what we see is a some some improvement on the overall.
DNA thing that or you know something fair to say is a you know when you add a the to cooperate Jenny cost of say my focus endeavor and then you look at the resulting a once the integration is done you have a into a significant savings between the combination of the two entities and so I would be expecting in particular given our.
Our production increase a that the overall corporate Ginnie on a dollar per owns a will be a lower and then to combine and also lower than the a and they're the ones on the standalone. So that's a that's one aspect a second aspect is obviously on the supply chain side.
Today, I would say a bang teen Cynthia the closing of the transaction and the quick wins on the on the supply chain and this was mainly in aligning all the key contracts on reagents and so on and by taking the best price between the two companies and making and applying them with the new volumes and getting a fair a discount on the on those volumes.
So we are expecting some between now and the end of the you're already some some impacts.
On the on the volumes and on the prices for those on those reagents. Fewer included then we've got a other I would say more that will take a bit more time over the next time the next quarter on a renegotiation renegotiating some some key contracts a contract mining and others.
We are a we have launched the also a key initiatives on putting in place a shared service center in a in Burkina Faso. That's the interest of having a you know for mines in one country is instead of having a in a lot of redundant tripled functions on each of the mines, ensuring that you put in place you know one.
On a one function in the in the capital city that can serve you know the for the four mines instead of duplicating four times to some of those resources. So those are all you know examples of of immediate synergies that you.
You should be able to see in terms of impact progressively in Q3, Q4, and a and on a full your basis, an extra in 21 and I would say that a you know we're going to be between 20 and $25 million minimum of of annual synergies for the sense for this transaction.
Great. Thank you.
Thank you and we will now take our next question and this comes from the line Uh Huh.
Hi, Chalet. Your line is now open. Please go ahead and ask your question.
Thank you operator, good afternoon, Sebastian and team are just a couple of questions from me first up on your no corporate related costs in Q2, I'm kinda give some I can give us some idea what the on a per announcements is what the additional costs might have been then if you expect.
Back to continue for the next couple of quarters I see that really I see guidance is unchanged. So just want to wander to see what the cost was in Q2.
Oh sure I think the you know the the overall the overall I would say donations and impact of cooking 19 in terms of putting in place contingency planning. So it has been no between seven to.
$8 million. So if you look on a per owns basis, a 150000 ounces produced that's about probably a $40 unknowns $4 unknowns.
So I mean, it's not a you know it's not a big it's not a big impact a and in fact, we're expecting that to the the fuel or a the fuel costs decreased should cover between Ah between now and then of the you're a those additional cost that we had I think the biggest impact for us of course in 19 was mainly.
To reshuffle the bid some of the a mine plans a in the and project a in a into two a in order to accelerate some items and free capacity is on side, you know not to have too many people's on site.
So a you know this has been the main impact in order to a pre bath and ensure that we had everything prepared for a stronger as strong h. too which is why we are highly confident in a in maintaining and confirming the a the overall guidance for for the summer for and the and endeavor in large group.
Okay. Thank the bashing and then on the deference stripping at Hyundai and about.
Is that going to be undertaken in the second half or do think that carried them. So.
The carry pump mining, starting at whom there and that stripping can be deferred to later years.
Mark you want to you want to comment on a on the mine plans.
Yeah on that one we carry pump coming in we can balance the the stripping Nate cyber just sort of what should that aggressively.
They will be an increase in April and mining towns in future years as part of the long mine plan.
Okay.
Yeah, I think it that's it from me.
Okay. Thanks Raj.
Thank you and it will not take our next question and this comes from the line Lawson Winder Your line smelting.
Go ahead and ask your question.
Hi, guys good afternoon.
Maybe just a follow up question on the dividend capacity you mentioned a buyback in your concluding comments as well I'm. Just curious you think is the buyback in terms of.
Partially offsetting a dividend or just being something that's a incremental.
Thanks, a lot so no I think the a you know the current views is that dividend is the the right instrument to put in place and a and we'll see that to be put in place as soon as we reach a net cash and cash position, which depending on the you know gold price forecast can the you know can come back and come quickly.
I think the buyback is just an additional instrument, depending on where and how you know our I'll share price a in a will be so we'll continue to monitor.
So what's the what's the best tutors, I mean to return value to shareholders. So clearly a dividend is the is one but we keep in mind that a you know a share buyback at some point might be something that a that is available in case, we believed that a introduction price is undervalued compared to our intrinsic value.
Thank you for that.
I also.
I wanted to ask about the other projects I mean, clearly set the CRO seems to be the favorite signed at this point, although of course that that could very well tends to be putting protocol side and looking at some of the other key potential projects you have.
Bands here.
The bank going Kalana.
Can you give us any updated a indication as to.
Which one Mike appeal the most of those three at this point.
Sure. So I think that a in a with the current gold price environment. Obviously, we have juggling was a you know optionalities I think a in a we are progressing on a on the updated a DFS for a full color now and I think that you know wisdom.
Gold price like the one we're enjoying right now colonize also you know becoming very a very interesting a in terms of capacity to generate strong cash ruins from returns.
Bend to I think it's a it's a bit too early bent who has a in a 2 million ounces of inferred resources or we need to go through an extensive drilling program there to convert those a inferred into indicated and look at the potential for for extensions or it's still a you know a very open in highly promising so I do believe that.
You know been too it seems to be attractive, but probably needs more work compared to a where we are out in terms of progress that boosted the core in the end color now so as we said the objective is a you know by end of 21, I do have two strong DFS, which how well optimized for a boasts a color now and for the whole and be able to decide.
By end of 21, a which one should go first in terms of returns and in bought it'll just be will be a continuing to work on a on the others, including a been too in the longer.
Its done a basketball so there's a minority interest there maybe you can comment on whether or not there would be in any interest in a consolidating that and then just in that same thing maybe just a now discussing if you're seeing any transactions that might that makes sense and <unk> and probably acknowledging that that you've made it.
I didn't really clear that you want to deals that make sense, but I'm just curious if you're seeing.
Any a acquisition transactions that that actually might make sense.
Well, we always you know very no very opportunistic and looking at a at the right opportunities in the case of into that has been there was an earning and learning plan with a with the Hama on some of the properties. So we are increasing progressively our shareholding a into that.
Into that project and as I said I think the the objective over the next to the next 12 months is to a drill extensively at a I've been to in order to convert a inferred into indicated resources and to see the potential to go beyond the current resources.
One thing we would like a enough for the next to the next to the next projects, we'd like to focus on projects that are able to produce a at least 200000 owns a another new on an annual basis and for 10 years period.
So we need to do more more exploration there.
And then maybe just one final one from me on a Unbilled go Patrick Patrick mentioned.
Seeing quite a bit of attention potential with that particular out that now in terms of timing when can you start.
Drilling there.
Everything significant drilling and then how does the security situation play into that thanks, Anna and that's all from you guys. I appreciate you taking questions.
No problem, when you're talking about bend too.
No no bogo.
Oh, sorry will yes, a boom, who is going to be a I think with a with manner Bushmen I'd move will be the the two biggest exploration budget for a for next year I'm that we see a we see potential that a boost assets, including at a I'd been group in terms of a you know a security.
First of all they all some.
Some targets, which are within a in fact, the the perimeter of the minor. So those are the priority ones that we stopped drilling a as early as a in a in the Q4 Q4 this year.
And then a as we grow in terms of a you know security environment and dispatching the right security a around the perimeter of the mine we should be able to start you know so drilling campaigns a into Vincent each of the mine or the key targets are within five kilometers around the mine and a and at some point once the a the six.
Richard plan will be a you know fully in place or was the restart of the a of the mining.
We believe that will be also in a position to restart the exploration.
Thank you very much listen.
Thank you.
Thank you and you will now take the next question and this comes from the line has that Chris Thompson. The lines now open. Please go ahead im asking a question.
Hi, guys. Congratulations on a great quarter I just got one quick question. Maybe this is fees Sebastian just curious about calmer attack bow, obviously, they're not cornerstone mines I guess the question is whether their core assets for the company right. Now can you give us a sense of the future that you see for both of these are these mines.
Sure. Thanks, Chris why do we always said that no. We'll continue to have a a very active portfolio management, a portfolio management approach, which means that a in a ones. We believe that a you know a mine is not a in a fitting in the portfolio we don't.
As you take a you know to find a and you and your potential owner I think that obviously the the gold price environment is a you know reflecting and changing some of their approach from a from you know day today.
You know when we look at a in particular, the Jack Bauer mine plan for a you know for next year or we see a very strong cash flow coming from a from the mine next year and the and I've always been performing very well, we see strong synergies not synergies, but I was a strong calendar approach between the you know the potential end of of.
Bow and the start of a project like a like for the whole.
Which on the same a in the same country or I think the subject that we'll probably have to reveal more cafferty. In Q3. In Q4 is a is kalma kalmadi off some a interesting optionality on a a lot of or refractory or a that a in a could be could become you know a much more.
Economic than they were at 1500 gold price. So those are the works that a that we need to do and a and if it's not attractive enough for us we've already been approached by a you know several potential buyers who are interested in buying this asset. So the thing we have options on the table a week or will continue to assess them and a entered.
The decision on you know what's the best in terms of Ah you know capital employed and ER and the location of management time, and the and returns for us for shareholders.
Great. Thanks for the candidates it really appreciate congratulations.
Very much Chris.
Thank you and the next question comes from the line has been Honey telephony. Your line is now open. Please go ahead.
Hi, Good morning, guys. So Chris I basically asked my question about Dot Com I'm, sorry about that.
And that Kurmanbek teacher, given the gold price right now.
So I'll just ask one final question on the dividend and I'm just trying to understand what kind of target are you starting for the debt ended it sort of a.
Sustainable dividend at a certain payout ratio maybe more.
One time oriented tied to your free cash flow tied to dollars per ounce or anything like that or is there any kind of color you can give a nonrecurring.
Sure. Thanks, Anita what I've seen first that the you know what we're trying to the you know to a two message and focus on the is trends over the balance sheet. So step one for US is a add to rich a net cash net cash positive I think the a the second step will probably be.
To ensure that we have a minimum net cash position on the balance sheet because the thing that you know this will give a even more confidence to up to the market then to investors that are in and despite this despite the perceived as a I would say geographic or risk exposure. We have a very strong balance sheet that can that can support the business.
Going going forward. So that's the real the a the first the first step.
In terms of dividend obviously in this is why we've been deferring to a ensuring that we have first the net cash position because we want a the a the dividend to be something which is sustainable or that we can maintain overtime and that will probably grow in terms of a view the as the cash flow and the net cash you know increases on the balance sheet. So.
You know that's probably the best way to a you know to frame. It at this stage is a it's something that a in a will be a evolutis as the S trends on the balance sheet increases.
So that a you know we can return property cash to shareholders.
Okay. Thank you very much.
Thank you and the next question comes from that I know Mark Bentley. Your line is now open system had [noise].
Good afternoon, Sebastian I have two questions. If I May festival, what mitigating measures have been taken against the impact of the rainy season on Q3 production.
Sure Mark what I think the a you know the biggest thing that we tend to work on a year on year is and last year I must say was a in a bit of a tough one big was was a very heavy rainy season in particular that started late and the to the point where are we.
Where commissioning a new Pete where they are in particular had one day and at the time, where we were ramping up progressively a the EG mine.
So last year was a in a pretty tough a rainy season environment. This year I'm expecting that a you know this will be much more smooshed unless we have a in a an unprecedented a in a rainy season, but should be much more smooth given that a you know we are preparing all that pits to be able to work properly during the rainy season.
Who is basically different levels a in a into different bids that are in the mine plan for Q3 in Q4, so that when you have a rayna a you know you're able to move on a youre shovels and trucks on the high level, a and while waiting for the de watering after the rain for the or for the Sublevel. So this is the way we've been.
Working in particular at a bow eating into one day, a which are the most affected usually by my rainy season.
Mark I don't know if you want to to give some some additional color on that.
I'll see you covered it pretty well Sebastian.
Okay.
Okay. Then my second question is do you see value in preserving cash so that to be able to repay the convertible debt in cash in twentytwenty three rather than.
Through share has given that the conversion prices now significantly below the share price.
I fully I would say that I fully agree a you know at this time I fully agree with just comment Mark a that has been you know our strategy. So far in particular, when we come up with the Nishu of a of the convertible bond instead of a you know doing a either an equity raise a and impacting dilution.
For shareholders at the time of the issue or a going for a high bond yield that would have been at a seven or 8% interest rate.
As you saw the the current coping on the on the convert he is a is 3% and we've always said that a you know we were expecting a EG and who they are two generates significant cash flow ones are in full operations and enough cash flow to ensuring that we have the ability to end to buyback. This bombs limits are therefore the.
Dilution for shareholders and justify through that a pretty attractive overall financing costs for building mines in a in West Africa. So that's a that's been you know clearly a a clearly said and still on the right out today.
Very good effects, thanks, very much the best in.
Mark.
Thank you and then no further questions have teams to do Sir you may continue.
Thank you very much operator.
I would just like to a you know, saying first my my team for a putting this on this quarter a up and I would like to Ah. Thank you all for attending a quarterly release and thank you very much and have it every day.
Thank you that's include check on frame smart today. Thank you all participating you may now disconnect.
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