Q3 2020 B2Gold Corp Earnings Call
Okay.
Ladies and gentlemen, please standby. This is the operator today's conference is scheduled to begin momentarily until that time your lines will be again placed on him musicals. Thank you for your patience.
[music].
This time I'd like to welcome everyone to the B two golds third quarter 2020 financial results Conference call.
All lines have been placed on mute to prevent any background noise.
After the speakers remarks, there will be a question and answer session.
I'd like to ask a question. During this time simply press Star then the number one on your telephone keypad.
If youd like to withdraw your question. Please press the pound key thank you mr.
Mr. Clive Johnson, President and CEO you may begin.
Thanks, operator welcome.
Welcome everyone to our.
Conference call too.
Discuss the third quarter of 2020.
Actual results will be to grow old obviously, I think most of you probably seen unusually usage came up.
Last night, another very strong quarter, putting us on.
He was on target to be at the lower end organs for 2022, the year I'm going to pass it on to Mike sentiment actually the talk walk you through the highlights of the financial results and.
And then bill Lytle seem to be too operations, who is going to give us an operational update truck you were little bit more about job.
Great and then we'll open up for questions.
We had a very good session <unk> session or 10 days ago, So I'm pretty sure. They won't have that many questions, but if they do that's fine and this is an opportunity for shareholders to ask some questions again, so once again very happy with the quarter, another strong quarter and with that I'll pass it over to Mike to give you some of the highlights.
Thanks, Mike.
Hey, Thanks, a lot.
I'm going to start on the revenue side, so with quarterly recovered <unk> million, we sold 253 ounces at an average price of $224 now so he quoted and all those goals were some silver to gold.
A pretty fun to do and obviously, we're all watching closely to see what comes to the gold price now that's hopefully we'll see that result from the U.S. election in short order.
In short order.
I would also say that our year to date, we have.
<unk> revenues of 1.3 billion. So it's been an excellent year for for me to even even in the <unk>.
[noise] turning to the operating side, so production or we had total production of 264000 ounces that's made up of 249.
Our three might want and that's a 2000 ounces from our German old sure controversial so.
On our production times led it's almost like called 163000 ounces or 3000 ounces a budget.
[music] Capricor excellent order again.
Quotation process grade and recovery, both higher than budget more than offset a.
A little bit of downtime on the throughput side that says we took the mill down to do them, it's difficult to mill expansion plan and also to do a full cycle relying so even without tying in place we still managed to beat budget by 3000 ounces for color.
As body right on budget 54000 ounces as.
His body the only the only thing different in the quarter from inside it was that we had a magnitude 6.6.
Earthquake in early or mid August and we had to take the mill down for about six days.
Inspections were carried out by the cold [laughter].
Life Sciences Bureau.
Those inspections confirmed no damage and the study is running very well.
Would you call it 43000 ounces 1000 ounces.
Budget and that basically or Chicago continues to move along nicely.
Our year to date, our consolidated production and stuff hundred 70000 pounds.
Including our shirt calibre and that's about 20000 ounces budgets overall.
Let's turn to the cost side of that equation.
Our our total.
Cash cost for the period and couldn't not sure caliber is $435, an ounce, which is a $6 lower than budget looking at our three operations were $411 an ounce against the budget of 428, so $17 an ounce.
What's the budget for the three month period and.
Oh It was 333 [laughter] told me in line with budget and.
That's really made up of slightly higher gold production was I. Just described earlier what was generally in line total mining costs. We did see some some costs were marginally higher than budget due to changes in mining sequences and some corporate related costs. We've also seen in Mali that.
Fuel costs, a beat on or slightly above budget, which sort of bucks the trend that we've seen.
Elsewhere in the World and just a reminder to everyone that in Mali fuel costs are set up one month and advanced by the government and don't always follow what the underlying disease.
And that he was $615, an ounce, which is $33 less than budget and they continued great. Ron same story as we've seen in Q1 and Q2.
Mining and processing costs were lower than budget with lower diesel on HFO prices and.
Lower waste stripping and lower haulage distances as we had a bit of a wind sequence change there to to deal with Cowen.
During the current year.
And then what's your total $435 an ounce $66 now plus a button so.
Turning to totally outperformed the budget, there and again same story.
The first two quarters higher than budgeted gold production lower fuel costs, and a significantly weaker than budgeted and then maybe a dollar.
Got it so that's a positive outcome approach codell.
On the all in sustaining cost side, our total all in sustaining cost per ounce for the quarter in caliber were $795 an ounce a quarter, that's 19 Watson budget and.
When you take our three operations it was $766, an ounce, which is $31 less than budget.
And.
Again not to sound like broke records theme is really the first two quarters, but we did see some capex catch up.
In Q3 so.
You know weve seen some capex moved around during the year and I'll comment a little bit more we think African kind of <unk> overall for the year, but we didn't see a little bit a lower capex earlier in the year and some of that caught up in the quarter. We do expect some of that catch up in Q4.
If you look at if you look at all ends for the year to date on a consolidated basis were $740, an ounce, which is $75 less than budget. So you can see that we're still expecting to see some of that capex catch up in Q.
Q4.
Okay.
Tacos results and and where we think we are going to come out with guidance wise. So firstly on the on the production side coal mine, we guided by mining and 620000 ounces. We think we're going to come out somewhere at the upper end right at the upper end of that guidance range.
Body was 200 to two time, we think we'll be in that range is leading the middle I know what you called out 165 to 175 again, it's right in the middle of that range overall, including our share of caliber. Our total consolidated guidance for the year was the millions a million 55000 nonsense.
And we think will come in right in the middle of that consolidated range.
On the cash costs and all in sustaining cost write off for a call. It was our arrangement to 85 325.
We think will be in the range from his body 665 to seven no five we think will be at or below the low end of that range and Oh Dakota or Eightys by 20, we think will be at or below the low end of that range.
When you take in our consolidated position put in calibre for 15 to 455, we think will be at or even slightly below the low end of our consolidated range.
On the all in sustaining cost side, Oh ranges by 55 to 595, we think we'll be at the upper end of that range, but when all said and done for the year.
Fatty ninesixty five the 105 per ounce, we think will be in the range. Oh you co 2000, 10050 ounces, we think what we are.
<unk> dollar for US, we think will be at or below.
The low end of that range overall consolidated 780 day 20, we think we'll be at the lower end of the range.
As I mentioned, we do have some capex catch up in Q4, we think it'll be somewhere in the range of 100 110 million overall for the year. If you look at our total capex that we budgeted well likely come in somewhere around 10 million.
Dollars less not total so when you factor that in you're looking at somewhere around 100 110 million Capex in Q4, So you won't see a higher all in sustaining costs in Q4, but overall as I said.
I think we're going to come in at the low end of that range 70 to 80 day 20 for the year consolidated.
[laughter].
Couple other comments, maybe on the operations generally.
Coal mine expansion. The mill expansion is now materially complete a that's a new mill.
Online and that's been commissioned bike and September.
Churn comment they need the final.
Construction cost for that plan expense were a little higher than we budgeted there about 13 million higher overall when all was said.
And with the majority of those overruns related the COVID-19 caused some delays and increased labor camp costs related to the dealing with the pandemic and bringing the people in and out to get that expansion finished up.
But overall very solid performance and they came in.
I think we are ahead of schedule.
On the core store side are we as we announced previously and disposal. We did have some delays on that earlier in the year as we use Oh, we were trying to manage bringing people in and out of the cap. We restarted the solar plant activity mid September and we are expecting completion to be by the end of Q1 2021, assuming that.
We're still able to bring people in uninterrupted to get that done.
I I remind everyone. So it doesn't impact 2020 guidance at all a solar plant, but but we do think we'll bring it online.
Earlier on 2021.
Yeah I commented overall on that on the Malik situation.
Molly for call it because just run very well through the year, considering everything we've had to deal with and the countries had to deal with in terms of the covert pandemic and acute results input call operating at record levels.
I might add to that in Mali, or the state of knowledge and 20% partner and then for coal mine. So they are a direct beneficiary of the results and the mine and we did put in some highlights of the total amount that have been paid to the government state. Since we started operations. There. So 27 to 2019, we paid 140 million plus in wages and.
With that said total payments the GAAP number around 276 million. So it is contributing it's a big contributor to the economy in Mali, there and thought to 76 includes priority dividends to the government gets for 10% of its share. In addition at second 10%. It owns are also eligible for ordinary dividends and we're just get to the point.
Where we're going to start paying those dividends are we.
We've just reached the point, where all our initial capital in Boston and the loans that we put into the country to get for co up and running I have been repaid. So we're now starting to pay ordinary dividends what games they will benefit from that.
And also as a reminder for everyone for coal is governed by the 2012 mining code and we have a 24 mining convention.
And one of the 2019 mining convention came in and did include specific stabilization terms, just just confirming that coal and the wafer cooperates is grandfathered under the 2012.
Well I'm going to move on just talk a little bit about some of the other income statement items and then couple of comments on the cash flow. So.
Income statement items, a few few items just to raise your attention.
One of the most significant ones for below the gross profit line related to the reversal of impairment of long lived assets. So we have a reversal of 174 million.
Net of deferred income taxes that reversal has an impact on the bottom line of 122 million and that relates to mess body, we had booked an impairment.
On them as bad in time for all years ago, when gold prices really dipped.
This adjustment here represents the final reversal of any final amount.
While remaining on the impairment charge that could be reversed.
It was driven by a change in our forecast oil price assumption based on analysts' consensus and other analysis, we did.
Long term gold price not we're using an assumption of $1500 an ounce. So.
So for accounting purposes, So that's what led to the impairment reversal.
And common share of income associate caliber, we got almost $11 million or caliber is back up and running in Q3, and we picked up in that $11 million share of their results for the period.
That's the highlight the taxes section.
Taxes are significant we are taxable in all jurisdictions Molly there were no accelerate reductions are paying taxes out of the gate.
That's bad in North Dakota, we are also fully taxable there now and any any residual tax loss carry forwards that we had there accelerated investment deductions et cetera.
Right now we are paying taxes everywhere.
Really a function of.
The mines running well into higher gold prices.
Well I translated into net income for the period 277 million.
At 262 attributable to shareholders of the company or 25 cents a share if you adjust that for significant non cash items, including that Ms. Betty impairment reversal, you got to adjusted income $161 million or 15 cents a share and.
And then if you look at our results year to date net income for the nine months almost have to go and 498 million.
That 460 attributed to shareholders of the company 44 cents, a share or adjusted net income 368 million or 35 cents a share.
I'm going to talk about.
A few items on the cash flow.
So first of all operating cash flow, we had a great quarter 300 million just over 300 million operating cash flow of 31 cents, a share or 755 million.
Operating cash flow of 73 cents a share year to date.
So when you look at that it looks like were well positioned to get up to that billion dollar level cash flow wise. If you pro rated up so we have been reminding you. We've given you some detail on the Mdna.
Part of the part of our operating cash flow includes significant taxes aren't yet paid cash we've accrued them in the financials, but they're not yet paid.
And so.
In Q4 and in total for the year to date and pay cash taxes of about $94 million for the year to date, we're anticipating somewhere around 205 billion. So some pretty hefty cash payments to come in Q4. So just remember that for your models and also there will be some true up of Malian taxes and.
Q1, Q2 next year.
As laid out under the rules for payment of taxes in Mali.
One of the items that we have highlighted in there about that those cash tax numbers I gave you a 200 million 205 million for the year.
Does include about we're looking to up to maybe $50 million of tax prepayments for the year that are strictly due until Q1 or early Q2 next year, but we think the taxes have already been incurred and we have the cash on hand, So we made prepay some of those taxes on a significant chunk of those would relate to Molly.
On the financing side.
I guess the story you can see there is that we have now we paid the revolver fully so we in the quarter, we paid back down 425 million, which was a total outstanding Bell.
On our revolver. So we're now.
We have we have no amount drawn on the revolver. We have we just have a little bit is that under the.
Finance leases related to mainly difficult of about 50 volume, but other than that no other debt.
And.
But what we have left on the revolver is 600 million undrawn capacity plus another 200 million accordion. So we really have $800 million of firepower there.
With the revolver as it stands.
We will in Q4 expect to see about 40 million U.S. come in from Cat loans, though because weve always use cash to help finance part of part of our fleets around the world and as part of the coal fleet expansion the times and methodical and mill expansion. We financed about 40 40 million of that in cash. So you will see that come in Q4.
Dividend wise, we paid $62 million in the quarter and 73 million year to date, we're paying dividends right now at the rate of four cents per share quarterly.
That would be 16 cents annualized U.S.
Which equates about $170 million a year, that's a yield right now about 2.4%, which I think puts us right up near the top of the dividend paying gold companies.
And maybe a comment on that from a capital allocation point of view so.
We are continuing to generate strong cash flow you can see in the cash we feel that we ended the quarter with 365 million will continue to.
Generate that cash over the course of the rest of the year.
As we move into next year, we've got a couple of big capital allocation decisions. The most significant one being.
For Graham allotted.
Hi, Graham will assay and we're expecting to get the feasibility study complete by the end of the first quarter next year and that will put us in a position to Makerbot build decision then discuss their partner EA and.
And so at that point, we will have a significant capital allocation decision to me. In addition to that we're also looking at our options.
In Pirquitas, how we might want to advance that project.
Then also just looking at we've got picked drilling campaign on the exploration side and good results.
In Mali and elsewhere around the world and so we'll be looking the results of that just deciding what we want to do allocation capital versus that so once we have looked at all of those things and decide.
What our capital needs are then we can also revisit our dividend.
Allocations.
Do anything about changing the dividend rate.
And just final comment really on the investing side of Capex as I mentioned overall, we had budgeted about $390 million for the year total capex, we well, we think will be about 10 under so forecasts about 380.
If you look at the cash spending capex today, it's about 265 million cash outflow for Capex. So we got somewhere in the region higher than 100 to 115 million to go. So that's what we expect to see somewhere around that mark in Q4.
Ken.
No groundwater itself.
Well that Capex was we are slightly behind for Q3, but overall for the year our share Gremolata season, both about 26 million and we think we're going to be broadly in line I haven't spent most of that and that exploration are we are a bit behind year to date, but our total exploration budget for the year is $53 million and again, we're forecasting to have spent most if not all of that by the end of the year.
So that's kind of where we are overall leaves us with cash and cash both into Q3, and very strong cash flow generating position cash.
Cash cash crops 365 million at the end of the year, we look forward to moving forward and continue to see that cash balance grow as we move forward into the end of the year and into next year.
And those are really summed up the main comments I'm going to make on the results.
Okay. Thanks, Mike.
I just realized that my interline may have left to work.
I think I said towards the lower end those.
Guidance for 2000, the 20 admit the lower end the cost guidance of course as Mike. Thanks Julio.
Got it right so.
Obviously.
Very strong quarter, good financial results and as we said.
On track.
For the mid range of our production guidance of between $1 billion 1.05 million ounces of gold for them or costs were expecting to be at or below the low end of our guidance range on operating costs between for 15 and Port 55.
All in sustaining costs, we expect to be at the lower end of our guidance, which is the range of between 780 820 per ounce.
To make sure I clarified that.
I think we'll pass it over to Bill Malibu gives a quick.
Review.
Im more focused on I guess some of the growth opportunities, we see going forward as I mentioned, the other especially with their most recently incurred a lot of ground. So bill maybe you can just give us an update.
Yes, sure sure and then we'll open questions all right. Thanks, Clive Yeah, I I don't want to really go rehash kind of what Mike said through.
The first three quarters of 2020, so I'd just reiterate reiterate what he said that we remain on guidance for the year, obviously, great great quarter, given everything that's going on around the world.
We'd like to just point out rather quickly once again that we did have another amazing.
Health and safety quarter, where we had in the second quarter and really no lost time accidents or.
Our lost time, indicee or injury frequency rate is down really amongst the industry leaders for sure if not at the lower end of industry leaders.
And then of course, we continue to form and Oliver U.S.G. commitments as best in class as well.
Maybe maybe looking forward a little bit.
So the budget turn out for 2020.
We not only put them out right. After the first year publicly but I do want to talk a little bit about production as Clive said over the next couple of years for sure. The next five years even.
We did put out a slide to the analysts which kind of showed us real.
Really kind of production assuming everything goes according to plan should basically look like what it did as good as it did this year your own kind of in that right around that million ounce range. So.
So in Theres, a couple of things coming up by the end of this year. The exploration group has agreed or has has told us that they're going to turn over an updated resource for Anaconda and we'll be using that to look at some long term potential which I'll talk about in just a minute at the Cola and then in Q1 of next year Mike's already talked about the graph.
Hello to feasibility, we feel pretty pretty good about that so far and so I'm going to talk a little about how that fits in our profile potentially and then at the end of Q1 also the exploration group is going to put out.
A resource on Cardinal Fmbs, Ed and that really has the potential if you look at what we're doing right now that really has the potential to have almost immediate impact.
Because.
When we did the expansion for the mill, we talk about the we're going from six to seven and a half million tonnes per annum, but we've always been a bit cagey about that we've always said, it's really whatever we think the maximum production is plus 1.5 million tons per annum and so now that we've got the expansion done we're in the process of really we just finished up a two week.
Test on where where we think that mill can run at least for 2000 22021, we put some more three that was representative of next year's mill feed.
There is the potential certainly that we can have additional capacity above that seven and a half million tonnes per annum now.
Now of course, we could feed that with low grade and that would have kind of a marginal impact on her ounce profile, but.
Or we could actually if if there is something in that Cardinal fmbs that area, we could fast track that into production and we could see even potentially late 2021 and 2022 seeing some production from Cardinal FM said, if that pans out at the end of Q1 so.
We're kind of tentatively scheduling some material that's come through next year after that and that that would help us with our balanced profile in 2020, and 20 or 2021 and 2022.
Additionally, one of the things that we want to do is we want to take.
A big bulk sample from the SAP related Anaconda, we're talking you know 200000 tons or something like that.
And run that through the mill, we've always been very open saying that if we can get separately there isn't a per sit there as a percentage 10% to 50% above our our maximum operating rate that we could feed the satellite through so there's the potential once again to get ounces from there and of course, even the existing resource shows a lot of a lot of potential for some high grade pockets that we could truck down to so.
Cola why.
While we're waiting for that what we're going to do long term with Anaconda and that we could see that fitting into our feeding into our production profile kind of in that 2023 and 2024 range. So.
You know once we get that all sorted out with a bulk sample looking.
Looking at 2020 once or.
Our production will come from for coal the main.
Potentially anaconda, FM or sorry, Cardinal Fmbs Ed.
And and then of course the regular sources in must buy to you know to kowtow now if you go on to 2022 again Youd have the same thing if a cola Cardinal Fmbs Ed you'd have the same thing at MAZ.
But today you'd have what you call it all.
For me open pit, but you'd also start to see the ounces flowing from the underground so those underground ore underground ounces could see is up around 200000 ounces at which occurred in 2022.
On the 2023, then you start to see the Cardinal come in you see obviously the same thing from for Cola you'd have my spot to you'd have which coating have which go to underground.
And then all the way out in 2000, 2020, 2024, what you'd see.
Scola you'd see a cardinal.
But to put you Cotto otjikoto underground by this time, it's our opinion that we would have grown it's our it's our intention that would have gramalote, they up and running.
So that that would hit us in 2024, and once again, so you'd see a very nice profile, but just about a million ounces for all five of those years.
Obviously with the potential for anything which might be developed through kiaka or other sources coming in on top of that.
I'm glad you're asking us when we talk about.
No Bill I think that's.
That's a good summary, so I think with that we'll we'll open up to questions.
The team on the phone.
Should we had pretty extensive good session with analysts recently Tom's on the pulling them answered this question from exploration well.
We will conduct a question so thanks.
At this time I'd like to remind everyone in order to ask a question. Please press star followed by the number one on your telephone keypad, we'll pause for a moment, while we compile the Q and a roster.
And our first question comes from the line of Ovais Habib from Scotia.
Bank go ahead. Please your line is open.
Thanks, Operator, hi, Klabin team congrats on a good quarter and thanks for taking my questions.
Quick question was going to be on litigation, but Mike covered that was my next question is for Bill.
In regards to will be.
B two has got it was production by 500 tonnes per day, which equates to about 182000 tons a year and you're currently has about 1.6 million tons of recoverable times and in the items as analysts day, you have guided towards the underground and begin mid 2025, even starting in 2022.
Just being conservative on the underground mine life or am I missing something here.
[noise] [noise] [noise] Hello, Bill.
Oh, sorry, I was I've been talking like for two minutes on mute apologies.
The answer is yes, it is a bit conservative all these.
There there absolutely is production rate upside and the reality is.
If you remember we've always talked about this potential down plunge extension, which can take us even further so at this time, we're talking primarily about the reserves that are in the existing mine life with the potential upside for for down plunge expansion.
Okay. So that's just a more of a functional drive drilling that and just better understand that's correct.
Okay got it and just.
Moving on to Cardinal so.
Turning up and the like.
What are you looking to see at garden, all basically in the resource update get the deposit across the line into production.
Did anything kind of metallurgy or anything else that you need to see before it comes into production.
Yes, So certainly I think maybe certainly I can't talk about it from an exploration standpoint. It what I can tell you is that they're going to put a resource on it well what we've done is we've looked at what they've had what they have which is at an inferred level and we put a mine plan on it and really saw how it really fit in as far as our waste dumps and everything else.
And so what we're just looking for his additional confidence in what their inferred resources.
I I think you know the reality is is this thing this thing even without a lot more drilling we could put into our mine plan. We don't we do have metallurgical testing already done on it at.
At a high level and we don't see any issues from it from a modeling standpoint.
Okay, that's that's great though.
That's it for me guys. Thanks, so much.
Hi, Chris.
Our next question comes from the line of Jordi Mark with Haywood Securities Go ahead. Please your line is open.
Yes.
Cool today, maybe you can run a the the mess, but a reversal grips the implications potentially to patients who are.
Updating future results reserves estimates.
It's.
An easy migration given the change in commodity price assumptions.
And or I mean are you looking at additional drilling that to flesh out the geological culture.
Oh.
Resources, and what sort of loss of margin expansion that we could expect to come into that financial assumption that two twin 36 as shown in the emptiness.
Sorry could you maybe just clarify your question just a little bit like it sounds like there's two parts just want to clarify again.
Sure just I guess, the first part would be any need to changes in the reserves reserve.
Brazil's estimates sort of <unk> to arise from Oh Gopro assumption.
And the other component there as well which would be required.
On a trailing basis too.
To to fill that if any.
I can tell.
Yeah.
Jordi just to answer your question you know we.
We took the existing resource so we had we projected it to death.
And looked at it with increase in gold prices.
And.
What came out of that was yes, the pitch kit can get bigger with yeah, the higher gold price or current gold prices. So the drill program, where we're doing right now.
They have been doing this year was to take that material you get as much of that indicated it's possible, it's not going to be complete well, we're going to have to continue that program next year, but with the results from this year, we'll be able to update some of the resources and years, we drilled two hopefully some of that will get into the area.
Does that answer your question.
Yeah, that's pretty good thanks, and maybe one last question because we do go down and stay there who all that just on cardinal pulling from other things too.
And then some of the Bill's commentary.
You're currently drilling continuing to drill at Cod moved two rigs and still looking at sort.
Sort of pushing yet the learned boundaries on the down plunge buttons.
Well right now a cardinal that we're down to just one drill drilling deeper in Cardinal really capable rate. This year with her cap set up and and isolation for coal, which is really nice core drills. So the other three girls now we pushed up into mobile as we see.
There has been no.
Never be an upside for us, but we're still continuing with the one girl going down one in the deeper part about Cardinal.
Excellent. Thank you appreciate it so today.
Thanks drew.
Our next question comes from the line of Kerry Mccurry from Canaccord Genuity go ahead. Please your line is open.
Hi, Good morning, guys, maybe just another question on Cardinal how does it compare.
Versus the Cola proper in terms of things like wits and strip ratio.
And they're getting in their mining it.
And maybe grade.
In terms in terms of when it's quite a bit more alden coal I remember for colon places.
Just a couple of hundred meters wide, we don't see anything like that Cardinal.
It's in the maps natural with reaching a card or are upwards of close to 30 meters generally cardinals, so less than 10 metres strip ratios don't have those yet because we haven't completed the resource and no. The resource report will put a decent mines, but also oh.
When we complete our resorts in the first quarter.
That would be an updated for a portion of it will be indicated then engineering guys were putting no mine plan on it and at that point, we'll have a better idea of what the strip where she is going to be.
Right.
The question.
Yeah.
Well.
[noise], sorry, maybe just switching down Kiaka I'm you mentioned the technical study coming there can you give us a bit of a sense of what you're looking to do there in terms of implant sciences, it's like a smaller higher grade project and what the previous owner considered or just some context around what you're thinking there.
You want me to answer that clever you want to pass it on to dance.
Oh, sorry, I missed the question.
Yeah.
So in general what were looking to do is we're looking to update the existing feasibility studies were really the plan size and through but I think we're talking around 12 million tons per annum is what we're really looking at and that's primarily because all those studies have already been done. The key differences is we're looking at things like you know obviously the cost of that.
Fuel costs, a natural gas is in play now we're talking about running a dual fuel trucks system.
There and so really we're looking at the cost side and about 12 million tons per annum to make that project economics.
Got it thank you.
Hi, again as a reminder, if you'd like to ask a question. Please press star followed by the number one on your telephone keypad.
And our next question is from the line of Lawson Winder with Bank of America Securities Go ahead. Please your line is open.
Hello, gentlemen, thank you for taking the question great quarter, just on a typical I might ask.
The increased money equipment, you now have and the increase.
Increased mining and doing I mean should we be expecting the grade to be materially higher in my 2022 than what we saw in the last technical study.
Well, so I'll answer it and then Randy can correct. Many brands on the call he'll correct me if I'm wrong. If you remember when we did the study we optimized for that mining equipment right. So what we did is is we employed kind of an optimized stockpiling strategy from day, one and so I don't think you're going to see anything different than what you're seeing in the p.
<unk> coming up in the next in 2022 for sure so.
So I kind of think what we had in the <unk> is what you're going to get my.
Am I correct Randy.
Yeah, that's correct, though [laughter].
Good.
Okay. That's that's very helpful and then I just wanted to.
I'll ask again on Kiaka I think its intriguing you're looking at it but you know as we know it now I mean, it seems to me like it's an asset that probably.
Dilute the portfolio to some extent just give them a very high quality and existing assets you guys have and I'm wondering if you know potential sale is still something you guys are considering or or or are you leaning towards building. It yourselves at this point.
Yeah. Good question I think its.
The early days in that regard I mean, just to [noise].
Hi, everybody, we have some maybe doing some internal valuations and we mentioned it I think in the news release we.
We've been looking at me on natural gas as an option.
Fuel and some other things solar et cetera that actually have a pretty significant impact potentially on the economic some kiaka. So we have some internal ones.
Good show some pretty compelling.
Compelling economics, and if we can prove that up with the new resource.
And the updated a feasibility study by the middle of next year.
Well have a clear picture I think just become not just because the gold price it's become more interesting asset to us for some others as I explained it's a good ore body.
4 million ounces, so I could get some unrealized value for our shareholders. So our job is to get value for shareholders. So as we go through the next months understanding it better I think we'll start looking at timing.
No, we're not going to change our strategy and start building.
Google My vehicle bites at the same time, we've always said that's something we would not do so you start looking at scheduling between gonna watching Kiaka. You know, we'll look at that and say is there potential opportunity to unlock value both of them.
For a period of time without.
Without detracting from what we are doing it works so well, we're going to see disciplined on our approach to what mine to the term construction. So the other alternatives would be to bring a partner.
To build the mine and there's other marquee players and key players and Bettina Paso.
As I mentioned, it's a good deposit we think so others will find it attractive as well or ultimately the potential.
Of course as always to consider.
That are selling yes, so we'll look at those alternatives over the next few months you know the governor Bettina fossil understandably is that this project to move forward if it's economic.
No we think that though if the current internal view, which is early but if the current internal technical view with lower fuel.
Cost, obviously medical person bar, but if those become reality, we can we've got a very significant asset that has the potential to produce for a long period of time or somewhere around 350000 ounces of gold a year.
In a country, where many others who have succeeded so well.
That's our that's our current two copper jackup tickets, becoming potentially a significant asset for sure.
Okay. No that's great. That's it tremendously helpful color color I thought and then and just remind us the pension still is sort of mid 2021 to have an uptick study I know.
I can't recall is that going to be a pretty he's or usability level study.
Well, we we well together put all kinds of or does we've got a full feasibility study that had the poor now we're gonna do update and resource, but it'll be.
It will be a full feasibility study will have a better view in the first quarter and certainly I think but it would be cool he's going to do I think about the middle of the year sorry Dennis.
Yeah, that's our goal is to get to a completed well.
Got a redesigned the thing that 12 million or we're going to do all of the work first principle study and really get the economics to work where we have.
Really good solid economics based decisions on we hope that by the end of the first quarter and then we'll take that information and put it into a a full feasibility study or around the middle of the year by around the middle of the year.
Okay, all right that's.
That's very helpful. Thank you and then just one final question on the the gold price assumption that during the analyst day, you guys had mentioned that copper reserves, we intend to use 1500, a dollar and I just I just wanted to follow up and kind of as a what your thinking was around that that particular level you know partly in light of house. Some of your peers are.
She was going to be a little bit more conservative and and and not change prices versus year end 2019, whereas others are planning to go you know still higher.
Thanks.
Well I can only talk that.
Well I think you know if you look at the reserve price for 1500, we repeat that on long term consensus so.
HM we picked up as reasonable basis is there anything to look at.
You know what if you look back I think the trailing three year average is not a whole lot different anyway. So that's that's kind of where we got to in our reserves and then on the resources side, which is.
80.
It's still obviously very good lots in current pricing and resources by definition need to be priced higher than the reserve level. So this.
So this is kind of where we are we think that 18 again, if you look at the consensus range something else.
<unk>.
A ballpark for sure. So it's in the range. So that's kind of how we arrived at it. It's it's a combo woken up what has happened.
Worthy I want to see things going forward in order to come up with.
What we think's, a reasonable price that we know what we have in each location, especially you heard Tom comment in this value there.
Significant from his value chain.
Change in price or in terms of certain source.
Yeah, maybe just an.
To provide you with a corporate point of view I mean, we you know we don't use with your goal the goal.
To try and bring in to try and bring in reserves resources per se I mean did the day.
We're low cost producer we're talking about.
Based on what we know today.
The next five years being around.
Million ounces year on average are.
Yes.
Somebody for.
For both sustaining cost. So we're one of the lowest cost is not lost cost producers. So we could have used 1200 1100, I guess I don't know maybe people think we're conservative we're really conservative.
Yeah, we're very good at a low cost producer so the gold price we choose to use there is not a reflection of like many other companies desperately using higher gold price.
And because of the money.
Or to bring in a resource that's not we don't play the game. So I would focus on our costs are putting it on a gold using it for reserves does not mean, we expect our costs to go dramatically higher and need.
The goal is to make money, we're making a lot of money.
That's really going to go so just wanted to give you a little bit of insight we can play.
No because it sort of feels like us, but we don't need to where we don't need to do.
I think the evidence of what we've accomplished.
In the last 15 years or so should speak to that.
Yeah, and maybe just to add to that class I mean, one of the things that we really struggled with from an operational standpoint, when you have.
<unk> numbers, which are which are much lower than what they actually are is how do you plan for things like how do you. How do you design for your waste dumps and and you know where you're going to put low grade stockpiles, what is going to be your cut off grade all this stuff, which is not really based on what we're seeing in reality. It makes it a lot harder. So you kind of end up running kind of two books and so for US. It 1500 is operate.
Additionally, what we think is right.
Yeah. Okay. That's that's very helpful. Thanks for eliminating that guys and again great quarter. Thanks.
Thanks, I think we feel like just thinking when you might need to let a raise more questions on a you know on cardinal so we'd like it even though it's never a.
Cool.
We're fast tracking for a reason right Bill you can respond to that from an engineering point of view, yes, we don't have a whole resource on it you have to why we moved almost or rigs onto despite the fact that it's an error and a cooler.
On my understanding is we think it has some good open pit potential yeah.
In the near term.
Yeah actually went when Tom was answering I thought maybe I'd throw that in there, but we kind of move past. The two quick so I guess it requires some historical context. Originally is that's where we wanted to put our next waste dumps, we're thinking about moving right there and so before they could do it. They obviously had to condemn it and so that they started at surface identifying this is an area which has great potential.
So lets surface.
For some sort of small pit. So we didn't want to marry that with the waste dumps that we said, okay. We put on a mine plan on a very rough inferred resource.
And said jeez, there's a potential to pull those ounces and so those out is actually that you that I was talking about and kind of that 2021 and 2022 are those those are from that study that we did so we know that there's an open pit potential there regardless of what they come up with but then what actually happened is then once we started doing that.
The exploration group came in said all that stuff.
Stop on this short pet there's little pit, we think there's a much bigger project there and so that's what their drilling right now so we're very confident at the very least at this at this small open pit.
With the potential for it to get much much larger.
And those are going to be underground potential and ultimately underground potentially.
I still.
As a reminder, if you'd like to ask a question to enter the question queue. Please press star followed by the number one on your telephone keypad.
Our next question comes from the line of Don Demarco with National Bank Financial go ahead. Please your line is open.
Hi, Thank you operator, it's a question for Mike So Mike given that.
Some of the attacks remain prepayment I'm trying to find that are not due till 2021.
Should we model an offset in 2021 with maybe lower tax payments.
Yeah, they do.
The the way Molly works, it's mainly Molly most others. The other jurisdictions based where you said it was up in the year and question Somali you pay based on the prior year.
As you pay it's like it's like you do in Canada, you pencil and based on the prior year, then you trued up in the following year and it's the same for all actually that you do it so yes, whatever your model as actual taxes payable this year that whatever whatever we pre pay in December you would reduce from the true up in April next year, that's right. Okay.
And just remind me then what did you do in 2019 did you pre pay in 2019 as well for 2020.
I 2019, we had a small a small piece I am I think weve paid from memory. It was either 12 or 15 million. Okay. That's just you're probably not a big.
Okay. My next question is done in a passive on built one mine at a time when do you guys ever consider overlapping construction of two minds like Graham Allotting, Kiaka or maybe Graham Latte and Anaconda Standalone.
Well, let me I'll get built to add on to that but [noise].
Oh I think a principle is we've been very successful by focusing building one line at the time.
My initial reaction when kiaka starts much more interesting wants to say well okay great.
We're not going to build two mines at the same time sockets in the same timeframe has done a lot to them we need to bring a partner in we're so that's kind of my first response an adult.
And the Guy soreness and playing around with it. So actually you know maybe from a scheduling point of view, we might be able to consider long term.
Yeah.
We might consider alternative to be able to progress both without my overlapping what you said so I'll pass it on a Billboard stocks, it's very early but.
That's where we were I was assuming we're going to need to find a partner.
We're selling through to stay within our conservative strategy to build them one at a time. So they'll just just want to give some I mean they'll spend early days, but we've been thrown around that you can share some of that was.
We'll discuss yeah sure sure it and as you said Clive at this point everything we're talking about is purely conceptual but the question came up you know if if we had the money and the ability with the construction team be able to do and of course, then you start looking at it you know can you can you slot in your your Earth works team to come in first and then rotate off the site.
We're waiting for the next big earthworks job to come back to is a basically you'd have people rotating into various facets of the project and we think there is a path to do that we've never done. It you know with the exception maybe some smaller projects. So it would definitely be new for us, but we certainly have the we have the team we have the capability. If you look at kind of our senior is the top.
Hi, guys. They almost always have at least one cross shifted maybe another person waiting in the wings and so they're they're they're probably is the potential to do it but.
But it is something that would take a lot of scheduling.
Okay, that's all I need.
Right, but.
Oh I was just gonna move onto the next question, but so go ahead go ahead Sir.
So I'll just say that those would obviously be.
Proceed with a great caution or we don't just look at it now it was an asset.
She had an out again.
Lock the value of we still believe that there are some investors in the industry growth.
I think a lot of the gold funds are still scared from.
The mistakes of the past a management than some of the investments so there.
Not really he talked about some of the growth, but we're looking at generalist funds.
When a well run company that pays a dividend it was good at what they do and grow the business. So we think weve shown that over 13 years.
So that I'm personally I'm going to go to.
Spots, so, yes that would be the drugs.
We've got lots of lots of assets and the pipeline will review the remote car purchases. We also.
Okay, and maybe just a final question then.
You know previously you've mentioned, how you you combed over a potential greenfield opportunities and he made remarks that this is not a lot out there, but where do you stand right now with respect to Greenfield M&A is that still something you're pretty actively looking at and maybe adding something small stage to your pipeline still.
Yeah, I think I I think I said are meant to say that when we look at development. That's out there today, we don't see a lot that we're in love with him Bruce that aren't there.
Scarce and therefore, perhaps highly valued.
We have always believed I've always had a very strong budget.
Being the years on the B two years industry, leading budget an expiration.
All their success that's come come back so.
Oh, we will we are always looking for green.
Greenfield exploration opportunities with the new joint ventures, whether they be opportunities that we.
Generate ourselves such as Pakistan, the joint venture with the government was Pakistan.
Finland, we're drilling an interesting target there and others that will continue so I could be.
Always calculus exploration potential in the world.
Look we're well continue to be driven by.
Charles not geography, very lucky for us to do any major M&A or here.
No the growth profile the assets, we have let's find out what.
Okay. That's good that's going to it's going to be mined realize value.
Let say spend up more of a cardinal kind of in a condo and ultimately whats beneath this operating out of Canada and now of course, Kiaka as well. So we see a pipeline of potential very good assets somewhat I realize that the market understand but at least it just or we're going to continue to probably a budget somewhere she was 50.
4 million I think an expiration that's just probably take.
<unk>, probably going to be 60 lot of that will be brownfield, but we're definitely going to.
Looking for significant exploration opportunities worldwide and there's a bunch of the pipeline that we can't talk about yet the voter.
Some of the past expiration opportunity. So that's kind of the way we see.
Our growth and looking forward definitely with a great team we have an expiration of course, we want to continue as we always have utilize them [noise].
But she was bouncing gogo is.
Yeah, the ones you fund.
Okay, well, thank you very much for that and and thank you for answering my questions.
Well for me.
And there are no further questions in queue at this time I'd like to turn the call back over to Clive Johnson.
Okay. Thank you all.
Your time and if other questions occur to any of you, including shareholders feel free to reach out to you in the clean and he'll put you in touch with the appropriate party to answer your question. So thank you for your time.
Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation you may now disconnect.
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