Q3 2020 B2Gold Corp Earnings Call
[music].
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].
Good afternoon. My name is James and I will be your conference operator today.
At 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.
If youd like to ask a question. During this time simply press Star then the number one on your telephone keypad if.
If youd like to withdraw your question. Please press the pound key thank you [laughter] Mr. Clive Johnson, President and CEO you may begin.
Thanks, operator.
Welcome everyone to our call.
Conference call to <unk>.
Discuss the third quarter of 2020.
Our actual results to be two gold, obviously, a big most you've probably seen our news release that came out.
Last night, another very strong quarter, putting us on a.
Hi, this is on target to be at the lower indoor garden for 2020 for the year I'm going to pass it on to Mike sentiment like seem to talk walk you through the highlights of the financial results.
And then bill Lytle extreme detail patients, who is going to give us an operational update talk a little bit more about a gross and then we'll open up for questions.
We had a very good session when that was especially 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 next month.
Hey, Thanks, Scott, So I'm going to start on the revenue side. So in quarterly record revenue of 487 million.
So 253 ounces seven ounces at an average price of like $224 now. So he quoted unopposed gold sales were some sales over two though still a.
It's pretty fun to do and obviously, we're all watching closely to see what happens in the gold price analysis.
Hopefully, we'll see that result from the U.S. election in short order a relatively short order.
I would also say that our year to date, we had record revenues of 1.3 billion. So it's been an excellent year for for me to even even in that.
[laughter].
Turning to the operating side, so production or we had total production of 264000 ounces.
It's made up of 249000 of our three mines and that should be something else.
From our attributable share of colors. So.
On our production times led it's almost like a call 153000 ounces at 3000 ounces a budget.
For corporate excellent order again.
Gross sales process grade and recovery, both higher than budget more than offset a little bit of downtime on the throughput side as we took the mill down to do the difficulty mill expansion plan and also to do a full cycle relying so even without tying in place we still managed to be bunch of like 3000 miles of cool as body.
Right on budget 54000 ounces or is that is the only the only thing different in the quarter from inside it was that we had a magnitude 6.6.
ER earthquake.
Early on in mid August and we had to take the mill down for about six days, a well inspections were carried out by the way.
Scientists Bureau, because.
But that's those inspections confer no damage and the study is running very well.
Would you call. It 43000 ounces 1000 ounces, both budget and that basically.
Chicago continues to move along nicely.
Our year to date, our consolidated production stuff hundred 70000 miles.
Including our shirt calibre and that's about 20000 ounces at his budget overall.
Let's turn to the cost side of that equation.
Our total.
Cash costs for the period and quoting our care 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 420 years of $17 an ounce.
What's the budget for the three month period, and Colo and 333 [laughter] broadly in line with budget and.
That's really.
Made up of slightly higher gold production as I. Just described earlier, but 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 are being 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.
Mr spot, one month and advanced by the government and don't always follow up quickly on the white joint disease.
And that he was $615 an ounce ER, which is $33 less than budget and they continued great. Ron same story as we've seen in Q1 in Q2 mining and processing costs were lower than budget with lower diesel and HFO prices and.
Lower waste stripping and lower haulage distances as we had a bit of a mine sequence change there to to deal with Cowen.
During the current year.
Then ocean totaled $435, an ounce $66 an hour plus a buffer so continuing 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 Namibian dollar all added to the positive outcome frozen codell.
On the all in sustaining cost side, our total all in sustaining cost per ounce for the encoding caliber were $795 an ounce.
Thats 19, lessened budget and when.
When when you take our three operations over $766, an ounce, which is $31 less than budget at.
And.
Again, not sound like broken record seemed was really the first two quarters, but we did see some capex catch up.
In Q3 so.
You know weve seen some capex move around during the year and I'll comment a little bit more we think African telling about overall for the year, but we did see a little bit of lower capex earlier in the year some of that caught up in the quarter. We do expect some of that to catch up in Q4. So.
So if you look at if you look at all and as 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 mining we guided by mining. The 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 already in the middle and Otijikoto 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 of million 55000 Johnson.
And we think will come in right in the middle of that consolidated range.
On the cash cost and all in sustaining cost write off or I'll call. It was a arrangements to 85 325.
I think we'll be in the range from his body 665 to 70 <unk> five we think will be at or below the low end of that range and Oh you quoted for 80 520, we think will be at or below the low end of that range.
When you take in our consolidated position, including calibre for 15 to 455, we think will be at or even slightly below the low end of that consolidated range.
On the all in sustaining cost side or a cola ranges by 55 595, we think we'll be at the upper end of that range when when all said and done for the year.
I missed badly ninesixty five the 105 per ounce, we think will be in the range. Oh, you Cotto doesn't tend to have 50 ounces. We think will be at our club 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.
The range. So other as I mentioned, we do have some capex catch up in Q4, we think it'll be somewhere in the range of 100 to 110 million overall for the year. If you look at our total capex that we budgeted will likely come in somewhere around $10 million.
Dollars less not total so when you factor that in you are looking at somewhere around 100 110 million Capex in Q4, So you will see.
Higher all in sustaining cost in Q4, but overall as I said.
We think we're going to come in at the low end of that range 70 to 80 day 20 for the year consolidated.
<unk>.
Couple of other comments, maybe on the operations generally.
The coal mines.
My expansion the mill expansion is now materially complete a the new mill.
Same online and that's been commissioned by.
In September.
Churn comment these needs the final.
Construction cost to that plan expense were a little higher than we invited there about 13 million higher overall when all was said.
And with the majority of those overruns related as a COVID-19 costs and 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.
Oh, very solid performance and they came in.
Basically.
Had a schedule.
On the call are solar side, we as we announced previously and disclosed we did have some delays on that earlier in the year as we use.
We're 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 are still able to bring people in uninterrupted to get that done.
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 sort of earlier on 2021.
Maybe I don't know I commented overall on an on the Malik situation.
Malian for call it because.
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 Covance pandemic and acute and we still see him for coal operating at record levels.
Right and to that end Molly or the state of knowledge at 20% partner and if a coal mine. So they are a direct beneficiary of the results in the mine and we we did put in some highlights of the total amount that have been paid to the government and state since we started operations. There. So 27 to 2019, we paid 140 million plus.
In wages and benefits and total payments that GAAP number around 276 million. So it is contributing as it's a big contributor to the economy in Mali, there and start to 76 includes priority dividends that the the government gets for 10% of its share. In addition, as 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 just reached the point, where all our initial capital investment 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 or gains they will benefit from that.
And I'll also remind everyone for coal is governed by the 2012 mining code and we have in 2012 mining convention.
And one of the 2019 mining convention came in a bit includes Pacific stabilization terms, just just confirming that coca.
For coal in the wafer cooperates is grandfathered on the 2012.
All right got 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 from below the gross profit line related to the reversal of a parent of long lived assets. So we have a reversal of a 174 million.
Net of deferred income taxes that reversal has an impact on the bottom line of 122 million and that relates to mess Batty, we had booked an impairment.
On them as bad in tank all years ago, when gold prices really dipped.
But.
Justin 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 gold price assumption based on analysts' consensus and other analysis, we did.
Long term gold price not we're using an assumption of $5100 an ounce.
So for accounting purposes, so that led to the impairment reversal.
That common share of income and 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 a highlight the taxes section.
Taxes are significant we are taxable in all jurisdictions Molly there were no accelerate reductions, there's we're 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.
Are all gone now, we're paying taxes everywhere and that's really a function of.
Mine's running well in the higher oil prices.
Well our translated into net income for the period $277 million of that 262 attributable to shareholders of the company or 25 cents a share if you adjust that for significant non cash items, including that.
That impairment reversal, you get to adjusted income $161 million or 15 cents a share.
And then if you look at our results year to date net income for the nine months almost half the building 498 million.
That 460 attributed to shareholders. 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 and the cash flow.
So first of all operating cash flow, we had a great quarter, a 300 million just over 300 million operating cash flow of 31 cents, a share or 755 million.
Operating cash from 73 cents a share year to date.
So when you look at that it looks like we are 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.
A part of the part of our operating cash flow and includes a significant taxes aren't yet paid cash we've accrued them in the financials, but they are not yet paid and so in Q4 and in total for the years today, we paid cash taxes of about 94 million.
For the year to date, we're anticipating somewhere around $205 million test that 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.
Laid out onto the rules for payment of taxes in Mali.
One of the items that we have highlighted in there that those cash tax numbers I gave you a 200 million to an IND filing for the year that does include about we're looking to up to maybe 50 million of tax prepayments for the year that aren't 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 been paid the revolver fully so we in the quarter, we paid back down $425 million in terms of total outstanding balance.
On our revolver. So we're now.
We have we have no amount drawn on the revolver. We have we just talk 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 that what we have left on the revolver is $600 million Undrawn capacity, plus another 200 million accordion. So we really have $800 million of far far there.
The revolver as it stands.
We will in Q4, I expect to see about 40 million U.S. come in from catalog, though because weve always use cash to help finance part for quarter over fleets around the world and as part of the coal fleet expansion that ties in with the Cold mill expansion.
We financed about 40 40 million of that in 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 are paying dividends right now at the rate of four cents per share quarterly.
That would be 16 cents annualized us well.
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 comment on that from a capital allocation point of view so.
We we are continuing to generate strong cash flow you can see in the Cashel here 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 1 billion.
Programmable logic.
Minimal 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 make or both to build decision then discuss with our partner AG and.
And so at that point, we will have a significant capital allocation decisions made in addition to that we're also looking at our options as key acted in Pirquitas, how we might want to advance that project and.
And also just looking at we've got big drilling campaign on the exploration side and got good results.
In Mali and elsewhere around the world and so we'll be looking at the results of that just deciding what we want to do allocation of capital versus that.
So once we have a look at all of those things and the site.
What our capital needs are then we can also revisit our dividend.
Allocations.
Do anything about changing that dividend rate.
Then just finally comment really on the investing side of Capex as I mentioned overall, we had budgeted about $390 million for the year total capex.
Well, we think will be about 10 under so forecasts about 380.
If you look at the cash spend in Capex to date, it's about $265 million cash outflow for Capex. So we got somewhere in the region higher than $100 million to $115 million. You go. So that's what we expect to see somewhere around that Mark in Q4, and you know.
Groundwater itself, we haven't talked with our Capex was we are slightly behind for Q3, but overall for the year our shirt ground lot season, both think about $26 million and we think we're going to be broadly in line.
Been spent most of that and that expiration, we are a bit behind year to date, but our total exploration budget for the year is $53 million and again, we're forecasting 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 that.
Cash and cash flow at the end of Q3, and very strong cash flow generating position.
Cash cash clubs 365 million end of the year, we look forward to move 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 that really sums up the main comments I was going to make on the results.
Okay. Thanks, Mike.
I just realized that my interline it may have looked like.
I said towards the lower end of <unk>.
For 2020, I missed the lower end the cost guidance of course, and as Mike said Cool you got it right. So.
Obviously.
Very strong quarter, good financial results and as we said.
On track.
Could the Midwest where production guidance.
1.05 million ounces of gold in or costs were expecting to be at or below the low end of our guidance range and operating costs between 15 and ports. If you thought that all in sustaining costs, we expect to be at the lower end of our guidance, which is the range of between 780 820 pounds just want to make sure to clarify.
Look I think we'll pass it over to Bill now and it gives a quick.
Review.
I'm more focused on I guess some of it.
Growth opportunities, we see going forward as I mentioned, we have that especially with their most recently incurred a lot of ground. So bill maybe you can just give us an update.
Yes, sure sure that we're looking at questions all right. Thanks, Clive Yeah, I I don't want to really go rehash kind of what Mike said through the.
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 is going on around the world I would 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 revenue lost time accidents or.
Our lost time, indicee or injury frequency rate is down really among the industry leaders for sure if not at the lower end of the industry leaders.
And then of course, we continue to form and all of our U.S.G. commitments.
Best in class as well.
Maybe maybe looking forward a little bit.
So the budget turn out for 2020.
We normally 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 for the analysts which kind of showed us.
Really kind of production assuming everything goes according to plan should basically look like what it did as good as it did this year, you're kind of in a union were right around that million ounce range. So.
So in 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 it 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.
Although the 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 add.
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.
When we did the expansion for the mill, we talk about that we're going to see 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.
Based on where we are we think that mill can run a lease for 2020 2021, we put some more through that was representative of next year's mill feed.
There was a potential certainly that we can have additional capacity above that seven and a half million tonnes per annum. Now of course, we could feed that with low grade and that would have kind of a a marginal impact on our ounce profile, but or.
Or we could actually if if there is something in that card and let them know that area, we could fast track that into production and we could see even potentially late 2021 in 2022 seeing some production from Cardinal Fmbs, Ed if that pans out at the end of Q1 so.
You know what kind of tentatively scheduling some material that's come through next year after that and that that would help us with our ounce 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 and you know, we're talking you know 200000 tons or something like that.
Run that through the mail, we've always been very open saying that if we can get separately there isn't a percent there as a percentage tend 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 six.
Hello.
While we're waiting for now what we're going to do long term with Anaconda and that we could see that fitting into our fitting 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 its a cola Cardinal FM said Youd have the same thing at Mas Bhatti you'd have once you cotto.
For me open pit, but you'd also start to see the ounces flowing from the underground so as underground ore underground ounces could see is up around 200000 ounces at which included 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 must buy to you'd have which CODI inhibits your 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 your cotto, what's your quota underground by this time, it's our opinion that we would have grown it's our it's our intention would have gramalote tee 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 are coming in on top of that.
Glass or anything else you want me to talk about.
No Bill I think that's.
That's a good summary, well I think with that we'll we'll open up for questions.
The team on the phone.
Should we have pretty extensive.
Session with the analysts recently Tom's on the call them through.
There's a question from expiration.
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 Scotiabank.
Go ahead. Please your line is open.
Thanks, Operator, hi, Clive and team congrats on a good quarter and thanks for taking my questions.
Quick question was going to be on that.
But Mike covered that was my next question then score below in.
In regards to books I'd be too has got it was production about 500 tonnes per day, which equates to about 182.
Yeah, and you're currently has about 1.6 million tons of recoverable done and in the items. This time as they you have guided towards the underground and begin mid 2025 in 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 <unk>.
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 you 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 grilling and just better understanding that's correct.
Okay got it and just moving on to Cardinal so.
Let them see what I mean, what are you looking to see at garden, all basically in the resource update get the deposit across the mine into production.
Did anything kind of metallurgy or anything else that you need to see before it comes into production.
Yes, so certainly I I think maybe certainly I can't talk about it from an exploration standpoint, 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 has had an inferred level and we put a mine plan on it and it 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 think you know the reality 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 a high level and we don't see any issues from that from a modeling standpoint.
Okay, that's great though that.
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.
Yeah. Thanks.
Thanks cool today.
Maybe you can run the the mess, but a reserve to grips the implications potentially to patients who are.
Updating future results reserves estimates that's.
An easy migration given the change in commodity price assumptions.
And or I mean are you looking at.
Additional drilling that to to flesh out the geological co put oh.
Oh.
Resources, and what sort of losses line expansion that we could expect to come into that financial assumption that two twin 36 is that's true.
Yeah.
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.
Just I guess, the first part would be any need to changes in the reserve.
Residuals estimates sort of <unk> to arise from Oh Gopro assumption.
And the other component there is what what would be required.
On a trailing basis to.
To to fill that if any.
I can look like.
Once yeah.
George do you get to ask your question you know we.
We took the existing resource than we had projected it to death and looked at it with increase in gold prices.
And.
What came out of that was yes pitch kit can get bigger with yeah, Hi, Goalposts are current gold prices. So the drill program where we're.
We're doing right now.
In doing this year was to take that material you get as much of that is indicated as 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.
In years, we drilled two hopefully some of that will get into the.
Does that answer.
Yeah that was pretty good thanks, and maybe one last question completed downstate as a rule that just on Cardinal I'm told that they used to and then some.
There was commentary you're currently drilling continues to drill at cod in two weeks and still working it.
Sort of pushing yet the learn boundaries on the down plunge buttons.
Oh right now a cardinals, we're down to just one drill drilling deeper and cardinal really capable rate. This year with her cap set up then and.
Thanks, Lisa the cool because really managed school drills. So.
The other three girls now we've pushed up into mobile as we see.
That area is doing though.
Significant upside for us, but we still continue with the one girl going down one in the group.
Part of a cardinal.
Hi, Thank you I appreciate it so today.
[laughter] extra HM.
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 coal a proper in terms of things like with them you know strip ratio.
Getting their money.
And maybe grade.
In terms in terms of when it's quite a bit more Alden coal you know remember Poland places this close.
Close to couple hundred meters wide, we don't see anything like that at Cardinal.
Well the maps natural attrition at Cardinal are upwards of close to 30 meters generally Clinton was little less than 10 metres stripped.
Trip racial don't have those yet because we haven't completed the resource and you know the resorts, we probably put a decent minds, but also oh.
When we can put our results in the first quarter well you know to be adopted it didnt for a portion of it will be indicated then <unk> engineering guys were putting in mine plan on it and at that point, we'll have a better idea of what the strip, which is going to be.
Right.
Good question.
Yeah.
Well.
[noise], sorry, maybe just switching down Kiaka 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 Dan.
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 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 the.
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.
And again as a reminder, if you'd like to ask a question. Please press star followed by the number one on your telephone keypad pattern.
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 I'm, just looking for color I might ask.
The increased money equipment, you now have and the increased.
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 mine equipment right. So what we did is we employed kind of an optimized to 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 P.A.'s, what you're gonna 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 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 through.
Probably.
Dilute the portfolio to some extent just given the very high quality 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 know leaning towards building. It yourselves at this point.
Yeah. Good question I think its goodies.
Pretty early days in that regard I mean, just.
[noise] 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 Neal natural gas as an option.
He will and some other things solar et cetera, that's actually a pretty significant impact potentially on the economics of Kiaka. So we have some internal ones.
Lets show some pretty compelling.
Compelling economics, and if we can prove that up with the new resource.
And the uptake of peace ability study by the middle of next year.
Well have a clear picture I think you know what this become not just because of gold price, it's become more interesting asset to us for some of the reasons I explained it's a good ore body.
4 million ounces. So once you get past some unrealized value for shareholders. So our job is to get value for shareholders. So as we go through the next months understanding is better I think we'll start looking at timing.
No, we're not going to change our strategy and started building.
Google My Big Bold bites at the same time, we go.
What we said that's something we would not do so you start looking at scheduling between gravel watching Kiaka. You know, we'll look at that and say is there potential opportunity to unlock value both of them.
Over 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 time 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 became a parcel.
As I mentioned, it's a good deposit we think that isn't quite as attractive as well where ultimately the potential of.
Of course as always to consider.
Consider selling.
Yes, So we'll look at those alternatives over the next few months you know the government of the Kina fossil understandably is that this project to move forward you could check and all that.
And we think that though if the current internal view, which is early.
Current internal technical view with lower fuel.
Cost.
Obviously medical person bar, but those.
Those become reality, we think we've got a very significant asset that has the potential to produce for a long period of time or somewhere around three or 50000 ounces of gold a year.
In a country, where many others who have succeeded so that's.
That's our that's our current two condo checker tickets, becoming potentially a significant asset for sure.
Okay No that's great that's it for me.
It's a 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 like.
I can't recall is that going to be a pretty either utility level study.
Well, we work together to put all kinds of who does we've got a full feasibility study didn't have the poor now we're gonna do update and resource, but it'll be.
It will be a usability study will have a better view in the first quarter and certainly I think but it would be cool. Please go to do I think by 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 you know.
Really good solid economics to face difficult decisions and we hope that by the end of the first quarter and then we'll take that information and put it into a full feasibility study or around the middle of the year by around the middle of the year.
Okay. 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 definitely there we intend to use out of 1500, a dollar and I just I just wanted to follow up in kind of that what you're thinking work around that that particular level you know partly in light of some of your peers are.
No she's going to be a little bit more conservative and not change prices versus year end 2019, whereas others are planning to go you know still higher.
Thanks.
Like your cuts up.
Well I think you know if you look at the reserve right 1500, we repeat that on long term consensus so.
HM we think that it's 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 a reserve and then on the resources side, which is higher 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.
This is this is kind of where we are we think that 18 again, if you look at the consensus range somebody else.
Full part for sure listen the range. So that's kind of how we arrived at it. It's it's a combo woken up what has happened to kind of worthy I want to see things going forward in order to come up with what we think a reasonable price that we know what we have in each location, especially you heard Tom comment much about either.
I figured from is that it.
Change in price there in terms of certain source.
Yeah, maybe just Uh huh.
Provide you with a corporate point of view I mean, we you know we don't use the 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 <unk> million ounces year on average.
We oh put around that.
Football sustaining cost. So we're one of the lowest cost is not loss 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.
And we're very good at a low cost producer silver gold price, we choose to use there is not a reflection of like many other companies desperately using her go price.
And because of the money.
Or to bring in a resource that's not.
Okay. So I would focus on our costs are putting it on a gold using it for reserves does not mean, we expect costs to go dramatically higher a neat you undergo a goal to make money, we're making a lot of money.
I think you're going to go so I'm just wondering.
Give you a little bit of insight you can play the bulk of 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.
And the last 13 years or so should speak to that.
Yeah, and maybe just to add to that cloud I mean, one of the things that we really struggle 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 out how do you. How do you design for your waste dumps in 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 kinda end up running kind of two books and so for US. It 1500 is operate.
Based on what we think is right.
Yeah. Okay. That's that's great very helpful. Thanks for eliminating that guys and again great quarter. Thanks.
Thanks, I think we feel like just thinking we might need to let a raise more questions on ER.
On Cardinal so we like it even though it's nerve or.
Cool.
We're fast tracking for reason right, maybe bill you can respond to that from an engineering point of view, yes, we don't have a whole resource on it yet, but why have we moved almost or rigs onto despite the fact that it's an error in the cooler.
On my understanding is we think it has some good open pit potential yeah, Oh, yeah. The.
The New York Yeah.
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 in and so that they started at surface identifying this is an area which has great potential.
Will that surface.
For some sort of small pit so we didn't want to marry that with the waste dump. So we said okay. We put on a mine plan on it on a very rough inferred resource.
Instead, usually there's a potential to pull those ounces and so those out is actually that you that I was talking about in kind of that 2021 and 2022 are those those are from that study that we did so we know that theres, 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 and said all that stuff.
Stop on the short pet there's little pit, we think there's a much bigger project there and so that's what they're doing right now so we're very confident at the very least at this at this small open pit.
With the potential for to get much much larger.
And ultimately 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, so question for my somebody given that.
Some of the tax P. maimed prepayment I'm 2020 that are not due until 2021.
Should we model an offset in 2021 with maybe lower tax payments.
Yeah, they do.
The the way Molly works, it's mainly volume most others. The other jurisdictions basically you said it was up I mean your question Somali you pay based on the prior year.
Taxes, you pay it's like it's like you do in Canada, you Penthol based on the prior year that gets trued up in the following year and it's the same for all actually that you do it and so yeah, whatever your model as actual taxes payable this year that whatever whatever we pre pay in December you would reduce from the true up.
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 20 Twond.
Hi, 2019 way that's more of a small piece time I think we paid from memory. It was either 12 or 15 million. Okay. So it's just you're probably not a big number.
Okay. My next question is done in the past you've owned built one mine at a time when do you guys ever consider overlapping construction two mines like grammar locking kiaka or maybe Graham Latte and Anaconda Standalone.
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 on building one mine at the time.
My initial reaction was construction much more interesting wants to say well, okay, great, but we're not going to build two mines at the same time. So it's in the same timeframe has done a lot to them, we need to bring a partner in or something that's kind of my first response and adult and.
And the Guy started playing around with the sales 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 my overlapping what you said so I'll pass it on to Bill for his thoughts it's very early but that's where we were I was assuming we're going to need to find a partner.
So to to stay within our conservative strategy of building one at a time, so it's going to give some very little spirit early days, but we've been through it around that you can share some of that was.
Well discuss yeah sure sure it and as you said Clive at this point everything we're talking about is purely conceptual but the the question came up you know if if we had the money and the ability with the construction team be able to do it 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.
Whether 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 seniors.
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 what I needed.
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 was a great caution or we don't just look at it and that was a massive.
As I said, an auto gas block.
Block the value, we still believe that there are some investors in the industry that loan growth.
I think a lot of the gold ones are still scared from.
The mistakes of the past a management than some other investments so there you.
Oh really he talked about some of the growth, but we're looking at generalist funds, who won 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 ability to go to <unk>.
Response, so yeah that would be the drug we've.
We've got lots of lots of assets and the pipeline will review them and we'll take our approach to this 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. It there's just 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 or 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 boost that art there are scarce and therefore, perhaps I mean.
Yes.
We have always believed I've always had a very strong budget.
To be many years on the B two years industry, leading budget an expression.
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 in interesting times, there and others that will continue so.
Oh, the scope of this exploration potential in the world.
We're well continues to be driven by.
Charles not geography right.
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 it's gonna do you mind realize value.
Let say spend up more of a cardinal kinda kinda ultimately once beneath this operating out of Canada and now of course, kiaka as well so we see a pipeline of potential there.
Good assets someone 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.
Well nothing when a person that she is probably the thing.
The board, you're probably going to be 60 lot of that will be brownfield, but we're definitely going to.
You are looking for significant exploration opportunities worldwide and there's a bunch of the pipeline that we can't talk about yet the voter some.
Some of the past exploration opportunities. 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].
The cheapest ounces Gogo is.
These are 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 couldn't 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 questions. 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.
[music].