Q3 2020 Yamana Gold Inc Earnings Call
All participants please standby your conference is ready to begin.
Thank you all for joining us this morning before I turn the call over I need to advise that certain statements made during this call today may contain forward looking information and actual results could differ from the conclusions or projections in that forward looking information, which include but are not limited to statements with respect to the estimation of mineral reserves and reach.
Of course is the timing and amount of estimated future production cost of production capital expenditures future metal prices and the cost and timing of the development of new projects.
For a complete discussion of the risks and uncertainties and factors, which may lead to actual financial results and performance being different from the estimates contained in the forward looking statements. Please refer to your man. Its press release issued yesterday announcing third quarter 2020 results as well as the management's discussion and analysis for the same period and other regulatory filings in the.
Canada in United States.
I'd like to remind everyone that this conference call is being recorded and will be available for replay today at 12 o'clock PM Eastern time.
Replay information and the presentation slides accompanying this conference call and webcast are available on humana's website at <unk> Dot com.
Now I'll turn the call over to Mr., Daniel Racine, President and CEO.
Thank you and thank you all for joining us and welcome to our third quarter Conference call.
So these Jason.
Our CFO and remarks, then our senior VP of exploration.
Let me start by thinking again, all our employees contractors suppliers and their family.
Keeping our operations safe.
This difficult time.
First of all the ways, let's talk about our health safety environment and corporate responsibility.
Total recordable injury frequency rate was <unk> 0.4, representing a 31% improvement.
Our social license to operate index, which is based on surveys conducted on our older communities continues to show an increase in trust across all the corporation.
Evidence indicates that thought COVID-19 response and engagement is a significant contributor to the improvement.
We have as I said on fuel the fuel to call engaged closely with our host communities since.
The early stage of the pandemic to understand their needs and help them across address those needs.
Provided versus the nation, along with thousands of mass loves so the size or respirators and other medical equipment and critical supplies.
And we will continue to do everything we can to support our communities partner through this challenging for you.
During the quarter there Jack will be not mine was named one of the 10 best places to work in the province of by by the Great place to work Institute.
Okay and you didn't Malartic mine received two awards the first <unk> SG O'connell trophy for the cubic <unk> from the cubic mining Association.
Recognize the operations for improvement in the operations health and safety records compared to the industry average.
Second there was a sustainable development environments Award.
Outdoor chamber of Commerce.
For all of these were kind of nations, which tell US we are doing the right things and.
Critical areas of our business like health safety sustainability, and environmental stewardship and thought as management.
Turning now to the future we highlights we delivered another strong quarter, both operationally and financially.
We produced 201 772 ounces of gold during the quarter supported by standout quarter funds like will be no. Indeed at Malartic opinion, I mean, they're definitely Duff.
The reserve production was just above 3 million ounces due to an exceptionally strong performance for my opinion.
Your production.
It was 240 466000 ounces exceeding plan as a result of strong gold and silver production.
Cash costs of $723 per Geo and all in sustaining cost of 1096 would you were in line with that old guidance.
Sustaining capital increase during the quarter as expected after declining in Q2.
Several mobile and can do them a lot they can ramp up following temporary suspensions due to go live in 19 releases restriction.
We expect Q4 to be our strongest production quarter of the year and that's such a cost per ounce will decrease.
That's earnings during the quarter, it was 55.6 million or six cents for sure.
Adjusted net.
Net earnings was 92.9 million or 10 cents for sure.
Cash flows from operating activities were 215 million and 237 million on an adjusted basis.
Cash flow or at a multiple that includes higher production periods, where we own operations that have since been sold or discontinued.
Cash flows from operating activities before net change in working capital.
199 million or $221.1 million, an adjusted basis.
Cash flow before dividends and debt repayment.
And 56.8 million.
As of September Thirtyth the company.
Cash and cash equivalent of 474.2 million, an increase of 149.4 million from the end of Q2.
We have significant cash sufficient cash on hand, and liquidity through our current cash balances and incoming cash flow to 40 manage the business and phone growth.
Within without having to borrow.
This includes but it's nothing limited to a litigation related to the Jack will be enough that expansion.
Fair enough, the Odyssey underground, which I guess Canadian Malartic generous.
Generative exploration.
Development of integrated that were weaker in Alumbrera project.
Further balance sheet improvement all the while having excess funds to do you gauge the bus to build other opportunities and dividend increases.
Subsequent to the quarter, we have announced that we will be increasing our annual dividend by a for the 50% to 10.5 cents for sure effective in Q4.
That is 425% higher than.
Our dividend level, just 18 months ago.
Isn't it will talk more about our dividend and dividend policy during his remarks.
Subsequent to the quarter. We also increased production guidance, our Geo forecast for this year is now 915000 ounces compared to the previous guidance of 890000 ounces.
This includes a 1% increase what bridges gold production forecast and a 6% increase to our previous syverson forecast.
Looking at our operation Jacoby Doc adds another strong quarter with production just about 44000 ounces.
The higher production resulted from the meal again, achieving a higher than than steady state of 6800 tonnes per day.
I'll provide an update on the minds optimization project in a moment.
Delphine on good for the gold production was strong during Q3, while silver production grades and you can see that the divorce.
<unk> Singh of higher grade silver Horn.
Silver grades are expected to normalize in Q4.
Dissipates higher grade gold grade in the quarter due to increased underground production and lower stockpile reclaim.
Well, that's mining from higher grade.
All great sectors.
And he didn't Malartic posted a strong production of 76398 ounces of gold due to higher throughput and fees.
Or not produced 13305 offices of free commercial production gold during the quarter.
And its successful ramp up resulted in the Barnett deposit declaring commercial production on September Thirtyth.
Several mobile mine and processing plant is operating at full capacity.
As of September Thirtyth following the temporary government restriction related to go in 19 and the subsequent ramp up.
As an artist or it was up and it's optimized thousand totaling 1150 tons per day, which is expected to be maintained going forward.
The transition to underground ore with higher grades is expected to continue in Q4.
Derives substantially higher production and lower costs.
Yeah, that's lucky that continuing to perform to perform well with results driven by higher feed grade and decreased on process larger.
Largely due to continuing improvement in productivity, which continues to contribution from Douglas and done in your Bulldog zones.
Turning to our strategic development and project updates.
Our agree couple, which I can get that Mark Argentina, we continued to advance the integration of everywhere. We go with I know very well and expect to complete the integration in Q4.
After which you Intergraded project would be manage as a combined operation.
To reiterate our excitement for this project. This is a very unique unfortunately d., we have in front of US I go because one of their largest on developed copper gold deposits in the world.
The integration with existing Alumbrera mine creates a de risking.
On field project.
Reduce capital requirements and reduce environmental footprint.
We remain on track for physicians. These study results in 2021.
As I mentioned Q threes with potentially could be not rich 6800 tonnes per day. This was the second straight quarter that the mine achieved this milestone.
A lot of us well above the target range of 6500 tonnes per day that we set for phase one of theirs or who we now project.
Weve indentified opportunities to further optimize result, and recoveries achieving the phase one with a modest investment.
Work commencing in Q3 for the expansion of the gravity concentration search with with.
The objective of optimizing gold recovery.
Higher throughput and.
Machining is scheduled for mid 2021.
Let's consider our goal technical work, which support the availability of the phase two expansion has already been completed.
The company intends to advance the project following the completion of the feasibility study in mid 2021.
The permitting process is also underway.
Like I mentioned before the phase two expansion will increase throughput 8500 tonnes per day and dig the younger annual gold production to 230000 ounces.
At Canadian Malartic construction of the surface infrastructure offices and direct border to the underground project is well underway with the rounds of Luqman into Odyssey, and whose mother FSIC scheduled to start in November.
<unk> will allow tighter definition drilling on Odyssey east about uptick and he's going to do from underground drill platforms and eventually be useful in mining and all their age of orphan upper zones.
This will allow us and potential production from Odyssey, South providing higher grade mill feed to complement the open pit production.
The underground project.
Me I've seen from our press release this week, it's continuing to advance with extended drill results reported on the East coast.
We are very encouraged by the resolve and excited by the potential for this project.
Our exploration team is doing an outstanding job both our existing operation.
Our generative project and then we will talk more about this in a moment.
As a complement to the advancement of these inter and all the opportunities.
Thirdly, the acquisition or investment in prospective exploration up what you need to use that align with our objective for capital allocation and financial result, the rich discipline quality geology and operational expertise.
Such opportunity do you wouldn't meet minimum requirement to achieve mineral reserve and middle of our resource inventories of at least 1.5 million ounces supporting a mine life at least eight years at 150000 ounces per year reduction right.
Before handing off to and we also want to highlight that on October 13, we began trading on the main markets on the London stock exchange, adding another senior exchange for treating to our existing of this thing in Toronto, and New York and further expanding our public market profile.
We're excited to be entering this market and look forward to sharing our story into UGI and Europe visiting relation relationship with the investment community there.
With that I will turn it over to intervene to provide an update on exploration.
Thank you Daniel.
Starting with a high level overview of our generative exploration program. We've currently built large land positions in all the countries, where we operate and the generative program targets are most highly prospective areas.
Includes both advanced an earlier stage projects wherever we see district scale potential.
A key objective of the program just to add a new inferred mineral resource of at least one and a half million ounces of gold that in three years.
Were going to support the corporate objectives of what potential production platform that can produce 150000 ounces per year.
Given the quite pipeline, we have a quality projects and the strong corporate commitment to organic growth, we do expect to be able to meet this objective.
As Daniel mentioned as an extension of that strategy. We also actively evaluate opportunities to acquire advanced stage exploration assets as long as they in line with our corporate objectives.
Now, let's take a quick update on some of the key projects in the program.
Monument Bay located in Manitoba, Canada drilling.
The drilling program to test the depth extension apply grade shoots at twin lakes.
He is ongoing with one drill hole completed in the quarter and to further de pulls pending.
There's a 16000 meter drill program plan for the winter as a first step in developing a high grade potentially underground resource in this project.
I'd love to be yet, which is an advanced exploration project located in Bahia, Brazil.
Turning to date and 2020 focused on 11 are they a south and southwest songs located immediately sell it can be established resource.
Ultra positive to date, and we expect to add to the resource base of oxide mineralization by year end.
Exploratory drilling is continuing in Q4.
The Jack will be in an arcade project is also located in by your state located just a few kilometers north of the Jack will be the mine.
This project covers 70 kilometers a favorable geology that extends north from the mine site.
Given the prolific geological setting good surface results, we expect this to become a flagship exploration project for the company.
During the years surface work is to find a 4.3 kilometer strike the mineralized read some parent call one of our high priority targets exploratory drilling on this target was initiated in Q3 and I'm a continued to the end of the year.
Further surface exploration is also underway and we expect to generate additional drill targets since make star. The 70 kilometer extent of the amended its exploration concessions covering this favorable geological basin.
Finally in the general Barbara Redman, located in Brazil's current Nbn Co. state drilling.
Drilling in Q3 extended the core massive sulphide zone that we discovered last year music.
We've extended the zone to the east and we now see 800 meters of strike defined by drilling and the original surface discovery.
Exploration will continue both on the known intercepts on the massive sulphide zone, but we're also going to be testing other copper gold soil anomalies in this large project to try to better define the size and the nature of the EPS.
I'm going to turn now to our exploration programs that are producing mine sites.
As you may have seen and as Daniel mentioned, we issued an exploration update on Wednesday for Canadian Malartic.
Exploration in Q3 focused on infill drilling at east Cold.
Recently discovered zone that we announced last year that significantly expanded the gold mineral resource base at Canadian Malartic.
And completed 38000 meters of drilling in Q3 of these called <unk> and the results have confirmed the expected grades and west of the zone.
We're also seeing that the zone remains open both at depth and along strike.
The positive results provided confidence to proceed with an expiration route.
And these results as well as ongoing drilling to year end will be incorporated into a new resource model to form the basis for a P.A. can be expected to be completed in 2021.
The higher grade he scolded zone is expected to significantly improve the economics of the consolidated Canadian Malartic underground project and these latest results represent a very significant step towards defining the project because a multi million ounce deposit.
Would support a future long life underground mine with.
Potential multi hundred thousand ounce per year production plans.
Moving to Jack will be not certainly.
Drilling was completed in the quarter at kind of get a school and that kinda have yet a central connector zone.
Continued to provide positive results. It's further expands the mineral envelope and one of the highest grade parts at the mine.
Also been working on the news on child, they look to that extent the child. They know mine to the south we've seen very good results from this zone and it clearly has the potential to add inferred resources at the mine.
At Cerro Moro in the core mine area exploration drilling is focused on the main escondida is always structural corridor, we completed infill drilling and I've also been testing new exploration targets based on new interpretations of the plunge in the mineralized envelope.
Drilling also continues to test the numerous exploration targets that we have within the property and the near mine area.
Most results are still pending due to some slow ATSI turnaround times in Argentina, that's one.
In addition surface work has identified an exciting new targets for us that's the lending vein located in the northern section under several Marlin package. These.
We've traced the main on surface for over 11000 meters, that's significantly larger targets than any other targets currently on the project.
Surface have assays from some sections of the pain have shown values from one gram per tonne gold twin size 15 grams per ton gold from selected grab and chip samples.
I didn't drill ready targets, we're going to expect to drill in Q4.
Well look now into an opinion, we're seeing excellent exploration results opinion on this year in fill drilling just returned positive results from a number of sectors, especially from patent pickup a mental and body and the love Hello, My name's, indicating very good potential in these areas front you've indicated resources.
We're most excited about the drilling success at Colorado, this or it's demonstrating significant potential we've got good drill results, we expect to add two inferred resources, but much of the strike and the debt extend to the zone has not yet been drilled tested NBC excellent potential for girls can be a significant new mineralized zone for the mine.
I mean, they're up Florida in filled during the quarter cut significant results as well, we're seeing good numbers from a number of things, including several high grade intercepts in Taiwan done they have pulled them.
As well as positive results from pole loading enough floor, indicating good potential for new resources and all of these areas.
Exploration that left Florida, and being able to consistently expand the mineral envelope falls to the east and the west and the core mine, indicating a strong future for this asset.
I'll now turn it over to Jason to discuss the financials.
Thank you Andrea and good morning, everyone, turning now to our financial performance revenue in the quarter was $439.4 million compared to 357.8 million in the same period of 2019 and 23% increase however.
However, gross margins, excluding BDNA rose, 40% to $272.8 million as costs were pretty much in line with last year.
Gee any cost in the quarter were essentially flat to $21.4 million.
Earnings during the quarter was six cents per share compared to 21 cents per share a year earlier.
Prior year earnings benefited from a one time $273.1 million gain from the Chicago sale.
On an adjusted basis net earnings doubled to 10 cents per share from five cents last year.
Total capex across all categories was about $62 million during Q3, as we bounce back from Kobe delays in Q2, although we still had some spending delays in Q3.
For Q4, I expect capital spending to be above the levels of Q3. The team will also be true of exploration expenses.
But despite the higher capital in Q4, we expect a meaningful increase in production, it's actually unit unit cost would be the lowest of the year.
Well see a bigger drop in cash costs versus basic because the basic as I mentioned, we'll have the higher capex, but we expect our hesik over to age can be between 10, 20, and 10 60 per Geo that we recently re guide.
Coming back to Capex, one category to point out, though is on the expansionary capital side that benefited from the margin associated with pre commercial ounces from burnout Arctic.
I'd burn out and we declared commercial production on September Thirtyth.
Emerging during the quarter from its pre commercial production.
Approximately $13.5 million was treated as a reduction in our expansionary capital for the quarter during Q3 starting.
Starting in Q4 sales from Burnett will flow through the income statement instead of being capitalized.
Quarterly cash flows continue to rise with cash flows from operating activities climbing to $215 million and cash flows for net change in working capital of $199 million.
That compares to 157.4 million and 152.4 million respectively in the prior year quarter looking back to Q2 this year cash flow in the quarter has more than doubled.
These cash flows included Cobra costs of $8.6 million for the quarter down from about $19 million in Q2 or Q4, we expect to see a further drop in these costs.
But to give a clearer representation of the cash both for Q3, if we adjust for these corporate costs and the margin associated with the pre commercial ounces.
Kartik I mentioned on the prior slide in.
Normalized cash flows from operations would have been approximately $237.1 million in before working capital movements would have been approximately $221.1 million.
Daniel noted cash flows from operating activities get a multiyear high including periods with higher production attributable to mine is no longer in the portfolio.
Free cash flow before dividends and debt repayments rose $256.8 million in Mark the sixth straight quarter of positive free cash flow generation for the company.
Combined with cash on hand.
Free cash flow that we're generating.
We will see the balance sheet continue to improve while the same find having the flexibility to invest in organic growth opportunities in the portfolio, including the Jackup Neenah phase two expansion younger guy animal Arctic in longer term integrated on to recur project.
But beyond that also being able to build excess funds for other opportunities and consider further dividend increases.
Said simply we see an excellent balance and flexibility among our capital allocation priorities.
In the shorter term that's strong operating cash flow, we're generating has translated to reductions in net debt.
The same time, we've been increasing our dividend.
In particular on the balance sheet.
Net debt decreased during the quarter by $148.9 million to $619.1 million.
Level that we haven't had going all the way back to the start of 2013.
If advances our objective of achieving a positive net cash balance sheet in creating further capital allocation flexibility.
Cash at quarter end totaled $474.2 million.
Contributing to the ending cash balance during the quarter. We also saw a marketable securities mainly 1.2 million equinox goals here as for proceeds of approximately $18 million.
Q4, we expect another solid free cash flow quarter that will lead to growing cash balances.
I might have higher capital spending in Q4 that I mentioned will also have our best quarter on production as an offset.
Our revolving credit facility is fully undrawn as Pedro standing $100 million on our $750 million facility towards the end of October.
Drew down $200 million during the first quarter of 2020 as a precaution.
<unk> that were paid the first $200 million in Q2.
Subsequent to quarter end as Daniel mentioned, we also went out there for a 50% increase to our annual dividend, bringing it to tenant how centsper share, which is 425% higher than just 18 months ago.
On a per ounce basis to give in rate is about $100 per geo, which is now the new dividend floor.
Consistent with our dividend plus a public policy and sustainability objectives.
Sufficient cash reserves to support payment of the dividend at the increased level for three years.
Cash Reserve fund product provides us with the flexibility to pay the dividend at the new floor for an extended period, even during low gold prices.
While we will continue to reflect our dividend on a per share and a per geo basis, we will no longer be providing a range for our dividends on a per year basis level.
Going forward any increases above the new dividend floor. It will be based entirely on cash flows in cash generation capacity of the company.
Our cash flows and cash balances increase our dividend will rise correspondingly the percentage of those cash flows.
And now with that I will hand, the call back over to Daniel.
Thank you Jason in closing I'll leave you with a few takeaways.
We are now well into our historically strongest quarter and executing exceptionally well in what we believe is the early stages of a secular bull cycle for gold.
Action in Q4 is planned to be higher than Q3, meaning our all in sustaining costs and cash costs will be sinking at significantly lower also.
Our cash flow and cash balances are rising eating a multiyear high indeed lastly, this quarter.
Significantly improving our financial flexibility.
The results, we are well positioned to invest in growth, while continuing to increase shareholder returns as evidenced by the recently announced 50% increase to our dividend.
And with that we'll be happy to take your questions operator.
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[noise]. The first question is from its a hard target of credit Suisse. Please go ahead. Your line is now open.
Hi, Good morning, Thanks for taking my question first on Cerro Moro I think it was a positive update that.
Your back to call it run rate throughput at the end of September.
One of your gold competitors also in the same country is having far more difficult and running well below capacity.
Can you talk a little bit about what you're doing differently at Cerro Moro to maybe mitigate some of the Colgate related impact and the second part of the question, what what kind of the run rate companywide for corporate cost going forward. Thanks.
Good morning, and good question so for Cerro Moro as you all know we had quite a long ramp up or because of a transport restriction, but we were able to with a quarter or two to mitigate that one of the things. We have done is we have improved the.
The runway the the airplane lending out to what it was this year, though so so our employees coming from outside the province Snow, we flew them to where it was this year that was so it's easier to have them to site.
All our employees are tested before they go to shift change. So each 14 days, we had a shift change that the several mobile so with time, we have improved the way. We're doing this so everybody needs to have a negative this desk before going into the mine site, we're having a lot less people at the mine site to to be honest there at all.
Our.
Stuff on the administration, mostly are working from home. So we have established make sure that they can do their work from home. So on the people that need it to go to site are going for site, we have increase our.
You know a.
Number of employees coming from Santa Cruz, So we had before around 30% and police coming from outside we move many of them into.
The province to avoid the the problem with a transportation.
But also we have or more people locally. So this is why as I mentioned before and I mentioned in the.
<unk>.
Out of this September we will fully back into production that that's a several mobile I don't know four so when they have over there goes the same province, but this.
<unk> North so maybe there was more difficulty for for for people, but in our case. The run rate is like I mentioned that between $1000 and a 150 tons per day. So we're fully back to production.
Regarding the second part maybe Jayson can can answer but the run rate like we said, it's going to be a lot higher than it was for sure in Q2 and Q2 full service costs.
Yeah and on the cost side, I guess I had mentioned well see we saw the decrease in those corporate costs between Q2 Q3, both well see that a carry on into Q4 and really be Cerro Moro will be the operation that will have some of those lingering.
Lingering cost and you know it's from transportation as Daniel said bookings continue to spend that money, we think it makes sense to.
[music] improve the the certainty of getting people in and out and then also we physically move people into a into the provenance and set of transporting them back and forth. So there are some additional cost on that so I.
I think it's probably a couple of million dollars for the time being I would say to somebody and.
No more for those costs, but that they.
You know that helps assure our ability to get those ah for throughput rates that we're trending right now.
Okay, great. So that so the 5.7 million of incremental costs that you incurred in Q3 for company wide is that like a good run rate going forward as well.
No, we should get a little bit lower than not at the 5000 and you know I think just a little little under half of that was attributable to the Cerro Moro and expect several more to that.
The bulk of that perspective, we Ah you know next in line is his opinion on it not.
Or just just transportation there most of the other operations were seeing these costs really stayed away.
Okay got it Okay and then the last question for me.
On Slide 11, you mentioned acquisition of earlier stage development assets.
Any geographic preference.
And you can you can provide on that.
Any of the four countries that we are working through right now so.
As you know, we like Canada, or Argentina, Brazil, and Chile.
And if there's an opportunity. There then we got to look at them for our first priority is our expansion project that will.
Moving on Canadian Malartic and also our EPS, you know or a generative exploration program and we mentioned that we think it does that Lisa one might that we'll be happy.
Happen within the next three years.
With diesel diesel exploration project.
On top of that if it doesn't you go into Portuguese in different countries. We are we going to look at them, though.
Okay. That's clear thank you very much.
Thank you.
The next question is from Ralph 'cause City capital. Please go ahead.
Good morning, everyone. Thanks for taking my questions to them. Please one on capital allocation and maybe one on Canadian Malartic Daniel.
The first one.
When you look at you know the generative exploration.
Right.
Looking at this.
Dedicated pool of capital that that's going to get put to work because.
The cash reserve fund and we see the dividend strategy, a sort of these very structured frameworks and I'm. Just wondering is your approach to the generative exploration along the same lines and maybe you can give us an indication of how much capital will be put to this over the next few years.
Yeah. Thank you Ralph good morning, it's a it's a good question, yes. It is it.
It is very well aligned we have 53 million over the next three years. So there was 14 million in 2020, <unk> to $20 million next year and the rest to do.
53 in 2022, so its very structure, we have de seventh project, we have many projects in the company, but we choose it.
Seven.
This is where are we going to focus our attention into next to three years and then like we mentioned many time, we think one of the seven project will generate.
What were looking for so at 1.5 million ounces of potential at least and then to be able to produce I didn't 50000 ounces per year. So that's really clear. Our objective is very is very clear on that that generates an exploration program. We'll see after what will happen and then yes. It is a separate budget than the rest of the exploration.
And that doesn't touch the exploration were doing a third mine site, it's just really separate.
From that okay, Okay got it.
Let me switch to a Canadian Malartic and where is the Q4 drilling any school is going to be focused on is this continuing to be in fill and how far the team away from testing convergence.
Tween.
Arctic any school, the and when possibly could we see results from that testing.
Right.
Yeah. Thanks, Ralph.
Good question.
Drilling in Q4, we'll focus on simply instilling a round the envelope that sort of shows up on the longitudinal section.
We're also doing some 75 meter spaced drilling and kind of the core upper part of the deposits.
So at the end of that we expect to see a reasonably high competence and triggers or send a few areas in which will see us make me a higher confidence level at that 75 meters.
Oh, we're quite a long ways from testing the convergence and I don't see us doing not within the year or probably even in a 2021. What we are seeing are some pretty high grade zones that we can actually project.
Up dip, especially to the to the east.
We have a positive drill sold out to the east of the main east cool these own a significant step out of about 200 meters.
So we're simply going to focus on growing non core zone. It's remarkably continuous so we'll simply does piece stepping out and growing that core zone as much as possible rather than focusing on deeper drilling down to the convergent Terry.
Got it okay.
Thanks Henry.
Yeah.
Thank you.
The next question is from Kerry Mccurry of Canaccord Genuity. Please go ahead.
Hi, Good morning, just wondering if you could give us a little more granularity on the grades you're expecting at Cerro Moro and not helping young for Q4.
Good morning Cary.
When you have these numbers.
Yeah, I think yeah, we've seen pretty steady credo I.E.
Moreover, through third year. Despite code that you know, we're gonna be we're going to be moving back towards reserve grade for for Q4.
And your own is maybe a marginal uptick on grade.
Here's what we indicated in Neenah Mdna as of last night. So I think that's what that's the way to look at it.
So the Q4.
The implied production given the guidance is a pretty big step up is there any are.
Are you expecting.
Pick ups at the other assets similarly.
Well I think I think you hit on one of them you know we've got full a full throughput at Cerro Moro would degrade mention I think also.
Arctic was working its way its way through.
And stockpiles as well so we will see a uptick in grade their Q4, and obviously with the tonnage that has a pretty.
Pretty big impact on the production levels. So those are probably the big two and otherwise it's a steady steady as she goes across the operations.
As you point out it's pretty easy to infer what 60.
For Q4 here, it's a very very strong quarter.
And then maybe a question on the Malartic on the ground I mean, you mentioned in your press release, you from getting to 20000 tons per day.
Just wondering if you could just sort of walk through how you get there you know from 2023, that's my 29 is that.
The shot coming in is her 2025 26 or is there you know.
Multiple declines just wondering if you could just said why not.
Well, we have to complete to carry the the Pea study that will be completed by the end of this year or early next year, where our team and our at the mine site. The partnership team and also our partner Agnico in the US were working all three together to optimize the actual PK study you know we'll have to make decision based on.
P and mostly in for the resources, but like we mentioned is very continuous as we see right. Now you know production from the open pit. This still another six seven years to go until the 2000.
27 are we going to see how and when we can bring the underground production into a four.
From underground as we start to wrap no in November or you can imagine we got access for sure where the Odyssey sold zone.
We sooner than 2027 that probably sometime in 2023. So this potential does some production coming starting in 2023 from that zone, specifically, but it won't be a very high.
And I think our focus right now is mostly to see how we can increase production in the open pit we have ideas.
Ah that can extend or increase the resources or reserves.
The actuals Barnett bit a you know a distinction between the Barnett Andy I mean can he then malartic pit this potential to go a mine the other offices.
We mentioned the potential around and other smaller open bids on surface. So there's a lot of work going on with with.
Just the partner into two companies to see or we can bring into production.
You know in that 27, 28 29 years during that time, the Shafi is completed.
And then it all depends when we go to start that.
Competed and and and go with the underground full underground production.
Great. Thank you.
Thank you.
Once again, please press star one at this time, if you have a question.
The following question is from Mike Parkin of National Bank. Please go ahead.
Hi, guys just some follow ups on.
The malarkey underground with respect permits is.
Is there any need to gain additional permits for the project.
Good morning, Mike or.
For the the underground we have already the exploration permit so there's a there's no problem to drive them to even to go do a bulk sample sure we're going to have to transfer that to an operation permit eventually but that shouldn't be an issue because the infrastructure on surface won't change. So did the two things aren't they.
Oh, that's already permitted.
Meal.
As we have mentioned many times in the past when do the tailings facilities are full then we got to put things at the bottom of the main Canadian Malartic bid and then.
I can assume that the capacity of the both fits one there be depleted and when the underground mine comes into production. This is gonna be plenty of stuff spaces. So.
Basically permitted is going to be less or less.
That's easy to obtain as you don't do any surface.
Expansion work and it speaks to the underground so there's no that doesn't know a public hearing I should say.
In English.
Resulting from going on the ground, so a lot easier to get permitted.
Sounds good the other thing.
With the ability to use the pits as tailings facilities for the underground does that give you any.
Beneficial.
Impact on closure costs that were allocated to the open pit.
We we were driving around right away from the two bits. So we won't use the pit for the underground.
Like I mentioned, we're planning to put twice.
So two things in the mostly in the the main Canadian Malartic pit so.
That won't be really useful tool after the underground because we won't have any infrastructure to build on surface proteins, but.
And that there's no.
Use on the two pits for accessing underground.
Right Okay.
And then.
With the ramp it sounds like.
You know you've got the focus near term as well its expiration. So in terms of you know what the significance.
Significant step up on the capital you know recognizing this is still early days and we're still waiting on the P.A., but your partner kind of indicated that you're not likely to have you know a construction decision made off reserve it would be more off a resource. When you go ahead kind of move on this is may.
Right so are.
Are we thinking kind of two or three years out before you would see significant capital getting spent on this project.
Again, you made it clear that we will approve the project on the PD and inferred resources, mostly there will be some indicated but mostly in food.
Well, let the P. it'd be completed then make the decision but we're.
We're not done many years away of capital that you know, we're starting to ramp we know what the ramp development over the next two years, it's going to be wrapped up in a lot of drilling happening from underground and and de risk on it.
Give us there the answer we think it's going to give US then we go ahead and we have to do a lot of the.
Engineering and the ordering of the equipment. So you know there's already a lot of engineering done even though we have mentioned in the past the size of the <unk>.
The shop that type of voice, we are going to use it you know.
Boston There should we think we can we can achieve from the the underground so I think as soon as that be solved.
Both us and our partners are gonna have to make a decision. If we go ahead.
Right away or are we with more time to do that.
To do if we go right away.
There's going to be capital spend next year at the end of next year and then in 2022. If we wait then it will be a need by the amount of time, we decided to postpone the project, but so.
So far I think Austin, our partner I'm quite excited about the project at Midas excited.
ER the P. looks really good ones, we have seen so far is and I've come to either but what we have seen so far so we'll see in the new year, but that wouldn't be surprised that.
It will take a very long before we make the decision to go or no go.
Okay sounds good and.
Switching over to the open pit side of things you know we saw really good throughput in the quarter is that a function of Barnett has always historically been known to kind of be a software or worse is that what's kind of helping that hit close to 60000 tons per day.
Yeah, you know, putting finally, having bought out into production that's helping that's helping quite quite a lot. It's good it's better grade as you know, but good going down that's kinion malartic because we're at the bottom right to the bottom, though it's a it's getting better due to softer ore for sure.
Ah, Yes, Barton that they did one of the big factor in Q3 wasn't Barnett and as if we are going to move more into Barnett.
The coming months and quarter.
And then yes, its going to continue to improve you know we had great success in Q2.
In tons per day same against Intune tree and despite two shutdowns in Q3 so.
He was remarkable that the meal was able to do with the standards. Despite tough to shut downs, we have one plan in December.
But youre right. The it seems the ore is more easier to mine in Barnett went up with where on just starting so we have to see.
And the next seven years, but yes, why not just helping quite a lot to improve production at the mine.
Right so.
Super looking forward to the fourth quarter and thanks again for taking the questions. Thank you.
Thank you.
Our final question is from townhouse Peel Hunt. Please go ahead.
Yeah, just a follow up on on one of the earlier questions which is.
I know you're still firmly in production recovery mode. As we head into year end and then looking forward to the fourth quarter as we given what you've said on Cerro Moro with respect to staffing levels.
And potential production efficiencies as we head into 2021.
Do you see more scope for cost initiatives in the year quite simply because we've seen that from one or two of the gold producers over here.
Didn't know if your focus is shifting a little bit more from.
Production recovery to two cost initiatives going into the following year.
Good afternoon, Tim.
Yeah. So I'm all the you know the first objective. This this quarter in Q2 west to the mine for the back into production we achieved that.
We don't see that as being an issue going forward.
We have all the ways, we're calling on cost improvements they have improved this year.
We will continue to improve in Q4, I suppose auction is going to be significantly higher compared to whatever we achieve in the first three quarters. This year should we.
You will see in Q4, a big increase in production and then also on the same same token you know a decrease in costs cash costs and all in sustaining costs at a at several mobile you know we have a lot of fixed costs at a.
Our minds and but as soon as you produce more officers with the same amount of people that there won't be any more people at the site with higher production than our our costs are going to be impacted.
Like any of our minds like the other four mines do they have each year.
Next to decrease costs being more efficient and several mobile is doing the same thing also.
Okay, that's great. Thanks.
Yeah.
Okay.
There are no further questions registered at this time I'll turn the meeting back over to Mr. missing.
Thank you operator, thank you everyone for joining us we look forward to updating you on our fourth quarter and year end result in February these take care and stay safe. Thank you and bye bye.
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