Q2 2020 Equinox Gold Corp Earnings Call
Thank you for standing by this is the conference operator, welcome to the Equinox Gold corporate update and second quarter results Conference call and webcast. As a reminder, all participants are in listen only mode and the conference is being recorded.
After their presentations there will be an opportunity to ask a question to join the question Q You May Press Star then one on your telephone keypad.
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I would now like to turn the conference over to Rylan Bailey, Vice President Investor Relations for Equinox Gold Corp. Please go ahead.
Thank you very much Anastasia. Thank you very much for joining us today at the Aquinox Gold's second quarter.
Date, we will of course, you, making a number of forward looking statements. Today. So please do take the time to visit our website and our continuous disclosure documents on both feet aren't I'd go to be fully informed I will now turn the conference call over <unk> CEO Christian MULO.
Yeah, Thanks for letting and welcome everyone to the second quarter call.
Just to note here Peter Hardy CEO CFO is with me today as well as Doug ready head of technical services soon to be COO and not to renew our currency always here as well and Scott have for news head of exploration. So the whole team ready for questions at the end as well.
As a quick summary, you know we had a very good quarter you know despite the challenges of co would that we know all the industry and other industries have been dealing with Los Filos in Mexico was temporarily suspended for most of the quarter, but it's up and running again, we had two of our Brazilian mine suspended for a little less than two weeks and overall, we had a very strong cash flow performance.
Very strong cost performance for the quarter, we're really pleased with.
I gave us the ability to repay a little bit of our debt.
And as we sort of transition here after a recently smooth integration during the cobot crisis, you know I'm very happy with how things have gone since March 10th when the two companies. We a golden economics came together and the management team really has gotten onto the same page here and I'd say, it's gone as well as it couldn't be expected and or.
We want to say, thanks to actually room, who has been a COO since the merger and I worked with I T for five years at endeavor mining as well and you know he made the transition here very smooth and really a it was a challenging time as covert came on literally within days of us completing the merger. So thanks Daddy and he'll be.
The retiring at the end of August so hopefully you'll enjoy a little more downtime and as I would say semi retirement and you know pleased to welcome Doug ready to the team as COO worked with Doug again for five years. It endeavor. So it feels like a fairly seamless transition and I think shareholder should be very happy with with the result here of a this kind of trends.
I shouldn't from one experienced leader to another so looking forward to the future there's lots of exciting stuff the common will run through that here today.
Just starting on slide three with health and safety. We did have three lost time injuries over the 2.6 million hours for the quarter, a respectable performance there and with Covance you know the impact.
Once I'm, a little disruptive at Los Filos being down for most of the quarter, but all the mines are currently operational but let's not forget here the risk hasn't gone away with co bids.
We're finding a new way to operate in a new normal for now until a vaccine has found or.
Our things change, we certainly are operating with a lot more testing at our sites we've implemented a quite regular testing in California. We're doing the same in both other countries as well, where even instituting potentially some labs on our sites and we're using the local labs that are in the the regions. So we're taking it very seriously and weve integrate.
I did a lot of those costs.
And as you can see we've had about 16 million of temporary costs for the quarter. So overall, a good performance and I'm going to actually pass over to Peter Hardy to run you through the rest of the up or the financial results here.
Thanks, So we had another record quarter with a production of 127000 ounces and on the back of that we sold just under 126000 ounces of gold at a realized price of a thousand $712 crowds.
I'll note that the the sales for the quarter or more than 40000 ounces more than over Q1 and that was with Los filos down for most of the quarter.
Due to government mandated a temporary.
ER standby due to cobot.
Our mimecast cost from our cost for the quarter. We're also quite strong with mine Cas cost of $776, an ounce and all in sustaining of $900 an ounce.
Those costs are driven by a first of all good cost controls is by operating teams on the ground favorable foreign exchange that of course low fuel prices.
Also influencing the cost for the quarter, where it was a adjustments for purchase price accounting.
Our consolidated financial results, we had revenues of 215 million in mine operating earnings of 85 billion.
Adjusted EBITDA was 83 million at our adjusted net income was 27 million or 12 cents a share.
Including in those adjustments as Christian as mentioned work adjustments for our gold hedges and and warrants liabilities as we have Canadian dollar denominated warrants for the gold hedges. There was 38 million and warrants 49, and then also an adjustment for foreign exchange all of these non cash charges or unrealized a for a total of button.
90 million.
Our capital from operations a after changes in working capital for the quarter was 84 million and would note that before changes in working capital was 61 million.
On to slide four.
For our corporate highlights we received a 157 million and exercises on warrants and options during the quarter.
Those words are predominantly a legacy breo warrants that came in through the legal merger.
We were added to the Gtx and Esa S&P TSX composition indices.
And in addition, a of note Solars resources, which was the copper spin out from the company in the summer of 2018 listed on the Tsxv. They came out with a strong news release yesterday of good drill results.
And our 30% investment then that company is now worth a a market rate of 70 million on our balance sheet of course, we carry that that cost and so that market rate is not reflected there.
With respect to our liquidity and capital position of course, the the warrant exercises from the quarter an option exercise its really strengthened or continue to strengthen an already strong balance sheet. Our caf is 494 million at the end of the quarter and that was after repaying 22 million in debt.
Our net debt a which includes our in the money convertible notes is 244.3 million.
And if you exclude those because they are well in the money at an average convert price of 650, a share we actually have a net cash position of 8.3 million.
With respect to our share price or share liquidity and volume since the merger we've experienced a huge increase in both with an average.
Daily trading volume up over 48 million recently.
Going to slide five.
Noting again, we had her second consecutive quarter with record results.
It was on the back of first of all of course, having a full quarter of results from post legal merger and having the assets now in the portfolio.
Mesquite had a very strong quarter, producing just shy of 40000 ounces for the quarter and 76000 ounces in the first half of the year at very good costs.
The Brazil assets, despite all of the difficulties with coated in that country and thanks to very strong management on the ground is meeting expectations for where we thought they would be from the beginning of the year. So they had a strong quarter and Los Filos, even though it was down for the quarter still produce.
Just shy of 18000 ounces at quite low costs.
The rationale or the basis for those costs is first of all with the mine being on a temporary suspension, we postponed sustaining capital and expenditure activity to the second half of the year and you'll see that in our guidance in a minute when Christian walks us through it.
Of course, we had favorable foreign exchange there and the activity of residual leaching in of itself is fairly low cost and finally.
Purchase price accounting also contributed somewhat to the low cost as well.
[noise] I'm, just going back to the operational results and walking through each mine a little more detail Los Filos first in Mexico.
Mining in development recommenced in June the ramp up to place probably mid way through June we retest the whole workforce for Covidien. So we took a very cautious approach to restarting.
One of the impacts from actually the quarter delay in development has been that the higher grade ounces that we expected from the Guadalupe open pit number of a whole underground ore being deferred to 2021. So we did have a delayed quarter and essentially of production in Q2, but we also have a knock on effect in Q4, moving those ounces into next year. So.
That's why we've reset that guidance.
And our all in sustaining costs benefited from the FX rates and fuel fuel rates that Peter alluded to.
We're still seeing those those nicest depreciating currency rates, helping us in Q3 as well.
Arizona, Brazil, you know it was its first full rainy season had good production.
Overall, we met our expectations for production and the only thing I think we're a little behind on our waste mining for the quarter and we expect to catch that up here in the dry season, we benefited from having a nice stockpile of of lower grade ore that we were able to draw upon as needed during the rains and we plan to have the same going into next rainy season at the end of the year.
Here again, FX rates and fuel helped our costs and what we're really focused on now and Scott spending a lot of time on is as we come out of this rainy season is how to extend the mine life.
Drilling is ongoing we're looking at obviously advancing to a prefeasibility study for the underground.
Potential there and there is drilling going around on at depth as well as a satellite pits and along strike so keep but keeping on that space. We plan to have some news obviously as we get results from that program.
Mosquitoes, Peter said was really kind of the star of the first half head of production a little below our cost targets, we were definitely prioritizing the oxide ore from the historical dumps, which we continue to find more and more of a scott's programs continue to bear fruit.
For the second half and part of June were starting to stacks more and more non oxide ore so there'll be a longer leach curve slightly lower recoveries. So we have sort of tempered our expectations for the second half we don't expect exactly the same sort of results.
We expect slightly lower production.
But what's really exciting there at the exploration is ongoing and we had really good results to date.
Remember this mine was acquired for $158 million in 2018, when gold is $1200 an ounce than it had a three year mine life.
We now have been mining for almost two years and we still have almost a three year mine life. So we're really pleased to see that exploration bear fruits.
We're also excited obviously, it's a very sort of leverage to gold operation, where it has a very good margin right now and when you look at it on dental EBITDA basis here. These types of gold prices were seeing even with the big fall today in the gold price.
You know potentially EBITDA generation on annual basis could be in excess of actually the purchase price. So.
Free cash flow from that operation is a very exciting and the other added benefit now is we're just wrapping up castle mountain into production here in the near term and we'll be able to smell the gold and share some of the actual back office and services between the two mines.
Let me turn back to Brazil, and says and on the next slide on slide seven.
Present, basically was affected slightly by co bid the mining workforce was reduced for a short period there the local merit put in place some restrictions to manage the covance situation in local communities. So we were impacted slightly by that but it's now operating at full capacity.
Grades were slightly lower for the quarter, we do expect to see ourselves through that period and probably into late Q3 and into Q4 will be seeing return to sort of the normal grades were used to seeing out of has anda.
Again, good costs, a slight deferred expenditures for the for the quarter into later part of this year.
And then when you look at R&D and the other Brazilian mine of some scale had a very strong first half were very happy with the grades in the mining performance slightly better than planned and whats exciting as well as we spent a lot.
Capturing of water and the storage of water has been very good for this year, where we expect to make it through the full year with the water sources that we have available to US again costs were good some slight deferred stripping spend from the first half.
And what we're planning to do is actually have a big pit extension.
Once we receive the permit for that and we'll be able to access and higher grade or later this year.
So overall very pleased with RDM performance and people are the smallest mine in Brazil had a pretty respectable first half.
Wasn't affected slightly in April there was a temporary suspension there as well for a couple of weeks.
But how to overall good performance and benefited again from FX and fuel rates.
Looking on slide eight.
Our cost guidance and our production guidance for the year, we have updated its.
Despite the still being some risks out there in all three countries that we operate in due to Cove it.
Just feel this has been the biggest adjustment we've come down from about 170, 190000 ounces 200 to about a 100000 ounces of expected production for the year again impacted by that quarter to cobot impact and temporary suspension as well as the pushing on the higher grade ores in quarter four into next year.
Cost performance has been good there so we moderated that down a bit.
For or his own or we've increased our guidance by about 5000 ounces and reduce the cost after a very good first half performance mesquite, we've increased the production guidance by about 10000 ounces and has ended we've reduced it just slightly by 5000 ounces after the slightly slower first half.
But overall our guidance for the whole years about 470 to 530000 ounces, which is down about 12% overall.
And our costs are down slightly to 975 to 1025 per ounce and on a capital basis were about the same as we expected the beginning of the year about $90 million on a sustaining capital spend basis and about 144 on expansion capital and interestingly in there. We've added a few million dollars for early works at Santa lose.
Let me turn over to the growth and development projects on slide number nine Castle Mountains. The first one which is very topical today phase. One construction is substantially complete I think as of yesterday were 95 or 96% complete.
We've commenced stacking or in June commissioning is underway and we certainly expect to meet guidance for this year were slightly delayed with covance slowing down a couple of the contractors and getting the final completion of the the physical construction, but we don't expect that to cause us any major the laser issues. This year so to be conservative we did sort of delay the goldcorp.
A couple of weeks into early Q4.
And we expect to produce about 50000 ounces on average their per year.
And then in the background, we've been working on the phase two feasibility study, which we still expect before year end, which will basically.
Demonstrate the 200000 ounce per year mine potential of this project.
And in the background. We've also been drilling for water on site for phase two and also in the nearby town areas. So thats all ongoing and of course will we'll be giving you results when the when that comes to late in the next six months here.
Switching back to Los Filos in Mexico.
Despite the temporary suspension that actually some very exciting stuff's been happening at Los Filos behind the scenes. No. This is a project producing on average you know 200000 ounces a year, but we really do see the potential to 350000 plus ounces.
In our near future here.
And in addition to developing the Guadalupe open pit and the variable Hall underground.
We've been looking at upsizing the carbon in Leach plant size, so Doug and the team down in Mexico and working on.
Moving from a 4000 ton per day plant up to something like 8000 tonnes per day expandable to about 10. The plan is to make that study public in the next sort of.
The 345 months here in early Q4 mid Q4, hopefully we should have that result out.
And really exciting part on the back of that it's allowed us to look at the actual mine plan and scheduling of our actual mining and obviously with the new gold price environment. It really does change things and so we have a 45 million ounce reserve. There we have a 6 million ounce resource base and we really do see the potential to increase the reserves in the short term here. So.
Sort of watch this space and when we come up with those results you'll see the the whole new brand new plant the upsize overall production capacity.
And we should be able to convert some of that resource as well.
And then secondarily on a little bit smaller basis saddle lose in Brazil, we're excited about that restart as well, it's a little bit ahead of Los Filos in Mexico.
Just finalizing the capex that economics on it.
We should be able to get that study out here in the second half of the year as well we've already given the go head to start some early works.
Small construction works and maybe a few orders in advance of that full construction announcement, but we fully expect to be announcing that in the second half of this year and and remember that's a 100000 ounce producer with an initial 11 year mine life.
And similar to sort of Arizona, we're pretty excited about the upside potential on surface and underground there.
So we're pretty excited about having these three fully financed projects in our portfolio. I mean, you think about castle has got two phases to it. So we've got four projects in the pipeline here, it's pretty unique compared to our mid mid tier competitors here, we've got a funded internal growth profile.
And when you go on to our flip on the page 10.
Kind of illustrate that that projection over the next couple of years here.
It's a funded organic growth profile towards a million ounces a year of annual production.
It's roughly a 20% per annum growth rates and really what peers have that kind of growth internally.
We really think that the opportunity here from a valuation perspective as well is that we've been trading a little bit on a.
Single asset to maybe now a multi asset producer on the 0.7 0.8 times price to net asset value range a lot of our peers are now and that one to one and half times, they're more established they've been around for a number of years that are little more steady state.
Our market cap is below $4 billion Canadian and a lot of that our peers that are producing about a three quarter million ounces per year are in that $6 billion to $10 billion range. So if we can execute on these projects and deliver on that sort of goal of meeting that sort of 752 million ounces of annual production. We really think there's an exceptional potential here for reiterate.
And the leveraged the goal these outstanding when you look at our portfolio now we've got 20 million ounces in resource got over 12 million ounces and reserve.
Got it 20% per annum growth rate and.
Key to US now is really executing on this profile of growth.
And turning on to slide number 11, just to summarize and bring it all together you know we've had a good first half of the year. Despite the disruptions were very happy with performance of the mines in the integration of the team and the assets.
Second half of this year is very catalyst rich. So our long term plans are on track. Despite some of these disruptions the teams in place to deliver on it and so Los Filos and the CIO plant construction is looking to start in the second half towards year end this year and get that study, which would give you a lot more detail on it satellite construction is.
Already sort of underway in terms of early works and we plan to get that study out in the second half of this year Castle Mountain Phase one goal for should be the first half of quarter for.
Castle Mountain Phase two feasibility studies in quarter, four and as well, we're going to be starting the Arizona underground prefeasibility with an expectation of completing that 2021.
On the exploration front, there's probably too much to talk about here, but we certainly got our eyes focused on extending the mine lives at our core mines, but also looking at a mid term exploration plan, which Scott and team are looking at right now and.
Plan to set the stage for the next two to three years.
Corporately as Pete said, we've we've been included in the indices. We completed the merger we just got out some sustainability reporting information on our web sites now operational if you go to our website and look for that.
And as I mentioned, the rebate potential here is exceptional so.
We'll continue to focus on the fully funded growth platform internally, we've got a strong balance sheet.
About 500 million, a cash and as Pete said, we're pretty much.
Net debt free when you exclude the in the money convertible notes, which mubadala hodes hold through our long term partner in shareholder ultimately.
And our net debt is below one times EBITDA. So we're in a very strong position to deliver on this.
Profile.
So I think I just want to say, thanks to the team and to use shareholders for support for the first half of the here, it's not but an easy half although the gold prices made up for some of the challenges we faced in our business on a day to day basis in country, but.
The teams performed very well despite.
All the in country disruptions from coded and the new normal that we now live in so with that does conclude it may be open it up to a question and answer session.
Thank you very much Christian operator could you please remind people how to ask a question.
Certainly.
We'll now begin the question and answer session to join the question Q You May Press Star then one on your telephone keypad.
Sure tone acknowledging your request.
You are using his speakerphone, please pick up your handset for pricing any Keith.
Withdraw your question. Please press Star then too.
If you are participating online you can submit a question using the ask a question Todd on your screen.
Well pause for a moment of colors join the queue.
Thank you very much while we wait for people to ask questions on the phones I will ask a question from our online listeners.
How will the development delay at Los Filos affect your production in 2021 at that project.
In terms of Los Filos for 2021, I mean, obviously, we're just starting our budget process. So I don't have detailed information on that yet, but what we do expect to see here is.
As we move towards the higher grades at both.
Guadalupe in Burma Hall, we expect to see that production increase incrementally.
Into next year, obviously won't have the benefits of the CIO plant probably until the end of 2021 or into the first half of 2022, when it becomes operational so you'll see an incremental improvement and increase in the production rates and levels and obviously 2022 will show an improvement beyond that because of obviously the CIO plant coming into play so it'd be nice sort of.
Call it steady upward trend here over the next sort of 18 to 24 months.
Okay. Thank you. Please take a question from the phones.
Certainly our first question comes from a base Habib with Scotia Bank. Please go ahead.
Hi, Chris and his team and congrats and good quarter. Despite.
I will give backs that we saw in Q2.
Couple of questions from me question.
Number one starting off with Arizona.
Obviously production was lower as a result of the rainfall, which reduce access to some of the high grade areas.
How are you increased your guidance at at the mine as well for for the year now grades are likely reason not to increase guys give us a ballpark what the grades you expecting in second half.
And also are you looking to do anything else to mitigate.
Any sort of risk in the for this next April or rainy season.
Going into 2021.
Maybe I'll take part of that and let Scott Scott comment a little bit on sort of where we're focused for grade et cetera.
No I think we were trying to be fairly prudent and conservative going into the rainy season being the first one for us so we.
We did factor in some potential less mining in a sense, maybe not be old axess, all the higher grade or we had a good stockpile, which is obviously lower grade and I'd say, we slightly outperformed that the plant operated well and performed well we see is going to the dry season here the potential to slightly outperform in terms of throughput going through the second.
Half.
And I think in terms of grade maybe Scott if you want to his comment on that yes greatest slightly lower in the first half largely due to sequencing in areas that we could access during the rains and then of course, keeping that managing of the reins strategy in place.
Production up drawing from stockpiled during the rain setting ourselves up for the for the next rainy season as well. So we expect to see the grade come up as the team has been able to access said that more central areas of the pit so grades and the 1.51 0.6 range.
They'll be much more of that in the mine plan for the second half.
You know and again base, we plan to move the mining rate up significantly we plan for sort of half the rate during the rainy season and obviously.
I think it's going to be quite a bit higher here in the dry dry periods will just like we experienced last year, and we'll be making up for that stockpile again, so that going into the range. We have that stockpile in place and are ready for it.
Okay, that's great and just.
On I'm, just sticking with Arizona, you're looking to modify the processing pumps yet either.
Basically I guess to net recoveries was this conversion into what since you started production, Arizona was this something new that.
Hasn't has come up.
And also if you can just a comment on the cost of this conversion.
Yes, I mean.
I don't know if after you want to comment on generally I can comment about the history and the cost as you want but you want to comment on a generally.
Yeah I think.
If you look at the the changing in the looked at it could as Steve said.
Got it doesn't.
Moving to India, Swedish little bit more carbonaceous beautiful and also more so 50 deal. So that's most suited to this yeah ill, but other than that she I'd be so good.
So just and maybe you can comment on that.
Just flip chip.
Yeah, I mean in terms of the cost of Ace I believe it's less than a million dollars. So it's pretty minor and it really has no disruption to the operations that can be done sort of in the background as we operate here and those kind of seamlessly happened I don't think people even notice it.
I will give us a little bit more stability and probably those recovery rates along the way but.
Overall pretty minor impact.
Most of most of the equipment. This lady on site electing to stage getting.
Due to be able to modify the thanks, So what's your sense about the Nigerian shoot.
Perfect and just switching gears and just going to gas amount now Chris and you were mentioning that you've you've started drilling for wardrobe site.
Can you comment or any sort of.
I mean is going according to plan.
If you give us some color on that product.
Yeah, I mean, obviously I can only give you so much color that at this stage I can tell you. We're drilling I think we're on whole number four or five theres water and all the holes.
You got to do our pump tests, we got to do our work to actually see the recharge rates than that but good news is there's water there were being I'd call. It prudent by also drilling.
And going out to sites that are give or take 15 or 20 miles away private lands that we could accesses supplemental backup or alternative water sources. So we're taking all options into play here and as as we hoped and expected. We are finding water. It's just a matter doing the work now to to prove up that.
Which site, it's coming from but there are multiple sites.
And so.
I think we'll we'll get that out in the next few months here you know, we just need enough time to actually go through the pump test in the the recharge rates.
Sounds good.
So that's it thanks for taking my questions just.
Thank you.
Our next question comes from Kip keen with S&P Global Please go ahead.
Hi, everyone that thanks for taking my question.
What's the strategy your view on shareholder returns I know, you're still on a growth base year, but I'd be come into more cash assuming gold prices remained elevated score.
Quarters or years, hi, how much repurchase.
Yes, that's a good question actually in we're getting that question much more often days in this current gold environment, Despite our growth profile. So.
In terms of our cash flow now as I said, we probably have operating cash flow. These kind of gold prices, where we're going to be funding our growth profile from operating cash flow rather than needing to use our balance sheet. So one of our plans is here in the next few weeks actually probably to repay $200 million on our revolving credit facility to pay that down and then.
I think secondarily, we're just starting the budget process here and we have to entertain the thought of a dividend I had a few people ask about share buyback, but certainly a dividend or share buyback for next year.
Despite the fact were in heavy growth phase at the moment, we just feel that at the moment. If we continue with the sustain high levels of gold prices, we will have the cash ability to start returning some capital to shareholders.
In some form or another so sort of washes space I think for this year, let's get through this.
Ended this year and the co it sort of stabilization and then in next year with our guidance and in coming out we should be having be able to comment on that a little more detailed but dividends are coming up the radar screen and we're certainly getting a lot of those questions. Today. Thanks, Linda just a follow up on another question.
[music].
In terms of.
Right.
Your operations and.
Staffing levels have you made any change in.
Say it or is on iron ore mesquite in terms of staffing levels sort of pre versus post kogut any savings there or are you seeing essentially the same.
I mean ill comment generally and ask you. Please jump in if I Miss anything but.
Overall, I'd say staffing levels of stayed fairly similar Theres, a few places where maybe we actually look to add a couple of people.
Because we have to modify shifts or rotations in that.
We've actually added a little extra in terms of testing in that for sure in terms of the regularity of testing if people and physical distancing et cetera, so it might cause a slight increase but not that significant.
We're obviously being completely offset by FX rates and fuel prices et cetera. So in terms of net net cost, it's probably actually down at the moment. Despite some frictional costs. If you want to call that from slight changes to the way we operate.
Okay. Thank you I think one of the other thing through that other thinks we did was also but of course tightening that had to make people mortgage field. So they can be used to illustrate.
To cover the shortages, resulting from that.
And did one instance, we had a contract that come in to do some of their work.
In place.
People.
But that's the mine.
Okay. Thank you.
Thank you we got a question now from a shareholder online in Saudi Arabia. When do you expect the company to be profitable on GAAP measures.
Hmm.
Yeah I mean.
At the moment, we would be but the gold price in the share price have been outperforming and we have those non cash losses that are coming at us.
From increased share price, which obviously revalues, our warrant liability on the balance sheet as well.
From the gold hedged from from the legal.
Merger is actually gets revalued at higher gold price so.
I mean, I think this quarter, if things stay flat on both the share price and a gold price based or are they happen to drop back a little bit which we've seen happened today, you have a potential for minimal to no impact or even a positive impact from those two factors and if that is the case, we're going to be seeing profitability here this quarter.
So really we're on the cost will that right now.
Thank you.
Other question from online you mentioned in your catalyst slide that you have accretive M&A in 2020 is that still the plan despite rising gold prices.
Yes, I mean accretive M&A, we probably it's not item number one on this list anymore, it's kind of down the list, we're still opportunistic and keen to grow the business, even externally, but we've got a lot of growth internally, we've got our focus on executing on that and we'll kind of keep our eye on the market and keep an eye on opportunities and we will look at things we would love to.
Continue to grow expand the portfolio in the Americas if possible.
But I would say, we don't need to get bigger for growth sake anymore. We've gotten the diversity to scale the liquidity now, but if there's something attractive we'd love to add it to the portfolio continued to up to your the portfolio looking for lower cost longer life, good jurisdiction mines, along the way but.
We don't need to do it it's something we'll be a nice add on.
Our next question comes from Dalton Barretto with Canaccord Genuity. Please go ahead.
Thanks, guys question the AD the online call actually beat me to the accretive M&A question, but I do want to follow up I'm not though.
Yes, it's one you didnt touch on when you talk talking about the rest of the catalyst. There. So just in terms of the current gold pricing. How are you thinking about the portfolio right now in terms of feet on the number of assets you have the quality of the assets and then as you look externally and trying to opt here. The portfolios you said what is that you look.
Are you looking more for Greenfield type stuff is just not anyone else you want to build up do you think you'll get the assets you're looking for in this environment at the pricing while I'm just any comments on that.
Yes, I mean, it's certainly harder to find those opportunistic deals that 2000 goals within 1200 goal thats for sure but.
Again, it's quite often can be on a relative basis. When you look at these so we will look on a relative basis, we do need to execute continue to get our re rating to allow us to to be a little more opportunistic on these opportunities but.
I'd say that underway at the moment, we're focused on things that are ideally, it's producing assets in the Americas hundred 50000 ounces plus type and live production, but obviously a lot number those are getting a re rating in terms of because of the gold price and there are trading at a higher value today. So.
They may not be as attractive as accretive as they used to be so we may pass it on a number of things like that so I'd say the doors opening I know Ross is certainly said before that the discount between producing and development assets wasn't big enough in the past I would say maybe now it start open up a little bit where.
Producing assets are being Rerated revalued and.
Maybe we are going to look at some of the development assets as well and because over the next 12 to 18 months here, we should be executing on three of our growth projects will continue to look at that development pipeline in long term so.
I'd say, we're a little more open to a development asset than we were a year ago or two years ago.
Okay, Great and then.
Just given where Solaris is trading now what are your thoughts on your holding there.
I mean, where the we'd love that asset as individual investors as as a company for for years now and it's been kind of hitting in our portfolio until what does it mid 2018.
Great to see I get to the light a day and Richard and Dan I've done a good job obviously, so far for its short life on the stock exchange again, I think our value right now 70 $75 million for our third of it.
We have no plans to be selling that in the near term. We believe it's worth a heck a lot more in the longer term and we love the Orients asset in Ecuador, I know Scott sitting beside me and he's in Greg or both here.
With that asset and then there's three or four assets more assets in this in the Americas in that portfolio and so we see the potential there and long term of creating significant value. This is just the start hand, where core shareholder and we plan to be they're supporting.
Okay, Great and let me just one last one for me are you able to comment at all in terms of but move bundle us thinking now just given where your share prices versus.
The exercise price on the birds.
Yeah, that's been a great partnership since they got involved I think if there is sort of a win win and it's kind of been that with them and.
They've gotten some good returns we've gotten a great stable long term partner in shareholder and we really do view them as a shareholder.
It did come in through a hybrid instruments. There is such a large fund and deep pool of capital I think they manage about a trillion dollars that they normally don't do deals of the scale and small size that they did with us. So they came in through a hybrid convertible and we're now at the liquidity and scale or I think.
It's a really interesting opportunity for them to long term to be a partner with a good side gold mining company, but will be a million ounce producer and.
We see them as a long term shareholder alongside Ross beauty, so great support and I think you'll see them covered that at some point. The next few years here, but there is no urgency to doing that they've still got three or four years left on their convertibles.
But what I do see them as a long term partner supporting our growth.
Okay, great. Thank you Thats all for me.
Thanks.
Our next question comes from Kerry Smith with Haywood Securities. Please go ahead.
Thanks, Operator Christian I apologize if this question to ask thank God jammed up on another call, but could you just go through with me.
The permit status for cash amount phase two expansion at Los Filos, and we started centers just so I understand which permits you need if any.
For each of those and just a timing.
So I'll comment maybe our castle, maybe I'll, let Doug count on the other two.
So for castle basically we've got our permits for phase one it's going operation here.
Thought is on the back of the feasibility study for phase, two which should be out in quarter four will submit that use that ultimately as our plans for phase two and we'll submit an amendment application ultimately to the regulators in California, there on the back of that so give or take quarter for quarter. One next year, we'll be able to submit.
An amendment upsize the area disturbance within our current Eas boundaries. So we assume that will take us at least a couple of years to do it is it is the you asked in California, So it's a methodical.
Permitting process, but remember, it's an amendment to an operating mine.
We've been very successful so far with both castle in terms of permitting as well as and Imperial County with.
Skeet so.
We see it is a process it will take time and resources, but.
We need to do the right thing first and show the very good citizen and operator, and then we'll go in them and [noise].
In terms of the other two maybe Doug you want to comment on Los Filos since I lose.
Los Filos, obviously the optimized.
The ability study work is underway at the moment.
We.
Previously we had the.
Permit for the plant location it was conditional on confirming the final footprint for the plant.
At this point, we will be moving that to a site that when we did our Geo technical program. We made a quite comprehensive covered some other areas that we thought would be superior and.
It looks like we will be moving the plant site. So we would revise that permit.
It's my understanding will take about a six month period to go through that.
Revision of just the outlines is still permitted just a revision of where the footprint would be.
The other ones would be the.
Filter tailings deposition, which.
In the.
Permit.
Again, it was final confirmation of the outline we previously had been putting planning to put the filter tailings onto the heap Leach pad So line facility.
Nothing changes there. So it's just a matter of confirming the out why we may shifted slightly because we anticipate the heap leach pad will ultimately be a bigger design.
Which is a good thing.
And then for.
Jeremy.
All right that when would that permit for the filter tails be put and then is that going to happen. This year that after the seasons on it doesn't work it'll go it will go as soon as the study goes then it'll be it'll be submitted but that will come through before and that is just a roof confirmation of the footprint. So.
It should be as straightforward revision.
And that would help and while we're in the midst of the.
Detailed engineering and moving into construction.
And then the final one that we have had all along was permit for the verbal whole underground we will be using the.
Currently permitted portal and ramp.
We do have additional sites for extra portals that were already permitted.
So we are just looking at one of those as being a additional opportunity in the future.
So we just tough to revisit confirmed that all the permitting is lined up for that one so no change their anticipated.
So all of those permits for Los Filos said, it sounds like they would all be.
Middle of next year would that be reasonable than.
I'll be reasonable timeframe.
Okay.
Beyond that.
First sent to lose.
We have all the permits with.
It is one thing that we're doing at the moment, which of the geotechnical drilling program to do a designed for the next phase for the tail end component.
So when that Geo technical design is finalized that will go in for a permit for.
Particular lift which will be.
No longer life lift on on side, but lose.
And then now that not all permits are in place.
Yep.
Okay. Okay, and then okay. That's great and then maybe just on me.
On the Amendment accounts Mountain Christian do you is it all state approvals that you need for that Amendment mentioned, they would be no federal involvement in that process for phase two.
Yes, it will be BLM in San Bernardino County, the lead agency.
Okay. Okay. So just the BLM is the only federal agency then okay, great. Thanks very much.
Yes, Thanks Kerry.
Thanks, Gary we have another question from listener online and Vancouver could you. Please provide a bit more color on your comment about sharing resources miscues and capital mountain and to what extent this can be done in a way to reduce costs and increased efficiencies.
Yeah sure. It's a good question now that we're coming operation.
The first Q1 is we didnt build the very back end of the plant there at that castle were actually trucking loaded carbon high grade gold on the carbon down to mesquite, which is about a four hour drive on a paved highway directly down a site effectively so we'll be able to smelter down there there's excess capacity. So we've been able to save up about say, 10% of the capital by.
Doing that.
We're using obviously experienced team and process. There. So we don't need to commission to the back into the plant in the sense.
There'll be back office staff will be reporting so be it systems that will be HR support there will be permitting support.
30 tax consolidation between the two sites, so any startup losses versus profits in the ski could potentially be offset against each other.
Things like.
Joint purchasing in the ultimate in the mid term here, when we're buying either cyanide or tires or spare parts et cetera, we'll be able to do that jointly and.
You know something like a fleet mosquito if we continue to extend the life there, maybe we need to be replacing part or all of that fleets in the long term it could be moved up to castle, if need be or it'll just state and skied. If we continue to extend life there. So.
It was all those kinds of opportunities.
Perfect well at the moment there are no more questions online or from the phones. So I guess, we'll wrap the call. Thank you again for joining US today. If you do you think of any other questions. Please don't hesitate to get in touch.
Understand there was a bit of an audio glitch the beginning of the webcast Dolby audio was captured on the conference call. So we'll be able to fix that up in the archive, which will be available on our website and a few Irish I'll now turn it back over to Christian for closing remarks.
Thanks Ryan.
Thanks again, everyone for attending and for your support during these challenging times.
The business isn't a great place growth is intact in the long term plan here is exceptional so stay tuned half second half of this year is going be pretty exciting lots of good news I think coming.
You know as we manage in this new environments that we live within so please stay tuned thanks.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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