Q3 2020 Yamana Gold Inc Earnings Call
[music].
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 reserve.
Versus 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.
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 as 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 <unk>.
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 its website at <unk> Dot com.
Now I'll turn the call over to Mr., Daniel Racine, President and CEO.
Thank you Emily Thank you all for joining us and welcome to our third quarter Conference call.
I need to do is Jason.
Our CFO and remarks, then our senior VP of exploration.
Let me start by thanking again, all our employees contractors suppliers and their family.
We're keeping our operations sales.
This difficult time.
First of all the ways, let's talk about our health safety environment and corporate responsibility.
Our 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 own communities continues to show an increase interest across all of our operation.
Evidence indicates that our COVID-19 response and engagement is a significant contributor to the improvement.
We have as I said on Q, 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 various the nation, along with thousands of mass gloss, and so thats, either 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 the 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.
Canadian Malartic mine received two awards the first the SG O'connell trophy for their Capex from the Qubec Mining Association, which recognized the operations for improvement in the operation sales and safety records compared to the industry average.
The second was the sustainable development and environment the word.
Val d'or chamber of Commerce.
We are proud of these recognitions, which tell US we are doing the right things in critical areas of our business like health safety sustainability, and environmental stewardship and talent management.
Turning now to the Q2 highlights we delivered another strong quarter, both operationally and financially.
We produced 201, 730 72 ounces of gold during the quarter supported by standout quarter funds I Covina, Canadian Malartic opinion, and Minera, Florida.
So the very production was just above 3 million ounces due to an exceptionally strong performance for my opinion.
Geo production.
It was 240 466000 ounces exceeding plan as a result of strong gold and silver production.
Cash cost of $723 per Geo and all in sustaining cost of 1096 review were in line with annual guidance.
Sustaining capital increase during the quarter as expected after declining in Q2 was several mobile and Canadian Malartic ramp up following temporary suspensions due to COVID-19 related service fiction.
We expect Q4 to be our strongest production quarter of the year and that's such a cost per ounce will decrease.
Net earnings during the quarter was $55.6 million or six cents per share.
Adjusted net earnings was $92.9 million or 10 cents per share.
Cash flows from operating activities were 215 million and $237 million on an adjusted basis.
Cash flow or at a multiple high and that includes higher production periods, where we own operation that has since been sold or discontinued.
Cash flows from operating activities before net change in working capital were 199 million or $221.1 million on that there's an adjusted basis.
Cash flow before dividends and debt repayment were 156.8 million.
As of September Thirtyth the company.
Cash and cash equivalent of 474.2 million, an increase of 114.4 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 for the managed the business and found growth.
Within without having to borrow.
This includes but it's not limited to obligation related to the project will be enough plant expansion.
Fend off the Odyssey underground project at Canadian Malartic.
Generative exploration development of the integrated that were weaker in Alumbrera project.
Further balance sheet improvement all the while I think access phone 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 per share effective in Q4.
That is 425% higher than our dividend level, just 18 months ago.
Isn't that we'll 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 to our previous gold production forecasts and a 6% increase to our previous server forecast.
Looking at our operation that will be the I'd add another strong quarter with production just about 44000 ounces.
The higher production resulted from the meal again, achieving a higher than than steady state throughput of 6800 tonnes per day.
I'll provide an update on the minds optimization project in a moment.
It does opinion, good but up gold production was strong during Q3, while silver production greatly exceeded plan due to the processing of higher grade silver whore.
Why silver grades are expected to normalize in Q4, we anticipate higher grade gold grade in the quarter due to increased underground production and lower stockpile reclaim as.
As well as mining from higher grade.
Gold grade sectors.
And you didn't malartic posted a strong production of 76.
I was on 398 ounces of gold.
To higher throughput and feed grade.
Barnett produced 13305 ounces 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.
After September Thirtyth following the temporary government restriction related to Govan 19, and the subsequent ramp up.
[laughter] has now returned to its up its optimize thousand totaling 1150 tons per day, which is expected to be maintained going forward.
The transition to underground ore with higher grade is expected to continue in Q4 and derives substantially higher production and lower costs.
Yeah, that's lucky that continue with the proof will perform well with results driven by higher feed grade and increased on process.
Largely due to continuing improvement in productivity will contribute to contribution from product loss and don't do you hold those loans.
Turning to our strategy development and project updates I.
Our ago pick up which I can get that America, Argentina, we continue to advance the integration of America, which I know very well and expect to complete the integration in Q4.
Store, which the integrated project would be managed as a combined operation.
To reiterate our excitement for this project. This is a very unique opportunity we have in front of us I worry caused one of their largest on developed copper gold deposits in the world and the integration with existing Alumbrera mine creates a de risking brownfield project, which reduced capital requirement and reduce.
Environmental footprint.
Remain on track for our visibility study results in 2021.
As I mentioned Q threes with potential will be not averaged 6800 tonnes per day. This was the second straight quarter that the mine achieved this milestone.
Lot of a lot of this well above the target rate of 6500 tonnes per day that we set for phase one of Distech will be no project.
And then to find 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 the objective of optimizing gold recovery I'd be higher throughput.
Commissioning is scheduled for mid 2021.
Let's consider bill 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.
Like I mentioned before the phase two expansion will increase throughput to 8500 tonnes per day and dig the aggregate 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 around development into Odyssey can you smell uptick scheduled to start in November.
Exploration ramp will allow tighter definition drilling on Odyssey decent uptick and east Goldie from underground drill platforms and eventually be used for mining and all of which have 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 as you may have seen from our press release this week.
Continuing to advance with extended drill results reported from East go deep.
We are very encouraged by the resolve and excited by the potential for this project.
Our exploration team is doing an outstanding job both at our existing operation and on our generative project an enemy will talk more about this in a moment.
As a complement to the advancement of these internal opportunities, we'll evaluate the acquisition or investment in prospective exploration opportunities that align with our objective for capital allocation and financial result.
Rich this gen quality geology, and operational expertise such opportunity 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 of at least eight years at 150000 ounces per year production rate.
Before handing off to entry I also want to highlight that on October 13, we began trading on the main market on the London stock exchange.
Adding another senior exchange for trading 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 in the UK and Europe and building relationships the relationship with the investment community there.
And with that I will turn it over to Henri to provide an update on exploration.
Thank you Daniel.
I'll start with a high level over deal up or 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.
It includes both advanced and earlier stage projects wherever we see district scale potential.
A key objective of the program is to add a new inferred mineral resource of at least one and a half million ounces of gold that in three years.
Where it would support the corporate objectives, although potential production platform that can produce a 150000 ounces per year.
Given the quite pipeline, we have 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 the strategy. We also actively evaluate opportunities to acquire advanced stage exploration assets as long as they had in line with our corporate objectives.
Now I'll move to a quick update on some of the key projects in the program.
Monument Bay, located Manitoba, Canada drilling program to test the depth extension of high grade shoots at twin Lakes.
Ongoing with one drill hole completed in the quarter and to further de pulls pending.
Theres, a 16000 meter drill program plan for the winter as a first step in developing a high grade potentially underground resource This project.
I'd love to value, which is an advanced exploration project located in by year, Brazil.
Drilling to date in 2020 focused on the level of Asia, South and southwest songs located immediately silicon the established resource.
Results are positive to date, and we expect to add to the resource base of oxide mineralization by year end extra.
Exploratory drilling is continuing in Q4.
The Jack will be in an arcade project is also located in by estate located just a few kilometers north of the Jack will be the mine.
This project covers 70 kilometers and 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 has defined 4.3 kilometer strike the mineralized read some patent comp one of our high priority targets exploratory drilling on this target was initiated in Q3 and will continue to the end of the year.
Further surface exploration is also underway and we expect to generate additional drill targets as we explore the 70 kilometer extent to the amendments exploration concessions covering this favorable geological basin.
Finally in the general rate at Barbara Raimo located in Brazil's current Nbn Co. state.
Drilling in Q3 extended the core massive sulphide zone that we discovered last year we.
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 non 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 asset.
I'm going to turn now to our exploration programs that are producing mine sites.
As you May have seen Mendez, Daniel mentioned, we issued an exploration update on Wednesday for Canadian Malartic. Thanks.
Exploration in Q3 focused on infill drilling in these calls.
A recently discovered zone that we announced last year that significantly expanded the gold mineral resource base at Canadian Malartic.
We completed 38000 meters of drilling in Q3 of these quality and the results have confirmed the expected grades and width of the zone. We're also seeing that the zone remains open at depth and along strike.
The positive results provided competence to proceed with an exploration ramp.
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. could we expect to see completed in 2021.
The higher grade difficulties on 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 has a multi million ounce deposit.
In support of future long life underground mine with a potential multi hundred thousand ounce per year production plant.
Moving to Jack will be not certainly.
Drilling was completed in the quarter it kind of get a school and that cannot be at a central connector zone.
And Thats continued to provide positive results. It's further extends the mineral envelope and one of the highest grade parts of the mine.
Also been working on the news on Shelby LSU that extend the gel day low mine to the South we've seen very good results from this zone and it clearly has the potential to add inferred resources to the mine.
At Cerro Moro in the core mine area exploration drilling is focused on the main escondida is always structural corridor. We completed in fill drilling and have also been testing new exploration targets based on new interpretations of the plunge of the mineralized envelope.
Drilling also continues to test the numerous exploration targets that we have within the property and the near mine area. Although most results are still pending due to some slow I'd say turnaround times in Argentina at this point.
In addition surface work has identified an exciting new target for us this lending vein located in the northern section on the Cerro Moro land package.
Trace the vein on surface for over 11000 meters, that's significantly larger target than any other targets currently on the project.
Surface had sales from some sections of the pain have shown values from one gram per tonne gold to as high as 15 grams per ton gold from selected Graben chip samples, providing drill ready targets. So we're going to expect to drill in Q4.
I'll move now to L. opinion, we're seeing excellent exploration results opinion on this year in fill drilling has returned positive results from a number of sectors, especially from patent pickup a mental and by the left alone loadings, indicating very good potential in these areas front you indicated resources.
We are most excited about the drilling success at Colorado sure. It's demonstrating significant potential we've got good sales results, we expect to add to incurred resources, but much of the strike from that Thats. The extent of the zone has not yet been drilled tested and we see excellent potential for girls since a significant new mineralized zone at the mine.
At Minera, Florida in sales 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 don't Leopoldo.
As well as positive results from pole loading and my floor, indicating good potential for new resources on all of these areas.
Exploration at lunch, Florida, and been able to consistently expand the mineral envelope, both to the east and the west than the core mine, indicating a strong future for this asset.
I will 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, which $439.4 million compared to $357.8 million in the same period of 2019 at 23% increase.
However, gross margins, excluding BDNA rose, 40% to $272.8 million as costs were pretty much in line with last year.
Genie 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. So.
So on an adjusted basis net earnings dealt with a 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 have some spending delays in Q3.
For Q4, I expect capital spending to be above the levels of Q3. The same will also be true of exploration expenses.
But despite the higher capital in Q4, we expect a meaningful increase in production in fact that unit unit costs will be the lowest of the year.
We'll see a bigger drop in cash costs versus basic because with basic as I mentioned, we'll have the higher capex, but we expect our aortic over to H could be between 10, 20, and 10 60 per Geo that we recently re guided.
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 burn at remote Arctic.
I'd Bernanke when we declare commercial production on September thirtyth emerging during the quarter from its pre commercial production of approximately $13.5 million was treated as a reduction in our expansionary capital for the quarter during Q3.
Starting in Q4 sales from Burnett will flow through the income statement instead of being capitalized.
Quarterly cash flow 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 back.
That compared 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 covert cost 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 clear representation of the cash both for Q3, if we adjust for these corporate costs and the margin associated with the pre commercial ounces at monarch again I mentioned on the prior slide.
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 hit a multiyear high including periods with higher production attributable to mind no longer in the portfolio.
Free cash flow before dividends and debt repayments rose to $156.8 million in marks the sixth straight quarter of positive free cash flow generation for the company.
Combined with cash on hand, and the free cash flow that we're generating.
We will see the balance sheet continued to improve while at the same time, having the flexibility to invest in organic growth opportunities in the portfolio, including the geography in a phase two expansion kindergarten will 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 debt dividend increases.
Thats 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 while at the same time, we've been increasing our dividend in.
In particular on the balance sheet.
Net debt decreased during the quarter by $148.9 million to $619.1 million a 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 and 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 gold shares for proceeds of approximately $18 million.
For 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 we repaid the outstanding $100 million on our $750 million facility towards the end of October we.
We drew down $200 million during the first quarter of 2020 as a precaution due to coated and were paid the first $100 million in Q2.
Subsequent to quarter end as Daniel mentioned, we also announced that for a 50% increase to our annual dividend, bringing a tenant half cent per share, which is 425% higher than just 18 months ago.
On a per ounce basis to give any rate is a good $100 per geo, which is now the new dividend floor.
Consistent with our dividend payout policy and sustainability objectives.
Got sufficient cash reserves to support payment of the dividend at the increased level for three years.
Our cash reserve fund provides us with the flexibility to pay the dividend at the new floor for an extended period, even during local 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 geo basis level.
Going forward any increases above the new dividend for 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 was.
Production in Q4 is planned to be higher than Q3.
Turning 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 multi year high in the last latest quarter.
Significantly improving our financial flexibility.
A result, 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.
Thank you we will now take questions from the telephone lines. If you have a question and you are using a speaker phone. Please lift your handset before making your selection.
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Thanks.
The first question is from the Hot topic 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 goals competitors also in the same country is having far more difficult in 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 in this.
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.
Because of the transport restriction, but we were able to through the quarter or two to mitigate that one of the things. We have done is do we have improved the.
The runway the airplane lending at a portal to Seattle, So so our employees coming from outside the province, no. We flew them to where it was this year, though so it's easier to have them to site.
All our employees are tested before they go to shift change will each 14 days, we have a shift change that the sales will model. So with time, we have improved the way. We are doing this so everybody needs to have a negative test before going into the mine site and we're having a lot less people at the mine site to to be honest new to all our.
Sure.
Staff on administration, mostly are working from home. So we have established and make sure that they can do their work from home. So on the people that needed to go to site are going for site, we have increase our.
You know.
Number of employees coming from Santa Cruz, So we had before around 30% from Immco.
Luis coming from outside we move many of them into the province to avoid the problem with a transportation, but also we have already or more people locally. So this is why as I mentioned before and I mentioned in the the color you are.
By the end of December September we will fully back into production at the at the several mobile I don't know four so unable and their goal is the same province, but this further north so maybe there was more difficulty for a fourth for people, but in our case the run rate is like I mentioned between $1000 and 152.
Per day, so we're fully back to production.
Regarding the second part maybe Jayson can get answered, but the run rate like we said, it's going to be a lot higher than it was for sure in Q2 in Q2 with Workover costs.
Yes on the cost side I guess I had mentioned, we'll see we saw the decrease in those corporate costs between Q2 Q3, both well see that.
Carry on into Q4, and really be Cerro Moro will be the operation that will have some of those lingering lingering cost.
It's from transportation as Daniel said bookings continue to spend that money. We think it makes sense to you improve the certainty of getting people in and out and then also we physically move people into into the provenance instead of transporting them back and forth. So there is some additional costs on that so I.
I think it's probably a couple of million dollars for the time being applicators commodity in that.
No more for those costs, but that they.
That helps to assure our ability to hit those full throughput rates that were achieving right now.
Okay, great. So that so the 5.7 million of incremental cost 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 that of the 5000, I think just a little little under half of that was attributable to Cerro Moro and expect Cerro Moro to throw the Buda bulk of that perspective, we get an extra mine has his own opinion on and Thats similar just transportation there most of the other operations were seeing these costs really stayed away.
Okay got it Okay and then the last question from 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, Argentina, Brazil, and Chile.
And if there is opportunity there than we are going to look at them for our first priorities our expansion project both that will.
We'll be non Canadian Malartic and also our Ics, you know or generative exploration program.
And we mentioned we think it does that Lisa one mind that will be a direct happen within the next three years.
With diesel diesel exploration project.
But on top of that if there's any good opportunities in different countries. We are we going to look at them no.
Okay. That's clear thank you very much.
Thank you.
The next question is from Ralph Profiti of 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 sure when you lay out the generative exploration strategy are you looking at this.
As a dedicated pool of capital that that's going to get put to work because we see the cash reserve fund and we see the dividend strategy as 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.
Yes. 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. This a $20 million in next year and the rest two to 53 in 2022. So its very structure. We have de seven project, we have many projects in the company but.
We choose to do.
Best seven and this is where are we going to focus our attention into next to three years and then like it. 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 lease and then to be able to produce 150000 ounces per year. So thats really.
Clearly our objective is very is very clear on the debt generative exploration program, we'll see after what will happen and then yes. It is a separate budget than the rest of the exploration that doesn't touch the exploration were doing at our mine site. It's a really separate from that okay. Okay got it.
Switch to Canadian Malartic, and where is the Q4 drilling at east will be going to be focused on is this continuing to be infill and how far the team away from testing convergence at gap between.
Similar to Andy's gouldian, when possibly could we receive results from that testing.
Andrew.
Yes, thanks Ralph.
Good question.
Drilling in Q4, we'll focus on simply Infilling around the envelope that sort of shows up on that longitudinal section.
We're also doing some 75 meter spaced drilling in kind of the core upper part of the deposits.
So at the end of that we expect to see a reasonably high confidence inferred resource and a few areas in which we will see a slightly higher confidence level at that 75 meters.
We're quite a long ways from testing the convergence and I don't see us doing that within the year or probably even in 2021, what we're seeing there are some pretty high grade zones that we can actually project.
Up dip, especially to the to the east.
We have a positive drill hole note to the east of the main Easco Multizone, a significant step out of about 200 meters.
So we're simply going to focus on growing that core zone, it's remarkably continuous.
So we will simply just be stepping out and growing that corazon as much as possible rather than focusing on deeper drilling complete conversion Terry.
Got it okay. Thanks.
Thanks, Dave Thanks Henry.
[laughter].
Thank you.
The next question is from Kerry mockery of Canaccord Genuity. Please go ahead.
Hi, Good morning, just wondering if you could give us little bit more granularity on the grade you're expecting at Cerro Moro and helping out in for Q4.
Good morning Cary.
Isn't you have these numbers.
Yeah, I think we've seen pretty steady Craig.
The.
At Cerro Moro through third year, despite co that we're going to be we're going to be moving back towards reserve grade for for Q4.
Pena owners may be a marginal uptick on grade.
On here is what we indicated in Neenah Mdna of last night, So I think thats what that that's the way to look at it.
[music].
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. We've got full a full throughput at Cerro Moro would degrade mentioned I think also.
Arctic was working its way through.
From stockpiles as well so we will see a uptick in grade Derek Q4, obviously with the tonnage that has a 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 operation.
As you point out is pretty easy to infer what that what we expect for Q4 here, it's a very very strong quarter.
And maybe a question on the Malartic on the ground I mean, you mentioned in your press release I'm getting to 20000 tons per day.
Just wondering if you could just sort of walk through how you get there from 2023 to 2029 is that.
The shock coming in into your 2025 26 or is there.
You know multiple declines just wondering if you get the sale by Matt.
Well, we have to complete to carry the PK study that will be completed by the end of this year early next year, where our team and our at the mine site. The partnership team and also our partner Agnico and 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 inferred resources, but like we mentioned is very continuous as we see right. Now you know production from the open pit. This still another said seven years to go until the 2000.
27, 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 you can imagine we got access for sure the Odyssey solid zone.
We sooner than 2027 that probably sometime in 2023. So this potential there's some production coming starting in 2023 from that zone, specifically, but it won't be a very high.
Option I think our focus right now is mostly to see how we can increase.
Production in the open pit we have ideas.
That can extend or increase the resources or reserves.
The actual barnett bit a you know the link between the Barnett Andy the main Canadian Malartic pit this potential to go mine the other ounces.
We mentioned the potential around and other smaller open bid on surface. So there's a lot of work going on with with.
Just didnt have the partner into two companies to see or we can bring to production.
You know in that 27, 28 29 years during that time the shaft is completed.
And then it all depends when are we going to start that.
Competed 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.
Malartic underground with respect to permit.
Is there any need to gain additional permits for the project.
Good morning, Mike.
For the the underground we have already the exploration permit so there's a there's no problem to drive their ramped even to go do a bulk sample sure we're going to have to transfer that to an operation permit eventually but that should not be an issue because the the infrastructure on surface won't change. So did the detainees are there.
Where this already permitted.
Meal.
As we have mentioned many times in the past when the tailings facilities, our fold and we got to put tailings at the bottom of the main Canadian Malartic bid and then.
You can assume that the capacity of the both bits one there will be depleted and when the underground mine comes into production. This is going to be plenty of spaces. So basically permitted is going to be a lot less or less easy to obtain as you don't do any surface X.
Expansion or work and this basically underground. So there is no baptism know a public hearing I should say.
English.
Resulting from going underground, so a lot easier to get permitted.
Sounds good the other thing.
With the ability to use the pits the tailings facilities for the underground does that give you any.
Beneficial.
Impact on closure costs that were allocated to the open pit.
We we we were driving around break 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 tool the tool after the underground because we won't have any infrastructure to build on surface proteins, but other than that there is no no real use on the two bits to for accessing underground.
Right Okay.
And then.
With the.
The ramp it sounds like.
Yes, that's the focus near term as well as exploration so in terms of.
A significant step up on the capital 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 a construction decision made on a reserve it would be more off our resource when you go ahead.
To move on this is made so.
Are we thinking kind of two or three years out before you would see significant capital getting spent on this project.
Again as you made it clear that we will approve the project on the PD and inferred resources, mostly there will be some indicated but most of the inferred and we'll let the p. it'd be completed then make the decision but where.
We're not many years away of capital in and you know we are starting to ramp we know what the ramp development over the next two years, it's going to be ramp development and a lot of drilling happening from underground and then if the de risk on it you know.
Give us the answer we think it's going to give US then we go ahead, then we have to do a lot of the engineering and ordering of the equipment. So you know there is already a lot of engineering done.
You know we have mentioned in the past the size of the.
Yeah, the shaft type of voice, we going to use it.
Oh.
Type of tonnage should we think we can we can achieve from the the underground so I think as soon as that be resolved.
Both us and our partners are going to have to make a decision. If we go ahead.
Right away or we wait more time to 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 delayed by the amount of time, we decided to postpone the project, but so far I think Austin our partner are quite excited about the project and mine is excited.
Yeah.
He looks really good what we have seen so far is not completed with what we have seen so far so we will see in the new year, but I wouldn't be surprised that.
That it will take a very long before we make the decision to go or no go.
Okay, good and.
Switching over to the open pit side of things, we saw really good throughput in the quarter.
Is that a function of Barnett has always historically been known to kind of be a softer ores worse is that what's kind of helping that hit.
Hit.
Close to 60000 tons per day.
Yeah, you know, putting finally, having bought out into production that developing that's helping quite quite a lot. It's good it's better grade as you know, but grade going down at Canadian Malartic as we're at the bottom or close to the bottom, though it's getting better do it's a softer hole for sure.
Yes, Barton that they did one of the big factor in Q3 wasn't Barnett and as we got to move more into Barnett in the coming months and quarter.
And yes. It is going to continue to improve you know we had great success in Q2.
In tons per day same against Intuit tree and then.
Despite two shutdowns in Q3, so it took us a remarkable that the meal was able to do with the stoneridge. Despite of two shutdowns we have one plan in December.
Youre right. It seems the ore is more easier to mine in Barnett for now but were on just starting so we have to see.
The next seven years, but.
So why not just helping quite a lot to improve production at the mine right though.
Super looking forward to the fourth quarter and thanks again for taking the questions. Thank you.
Thank you.
Our final question is from Tim Hockey Peel Hunt. Please go ahead.
Yeah, just a follow up on on one of your earlier question, which is that.
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 and I Didnt know if your focus is shifting a little bit more from pre.
Production recovery to two cost initiatives going into the following year.
Good afternoon, Tim.
So I'm all the you know the first objective. This this quarter in Q2 was to put the mine for the back into production we achieved that.
We don't see that being an issue going forward.
We have always work on cost improvement to have improved this year. They will continue to improve in Q4 as production is going to be significantly higher compared to whatever we achieve in the first three quarters of this year should we.
You will see in Q4.
Big increase in production and then also on the same same token.
No 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.
Thats, our minds and but as soon as you produce more officers with the same amount of people and it 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 a decrease costs being more efficient and several mobile is doing the same thing also.
Okay, that's great. Thanks.
Q.
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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