Q3 2020 OceanaGold Corp Earnings Call
[music].
Let's call webcast at this time all lines are in a listen only mode. Following the presentation. We will conduct a question and answer session and if at any time. During this call would you be quiet immediate assistance. Please press does you know for the operator also note that the call is being recorded on Thursday October 29th 2020 and I.
I would like to turn the call over to San Besuki. Please go ahead Sam.
Good evening, good morning, and welcome to Shannon go kill quota 2020 results webcast in conference call in Kansas.
President of Investor Relations for oceanic gold.
I am joined today by Michael Holmes, President and CEO of Oceanic gold along with Scott Mcqueen, Chief Financial Officer, Mark cargo, Chief Development Officer, and Jim Whittaker Executive General manager of the Hail Goldmine.
Before we proceed note that the references in this presentation adhere to international financial reporting standards and all financial figures are denominated in U S dollars unless otherwise stated also notes that the presentation contains forward looking statements, which by the very nature.
Sure are subject to some degree of uncertainty.
Can be no assurances that are forward looking statements will prove to be accurate as future results and advanced could differ materially.
Refer you to disclaimers on the forward looking statements in our presentation I will now turn it over to Michael Holmes.
Thank you San and good morning, Good evening Tomorrow, I'll have everybody's signing healthy and thanks for joining us today to review at third quarter operating and financial results.
Moving on to slide for.
Our third quarter results reflect the impacted COVID-19 pandemic his head on a business.
During the quarter, we revised out of 2020 outlook, which was driven by lower production expectations and a pile.
We are currently tracking to allow end of guidance and higher than normal consolidated level, we expect to produce approximately 300000 ounces of gold and consequently, higher all in sustaining costs.
At Heil production and costs in the third quarter were below expectations with positive Covid cases.
Increasing from two to either 20 at quarter end and with 330 work is self isolating since the beginning of March including 220 from the first through July to the 21st of October This represents 40% of the workforce.
Also I used to date the side has experienced a 35 year record high rainfall. These.
These factors impacted operational productivity and prevented us from advancing mining rights as originally planned resulting into lying access to high grade all sides.
Uncertainties around COVID-19 remain as cases in South Carolina continue to increase.
These are real challenges for how team, but ones I addressing to safeguard the health and wellbeing of our workforce and delivering on expectations, which include.
Maintaining a higher plan to three reports improving recoveries and stopping up to counteract workforce disruption due to illness and absenteeism.
In New Zealand Mcright is tracking to the full da guidance of 140 to 150000 ounces of gold.
With Christ is bounce back well from the second quarter suspensions and the team is delivering on all fronts.
On the North Island F Y Hey, despite the five week development hiatus in the second quarter related to Kevin restrictions, the math or underground is on track for first production in the second quarter of 2021.
We have an advanced ciba two kilometers underground development during the quarter and I have a five kilometers euthanize.
Project Tonight, sorry.
By year, and we expect it to be delivered developing approximately 900 meters per month.
At a title company level at financial results are consistent with underlying operational performance and broadly in law and quarter on quarter Ah High gold price help to offset generally low adult south as a result of no styles from the <unk>, the depot and lower than expected golf trials from hyle in the third quarter.
Quarter on quarter, adjusted EBITDA increased from strong production from the price and a high golf price.
Subsidence subsequent to quarter and we made the difficult decision to permanently lie off approximately 900 full time and contract workers at the <unk> given the indirect inaction related to our FTAA renewal an ongoing blockade of the access road what are the local government units and the menorah.
City of individuals who are Audi logically opposed to morning.
And a net loss of $154 million either died in $97 million in the third quarter reflects a pretax impairment charge of $80 million related to the carrying value of the DPR.
Third quarter adjusted net loss of 24.9 million resulted in that industry share of negative for.
Which was flat quarter on quarter.
Cash flow to share was 11 since you Tonight and <unk> in the third quarter, excluding the goal pre sales for each period.
Despite the challenging year, we've had we remained committed to delivering the most valued to actually hold the size of the long term.
And we will achieve that by progressing add a NAMIC winick gripe pipeline and executing on our operational plans, while managing the continued risks we face.
During the quarter, we finalized optimization of the Heil underground.
The horseshoe underground at Heil wall solidifying a long term vision for the asset.
Math or underground at why he is progressing well.
And Golden point on the ground that my cries.
The development will begin this quarter with first production expected in late 2021.
Permitting and expiration is ongoing in New Zealand setting the stage to realize the full potential of the bright out why he district.
Turning to slide five.
We have strict protocols in place at all sides to maintain the health safety and wellbeing of our workforce.
This is a top priority for us.
These protocols enforce it all sorts and for our corporate soft include workplace health screening staggard shifts rigorous cleaning practices and working from home where practical or mandated.
October 22nd Ah How operation has recorded 25 positive COVID-19 cases, including five cases in the fourth quarter, thus far with only one active case along with another non presumptive positive cases under watch currently.
I have a 330, how workers have had to so fossilized for two weeks at some point in time since the beginning of March including 120 in the third quarter.
<unk> 50, thus far in the fourth quarter.
The New Zealand government locked down in the second quarter successfully was successfully successfully managed the spread of the virus and to diet. We've had no positive covid cases at reprise or Wahid.
To die 30 of our workforce is tested positive the Covid 1925, Basted Heil four at the depot and one from our corporate thing.
Despite these challenges is sycee performance reminds relatively stable quarter on quarter resolving in the company's total recordable injury frequency right trading to 2.9 per million Alice worked.
During this uncertain time, we continue to achieve strong safety results and we will continue to do so it's really strong leadership and communication to ensure that trend continues in the right direction.
Moving on to slide six.
We have upper either to sustainable business for the past through the years by applying robust ESG practices across our business and this year, we continue to advance key initiatives to keep us at the forefront of best practice globally.
We are progressing our approach to climate change with the development of work plans measures and targets related to this very pressing global issue.
This includes our commitment to provide short term targets in line with the task force on climate related financial disclosure by the end of 2022 and now commitment to other long term goals.
The work is already happening on how to reduce emissions across their business, particularly as we deliver algometer.
Organic price plants.
Evaluating mind plans and designs within the context of using low emission fleets, particularly in our underground operation.
So the innovation and focus on change is underway.
We look forward to sharing more details on our climate change related with before year end.
In addition, we received assurance on our first phase of compliance with the World go Council's responsible gold mining principles and expect to be in full compliance with these standards by the end of 2022.
<unk> ESG performance has been recognized by the major ESG, writing agencies and most recently, we maintained a writing with the MSCI and outperformer ranking by sustain bolitics, putting us among the elite ESG performers in the mining industry.
Moving on to high on slide seven.
Heil with the many challenges we face they used to diet continues to see safety improvements.
The trip.
Tunnel recordable injury frequency right trended lower in the third quarter to five four versus six three and <unk>.
I attribute this to the strong leadership, we've put in place at the operation Brining, our safety culture that requires continuous employee engagement.
The third quarter at Heil was as expected given the challenges we face.
<unk> cases increased dramatically an exceptional rainfall hinders productivity.
Ryan full title 51 inches through September the highest amount on record for the last 35 years.
Despite these impediments the team at Heil is kept the operation moving forward in all aspects of Lamont activity and project development.
30% of our workforce self isolated in the third quarter due to the <unk> and positive cases increased tenfold.
The disruption in workforce resulted in the whole truck utilization rights of 60% you today, which is much lower than our expectations for the.
Quite simply because of these factors, we are unable to advance and mining rights as expected, resulting in delight access to the hydride old science.
Production was lower than costs were higher during the quarter mile.
<unk> and processing unit costs increased 26% of 23% respectively quarter on quarter.
Hi, mining unit cost reflected increasing and increasing head count and trying to offset absenteeism impact.
30% increase in the cost of diesel during the quarter and more drilling and blasting of material in the ice and pits as demand plan progressive.
Hi, milling costs reflect utilization losses from west in circuit material plus the three died planned maintenance shutdown, which was bought for from October.
Quarter on quarter, we had quite a bit of noise, but year on year. There is a trend of improvement across the board 2020, either dies figures of a 2019 results have shown significant improvements entitled material mind, all mining increasing.
Mil fade, increasing recoveries improving in costume framing.
We're on the right path at Highlander spot. The detour of 2020, we have NAS lost sight of the long term potential of the assets.
Turning to slide ice.
He will say proof of the points related to the challenges we face in the third quarter and continue to manage it hile.
The reality is that the Carolinas continues to experience excessive Brian full and although we've had affected in Ryan when establishing their budgets and guidance. It is a variable that we cannot predict.
Despite the rainfall titanite that we are moving more of South Carolina, the neighborhood, averaging 3.3 million tonnes per month since the beginning of this year.
Despite receiving more mindful they never with experienced since the beginning of the prices.
We continue to work through expanding the pits and mining through the clouds and set for life to get to the heart of rock, which we expect will improve productivity independent of whether a base.
Concurrently we've been successful at reducing Tuttle turn over to less than 25% attributable to better recruiting practices and employee targeting as well as on the job training.
We are also increasing staffing levels to mitigate and manage absenteeism from Covid in China.
Kind of annoyed and remains a challenge for us.
As cases in South Carolina continue to escalate.
But with a strict protocols implies we have prevented the spread at thought thus far.
<unk> standing the continued risk associated with the pandemic, we expect continued improvement from the team at Heil.
Training to slide nine.
And the cries.
During the third quarter and the cries operation reported two reportable injuries, bringing the year titled just right.
The resulting tuttle recordable injury frequency right was 2.3 million elsewhere.
The operation continues to see a significant reduction in the number and severity of injuries as compared to last year.
In the third quarter Mcright produced approximately 35000 announced that go and increase quarter on quarter as we resumed full scale mining and processing post government imposed COVID-19 restrictions in order to.
I've been paid an underground mining costs generally increase quarter on quarter with the resumption of normal operations during the quarter relative to <unk>.
Processing costs also increased quarter on quarter, Japan maintenance shutdown completed during the quarter.
All into signing cost of $492 per ounce. So we're not necessarily up quarter on quarter, reflecting the resumption of the priest stripping activities relative to quarter to an increase sustaining capital spend related to a public road realignment project.
The road realignment project is imperative to facilitate some mind loss extension to 2020 items that we share it as part of a off died a technical report.
We expect the price to produce over 1 million ounces at enrolling sustaining costs of approximately $1000 per ounce sold over the next is.
The development of Goldman point underground and additional open pit opportunities that date, though in this mills and guidance and have increased demand life, we expect to invest approximately $15 million to develop the golden point underground, which effectively replaces the fries is underground and we will invest an additional $30 million.
Annually in sustaining capital with the IP expansions.
2020, and the crisis trekking comfortably within the <unk> production guidance of 140 to 150000 ounces of go.
We continue to expect a quarter to be the highest quarter of production at the lowest.
Corresponding owens sustaining costs, particularly a sustaining capital investments type or off.
Moving on to slide 10, and why he recorded zero injuries during the quarter and it's maintaining its title injury total recordable injury frequency right relative to <unk>.
Development that the monitor underground continues to progress on budget on schedule for the full year. Despite the temporary can Tom and in the second quarter due to COVID-19 related restrictions.
With title advance brights continuing to increase.
And at the end of quarter three we can play the 2.2 kilometers of underground development.
First production of stifle for math or undergrad is tracking to the second quarter of 2021.
And that will be supplemented we stopped Paul development or as we progressed, which we advance the project.
Looking ahead, the processing plant, which was shut down in February after completion of stock money at Carranza.
We will resume batch processing this quarter with all from narrow vein mining in the Alpha Carranza and Louis spies.
We.
Expecting 7002, Ipass announces a golf production from Wahidi in the fourth quarter, bringing total production to approximately 20000 ounces of golf this year.
Moving on to slide 11 in the depot.
Focus at the depot is on lifting the operating restraints Amman and renewing the FTAA.
During the third quarter the.
The community of the depot held the General Assembly on September 10th and 400 community members participated representing the majority of the did you get a family.
The General Assembly passed resolutions supporting the resumption of free travel for the epi them on supplies and products effectively supporting the removal of the blockade Andrew.
And requested that the <unk> Council, which has been active in establishing maintaining the blackeyed support these resolutions.
To date the resolution to the General Assembly have been opposed by the local later and these coalition on the <unk> cancel and as such the blockade reminds in place.
Despite the efforts of the General Assembly.
<unk> and the municipal Council agreement to remove the Blackeyed and the anti morning, Actavis men in the blockheads located could not be achieved.
As a result and in accordance with the Philippine live in Lois we terminate the employment of 496 employees and 400 contractors on the 13th of October.
This is a very disappointing outcome for us and most especially are dedicated and skilled philopena workforce as well as the brought up Aaron Goodbye.
<unk> is a significant source of jobs, social development taxes and revenues that we believe will be critical and contributing to the Philippines post COVID-19 recovery.
With the permanent lie off of the majority of the workforce at focus has been tuned to transitioning to DPA two side of operational standby.
Are expected timeline for resumption too full operations has now extended to up to 12 months as it would take considerable time and if it to rehaut and retrying are highly skilled phillip paint workforce.
We continue to save temporary injunction against the government's order restraining. The operations. We have received word that appeal to the court of appeals for temporary injunction has things not and we are currently evaluating the option to appeal. This decision to the Supreme Court.
And currently we remain in dialogue with the appropriate representatives at the national level on the renewed status and currently I'm understanding is the FTAA remains with the office of the president for approval, but we do not have visibility on a timeline for action from the president.
I will now turn the presentation over to start to take you through a financial results.
Thank you, Michael and Hello, everyone.
The next few slides, Michael said to summarize outfit quarter financial results.
Tending to slide 12, which provides a snapshot of a balance sheet.
As noted is that 30 September a cash balance was 127 million, while I met that stood at $187 million.
We have been actively managing a liquidity position for some time in response to the suspension of operations at the <unk>.
As well as the planned production poison Hawaii.
This is included that amendments late last year the style of them interest in JSP in Q1.
On the Gulf Presale arrangements executed to better align out near 10 operating cash flow profile without 2020 capital investment plan.
2020 plan included a strengthening operating cash flow consistent with increasing mind rides it by tile and the cries across the third quarter Nathan more so into the fourth quarter.
However, the five week covid shutdown that mcright impacted mining progress and in doing so.
<unk> access to some high grade zines in the context of the third quarter.
Hi, all has experienced similar timing challenges with the management of Covid, resulting in increased workforce absenteeism due to oscillations in case management again is contributed to reducing mind productivity and delight access to higher grade zines in the third quarter.
While we are proactively managed the material impact a short term challenges head on liquidity and we expect improved performance in the fourth quarter.
The Qaeda realizing the value of the AJC is not just managing nay short term risks but.
But at the same time and sharing we can commit to delivering a significant organic growth projects and add portfolio.
Despite these risks.
To change. These calls we felt additional equity was the best path given the increased risk I've the DPI timing on.
Okay also I, considering the significant capital investment commitment required to bring these projects to fruition over the next few years.
The equity raised announcements to timber was completed this month and as noted titled 81.6 million common shady issued for net prices of approximately 122.4 million.
The complete a transaction included the exercise of an over allotment option that $8 6 million shed.
As previously involved with the bulk of the price into a market to underpin the horseshoe underground mine development tile development of opportunities and the lighting district, and importantly, also ongoing exploration to further enhance the value of already evident in the <unk> region.
While we continue to face uncertainty trajectory of Covid in the U S and broad economic risks remain we believe we can now move forward with confidence and commitment to delivering operational performance and a significant value enhancing growth projects, while at the same time retaining their full value an optional.
In the hands of the shareholders.
Maybe dislike 13, and the financial results summary.
The overall color a result of a net loss of $97 million, which included an impairment charge of 80 million related to disappear.
This followed the announcement at the planned workforce, Tom terminations in the third quarter first tranche of which occurred in mid October.
These terminations, where resulting and expected.
Change in the status of the asset as Michael explained effectively.
As previously highlighted the operational trends physician from a state of operational readiness for rapid rate stuff to reduce status of operational standby.
These changes expected to materially impact the timeline required to resume full operations subsequent to a resolution of blockade or.
The decision by the up from the President on the renewal as such the carrying value of the asset was reassessed at the end of the quarter to include this change an assumption and it's Ray assessment resulted in in payment charge as included in the third quarter results.
Carrying value of the debate will continue to be reviewed based on the situation on the ground and with respect to progress.
With the FTAA renewal.
Should a positive outcome be achieved and the operational ramp up <unk>.
Happened more quickly than anticipated the carrying value may also re assessed on that basis.
The thoughts on the non-cash impairment recognized the underlying thing for the financial results were consistent with the operating performance.
During the quarter and <unk>, we can totally consistent with the previous quarter.
Year on year reduction in both EBITDA.
And revenue largely reflects the lower Gulf production and sales at the <unk>.
But also the planned production pulls a vahid, where there has been no production in the second and third quarters.
Ah marginally higher average gold price realized combined with stronger production quota from a Christ effective effectively offset the small reduction Saint Ohio.
The adjusted third quarter result, excluding unrealized gains in hedge guidance and the impairment charge or the loss of 24 9 million on negative four cents per share fully diluted.
A quarter on quarter basis, EBITDA was largely comparable.
It just it Aps improved by one <unk>.
For sure and the cash flow for sure before working capital movements was flat at two springing the year to date title to 11 cents per share.
Generally a financial outlook for the final quarter is materially stronger based on higher production from bosma cries and tile combined with a restart of the plant Hawaii to batch process accumulated narrow vein all staff.
Based on current golf process and has improved production outlook. We are targeting every 10 to underlying profitability in the fourth quarter.
As far as the cash flow summary at the bottom of the slide neither date operating cash flows increased due to that or state of $155 million from the previously announced called pray style, which totaled Adi announces.
48000 answer the juke delivery in 2020 with the remaining 40000, a delivery and Q2 2021 during.
During the third quarter. The first 12000 ounces June this year were delivered the remaining 36 will be delivered in the fourth quarter.
The year to date invest in cash flows reflect increased capital investment for growth projects, partly offset offset by prices from the file a <unk> investment earlier in the year.
The quarter on quarter, increasing investing cashflow, largely reflects increased pre stripping activity and growth capital at higher.
Cash used in financing or 6 million reflect finance lease repayments without that facilities unchanged during the quarter.
Turning to slide 14, which provide some additional data on the capital expenditure from Dakota.
As outlined at the top of the table total capital expenditure was approximately 82 million a 50% increase on the product quota.
Just under half of the quarters capital spending attributable to increase capital investments at hail.
By a major works included completion of the second Ksf will lift commencement of work on the third list plus heavy F O X related to peg sell construction.
<unk>, so high a pre strict consistent with the non plan.
Balance was split equally between the cries <unk>, both approximately 20 million H.
Cries sustaining capital increased with a full quarter of mining, including ongoing prescript coronation North stage four plus the road Ray lawn alignment project being a K feature in the quarter.
All he include the continued development that math or underground plus increased exploration spend covering both Martha and W. K P.
I will now turn it back over to Michael to discuss that exciting organic growth Potline further.
Thank you Scott moving on the slide 15.
During the third quarter, we delivered a comprehensive uptight of our exciting portfolio with the Finalization of the technical reports for our operating assets.
The results demonstrate real value over the long term and we believe delivering a dynamic organic growth pipeline is critical to creating shareholder value.
The future of items Xian ago is into top Ta jurisdictions, the Americas, and New Zealand bigger.
Beginning with the growth in the Americas, we finalize the optimizations the whole shoe underground at high on the third quarter and solidified view of the assets long term potential we.
We see an exciting underground future at how.
Supplementing the open pit operations and it is Amazon. This is true that drove it to continue to increase the loss of the underground project.
We envision Heil is the 200000 plus ounce producer at a sub $900.
Around swollen sustaining costs in the near term investment in Weiss storage facilities supports this vision and generates active lots of mine free cash flows and activates.
The company is in the final stages of the supplementary environmental impact study state of prices to expand the how operation.
The Acoa's facilitates continued development of the existing how footprint expansion of the TSS and why stumps and the commitment of the mining from the underground who shoot mine too.
<unk> there have been no objections by any stakeholder group <unk> and at this stage the company anticipates a successful record of decision on completion of the prices, while the first quarter of next year.
The majority of exploration activities are in New Zealand, where we have is operated responsibly for the past 30 years, creating significant value for shareholders and socio economic benefits a host communities regions in the country.
Martha underground underpins the great the great Wahid district, as we currently see it.
It is fully permitted currently in development and on track for first production in quarter to 2021.
As we develop the math or underground project, we will continue to invest in the drove it.
We believe the why he district represents the largest value creating opportunity we have in their portfolio and expiration is expected to continue to use to come.
At <unk> the updated 43, one on one technical report reflected a mind loft extension to 2020.
With the development of the icmp opportunities and the Golden point underground.
Seldom point underground is expected to reply surprises underground and extend the mind lost in the cries of production levels of 150000 ounces to 190 S announces a year and all in signing costs of around a thousand.
Dollars per ounce we've.
We continue to expect me price to be a major source of free cash flow generation for many years to count.
Turning to slide 16.
<unk> as I stated before the exciting future of Hailes underground during the third quarter. We've completed the optimization of the whole shoe underground, including the sheet of a bottom up mining approach with the use of the submitted Rockville backfill.
Portal development follow the whole shoe is expected to begin next year with the receipt of the.
And first production is currently trucking to 2022 year and.
The whole show underground is one of several underground exploration targets at how.
Which was recognized as part of the regional too diligence. These targets stretch I have a one kilometer from the whole she in the east to the palomino in the southwest.
In 2016, we drove the upper portion of Horseshoe with some excellent results that have now converted to reserve of approximately half a million ounces along with the substantial inferred component still to be converted at that.
At deeper levels.
Significant extensions to holzschuh also remind to be tested as highlighted in the figure on the lift with 64 made us at 15 grams, but.
Photonics calls.
Comma is what's the next opportunity to drills with a substantial and food results of approximately 600 S announces being booked earlier this year.
As part of this work, we also identified the snake shoe and PISCES targets with excellent Julien sets. In addition to a large conceptual target still to be tested call Aquarius each of the substantial opportunities will be advanced over the next several years.
In addition to exploring underground we continue to drill ahead of the icmp at operations and expand opportunities at surface.
Turning to slide 17.
Math or underground is advancing to first production in the second quarter of next year and is the foundation asset for district with enormous potential.
Exploration effigy that I'd at math or underground have focused on resource definition in support of feasibility level studies currently underway.
We have not fully defined the resource at math around the grants diet with additional areas highlighted for further drilling programs and definitions.
Located 10 kilometers to the north of why he we continue to believe that W. Kepi will grow into a multi million dollar ounce deposit and we will dedicate the drilling resources to highlight this.
<unk> is a major discovery with the results of one one me announces griding between 12 and 13 grants for Tom based on only 35 to us and made us drilling.
Throughout 2020, the company has been focused on step at an infield drilling of the eastern Robyn bind to further delineates the results.
Also during the third quarter the mining permit applications for WK paid was approved granting us exclusive right to the W. K P. Mineral resource we look forward to continuing a robust exploration program.
Along with all the technical and environmental studies.
Turning to slide iodine at my cries development of the Golden point underground underpins demand Los extension.
Services in earthworks around the portal have already.
Commenced and we expect to begin portal construction for the Golden point underground before year end or early next year.
In addition, we are progressing and I've been praised pre feasibility study for the round Hill Golden point area.
As part of this and evaluation will be undertaking a comparison between.
Between the underground and open pit mining options for exist for the existing resource.
This study is expected to completed in the first half of next year.
In summary, and moving to slide 19.
2020 has been a challenging year. This is not where we expected or wanted to be.
I'm sure. Many of you have reflected on 2020 and feel the same as we all face an unprecedented unprecedented global pandemic on.
<unk> had to make some challenging and courageous decisions hitting into the fourth quarter.
On October the 13th we apparently light of 496 employees and 400 contract. This at the CPA, which was extremely disappointing.
Given the impact of COVID-19 on the Philippines. It is hard to understand.
We are responsible contracted to the national government and we can assist them on so many levels.
I use the term courageous because it's not easy to terminate employment of nearly 1000 Filipinos that helps our.
As difficult as the processes. It is the right path drive Shannon ago is the right path for us to type on behalf of Hbos's shareholders.
Six days off the payment light also the DPI, we closed at both deal offering.
And this was all this also I was not an easy decision for US we evaluated all options before moving forward.
As requires add this year look to the future and our approach will not falter, we will not deviate from a path that delivers the most value to our shareholders of the long term and we believe that pop mainstream.
<unk> progressing as dynamic organic Friday.
Looking to the future we see our most promising growth projects coming online and we will continue to make the hard decisions to keeps on the right path liver enduring value.
There's been a difficult year the uncertainty of the deeper on the conditions of how have been channel challenging how.
However, nothing has fundamentally changed with assets in fact, we are accelerating our exploration focused in New Zealand and it how to convert resources to reserves better define how assets and development and deliver the enormous potential we see today.
Nothing is fundamentally changed with that same we are off writing and talk to you jurisdictions with decades of experience.
We have all the right ingredients for success.
We have a solid plan to deliver on quality assets and talk to jurisdictions.
Under the stewardship of good management.
We expect improved performance in the fourth quarter.
In the case of realizing value within AGC is not just managing these short term risks, but at the same time, ensuring we can committed to delivering the significant organic growth projects and add portfolio in face of these risks.
We are focused on progressing add rice, which means building three underground mines Heil monitoring Golden point.
Expanding compete operations and continuing to explore the grind Hawaii district.
We believe this translates to real value for current and prospective shareholders I belong to.
Early next year I look forward to sharing more details, including a path forward or an ambitious vision for the future of ocean on the go.
In the meantime, we'll be heads down executing on the day today and focusing on that path forward to deliver value over the long term.
We are resilient and dynamic gold miner with a strong sustainable future ahead of us.
<unk> pipeline is one of the best in the industry and it represents decades of opportunities for a company and my team and I look forward to delivering that value.
Now back to stand thank you very much.
Thank you Michael So that concludes the formal presentations segment of the webcast I will now turn it over to the moderator to facilitate the Q&A session.
Ladies and gentlemen, if you do have a question at this time. Please press star followed by one on your Touchtone phone.
Been hearing three Tom prompt acknowledging of your request and should you decide to withdraw your question simply Pasdar followed by too.
If you're using a speaker phone, we do ask that you. Please lift the handset before pressing any keys. Please go ahead and pass Dhawan now if you do have a question.
And your first question will be from all this habit.
<unk> Bank. Please go ahead.
Hi, Michael and team Thanks for taking my questions.
Just.
Darting off at Hale.
Based on the implied production needed to meet the lower end of guidance.
Obviously cute to form needs to be a pretty strong quarter can you give us any color on how Q4 is going based on what you witnessed in October so far.
Yes, Hi satellites look at hand, Spain, It has been <unk>.
The challenging year is mentioned it heil and we are focused on delivering the guidance.
We've IP me out of the area.
Snake finds too, we're finishing off the radio and and mining into the the late <unk> one.
And so we are actually getting down into the hydride portions and in October is is advancing as per the expectations. This will be an important quarter for us and.
And it has been the deferral that high rise, but we're advancing to the expectations to deliver that <unk> the guidance.
<unk>.
So then in terms of.
You said that.
Employees that are in quarantine basically the number of quarantine in Q3, one 160 employees and then it's come down to about 50, I mean, obviously, then utilization will get good phantasmal tyre and has that helped kind of moved material even further.
Yes, I would part of the actions that has been taken on sergeant and Jim controlled but more of this is that we've actually because of the impact of.
I'll stay action T as in Langsat during the third quarter.
We've been guys. The local library company that actually has been supplementing the the workforce and some are actually using and Brian a pool of people to ensure that we were actually.
Moving through with the number of people on site, which improves the utilization of the equipment.
So that has improved and that's been an action that has been taken on site.
To to me to guide the absentees and the impact of guidance.
Kansas. This again in terms of the amount of tons. Your mind I mean, it was about 707000 tons of or at 1.69 grams per time in your mode 864000 tons of 126 can you give us a breakdown on what tons engaged came from stockpiles in Wisconsin.
Came from the mind material and I'm, assuming you have a high grade stockpile going into the queue for.
Yeah, those types of ice all all actually handle that question I have it to Jim.
With with some of the more specifics of detail.
Thanks.
Yeah, Hi, this is Jim here Yeah. Great question. Thank you very much and bed hear from me again.
Uhm Yeah. The focus is obviously as as you see we no more than your mind up to the mail and that slightly diluted tons, we have quite a bit of stockpile up to about a million times at about seven that's why you see that impact.
The plan going forward into this final quarter over 70% of material is really going to be focused on snake phase too.
And that would be both tons and Greg will be higher from that area. We're also about 20% will be from Ledbetter, where we're opening up the center of the mind.
Great slightly lower but the time again about half of what we're getting from snake face too. So we've we've really positioned ourselves into the center of the or body opening up the middle part and.
And connecting Snaking Redhill.
Got it and and yet and anything you need to do going forward to mitigate the risk of additional work whether going forward I mean that I.
I mean, obviously.
Kind of getting used to the fact that there's there's a lot of rain in this area.
And that has been impacting your kind of mining weights on and off is that anything additional you'll need to do to mitigate that risk.
Currently what we're doing we that when we were working only in snake and Redhill, we were doing a lot of work and doing drop cuts off of the ramps and creating something.
So we could try to channel some of the water into the lowest part of pets.
Ledbetter, it's a much more wider area and we found that that methodology doesn't work. So good and typically what we're doing now we're we're pulling water out of those trees areas, we're putting putting the water into mills on and knows on is actually are transferred pump Ah transfer point into the water treatment plant system.
So really a couple of things one is active something.
In the lower areas.
Having a wider area, but better also helps but it's part of the on line design and then the back end of the process plant, which is C. Water treatment plant is very important to us to be able to manage this complete flow of water through the system from the mind into mellophone pit and then back out Street plan.
I think some other other actions we've taken their advice that the Jews.
And talked about is just some of the selection of the equipment, so a larger and larger grinding in fleet to to manage.
Post the right of innocence and allow us a foster reentry job.
Alright, I appreciate the color on that and just lastly.
Regarding your credit facility, that's that's due by the end of 2021.
Ah you engage with any of your lenders to put then pushed that Chris great facility forward.
Yes.
We've had a gripe banking group.
For a for a long period of time and and post the equity rise of these if it's an action that we're following up with Scotland team too.
To talk with the credit facilities and and see what we can do they with regards to I'm pushing that further out.
Thanks, Michael and thanks for taking my question that's it for me.
Thank you all of us.
Thank you next question will be some carpet at credit Suisse. Please go ahead.
Thank you Hi, Michael and team peak from May you. Please.
<unk> and.
Sorry to say that <unk> staff here and I'm just wondering.
Since that has there been any perceptible changing government engagement or.
Oh.
Not at all it doesn't really sound like it has been changed 90, if you're just not getting comments on that.
Yeah, Thanks Snake.
Through the quarter, we have had had numerous discussions with the government off had discussions with the secretary of the Department of Finance is the executive Secretary.
Trying to get some further color on if there is entity anything else outstanding that we required today.
With regards to the recommendations that the working great gave to the president.
And trying to get a little bit more color on on what is happening with the time lunch at this point in time.
The President is is fairly busy.
Was managing covid within the within the country and and and certainly a lot of the local cheese support staffer managing that that issue as well we continue to be engaged with the under secretary so that.
The.
Secretary.
Of the office of the President.
As mentioned the.
The the renewal is still with the office of the President and we're still in discussions with them.
But unfortunately, we just haven't been analysis secure.
Some of the outstanding.
Tom Lawn Smart thing with regards to the renewal process.
Alright understood. Thanks, and then do you mind, just flipping through the the costs from here.
Redundancy costs ongoing holding costs.
Is there any other upcoming decisions points of all lumpy payments that we should be aware of.
Yeah sure so uhm.
So I basically.
With the lay offs will happen into trances, one trent's was the 30 some type of the second triumph will be around the 12th of November.
The food's transfer was sort of some of the flipping a workforce. The second trends include sort of more of the senior.
Senior with forced by Filipino next pet so title title redundancy cross around about $8 million U S.
And you'll see in the third quarter results there.
Accrual of $3 to mean uhm, so that we accrued for the fish trends in.
In the corner 3312, So the reminder.
Once it will come through in the in the fish Bowl.
Quarter, if we don't see if.
If we don't see any any advancement on the FTAA pulled up to the eighth of November.
I'm going cost and it's just around the bat uhm.
To keep it in in the state of operational standby and and to ensure that the the <unk> is.
Is.
It's in <unk>.
I have run by water.
The majority of the cost is in power to the order them on and that's it and an average cost of around about $1.5 million per month run right for ensuring that the the environmental compliance the security the assets and the security of your autograph.
Okay. So.
So that pretty much covers it all and.
Right and then maybe just want to eat Scott Uhm, you wanted to <unk>.
Consumption job and I'm, hoping that.
Written down value for that sort of 540 odd million recoverable value.
<unk> is that I've seen.
Is that if she into the forward to recovery or what can I do to that number.
Yeah, Thanks to make it it's a it's a fairly.
I guess.
Unique situation on what's changed and the reason we had an entertainment is probably a way to stop.
Nothing's changed in respect to the renewal process and we're still working through that was still engaged with the government is Michael said and what has changed materially and the reason that we reassess the carrying value was.
The trigger thing the termination of the workforce and the expectation that that will.
And extended the time to restart the asset.
Now the analysis around the carrying value is based on Ah.
<unk>, a number of scenarios, which we feel so much appropriate way to do it in this instance.
And the delay that we're assuming now.
To start.
Start to generate cash flow again from the asset beyond a decision to raise stuff.
Has a longer time onto it and therefore, the discounting effective stuff coming towards essentially we're using a probability wedded analysis. It now has a a longer gap fully luck going to say any catchfly from the asset and that's what's.
Driving the carrying value assessment and will continue to monitor that as we go forward obviously based on changes on the ground and as I said previously that we've got that we've got an assumption that the full 12 months plus some time for a new like Tetris is the current view if we if we do better than that and we did get it up and running sooner than that carrying value can be reassessed on that basis as well.
Well.
Okay, great. Thank you and then finally wanted to click one goodnight.
Just reminding me around the timing.
Kyle instead of the morning schedule when you get through.
Into that while predominant for the the <unk> all done it.
Have you done for the Q1.
Next year.
Yeah, Nick this I am the highest approach with regards to.
The opening up the house or bodies.
The ultimate peak sort of includes 600 bodies, and which to the Viper not milk zine as we do future cutbacks with Middletown face too.
Nonsense up snake, one and company Hyped me up Sightsee.
And I can't lift at a one so there'll be different based approaches with regards to the designs and that'll have to type in the next.
Five years, but the idea is that with that.
So you're out of the next trees.
The the idea is that as we supervise been up a larger areas just expired late better in the service area.
And getting into the Hot rock, we've got a lot more optionality they inside of the impact of the weather with the hotter rock as we are not the pits.
<unk> the cutbacks standard diet, one have as much impact with regards to the to the with US we'll have alternative places smart.
From a from a morning, a few morning point of view, we'll see those.
The the soft materials, they continue to call into 2023.
Okay understood. Thanks, guys I'll perform.
Thank you.
Question, there will be some Mike packet of National Bank. Please go ahead.
Hi, guys. Thanks for taking my questions Angel, just flipping back the slide eight.
I just wanted to you know you've got that line in there a 35 year, but luckily it can you just remind us what the.
The technical report kind of of things what your budget process I don't think can't use a 35 year average if I recall correctly.
Yeah, Thanks for that much.
I'm just trying to remember we've basically.
Use a random about a month.
Brian impacts in our budgeting process.
A 35 year history.
Basically doubles that amount of impact so types it up to to a roundabout 55 sort of diet Si.
We've historically sort of have a little bit.
At the city foggy.
Extreme events, we've thought was taken the lobster.
Or previous two two.
Two 2000 on it a lot a mistake in the last.
10 year average.
Which is historical veins, a roundabout at four to six inches amount.
Thing, we're seeing some accessories, so going forward part of the price that we have done is we should have taken that into account.
We built some.
Some additional Ryan effected dies in.
In 2021.
We for G C Tuttle, a masked material mind as as we call Lauder do the typical report down to 45 million tonnes from that 50 55 million tonnes going forward site.
What we're doing is we're accounting accounting for that we haven't sort of finalize the budgeting process <unk> to to understand.
The sort of risks.
And and risk mitigation around our rent how we met each.
The tuttle prices and that is cool so I will die like that towards the end of the beginning of next year with that with that God, It's reset, but uhm, we'll certainly in the in at 43, what I want is positioned ourselves to uncia understand that and and better management as well as the.
The management of impact.
All the all the Ryan on on certain facilities and certainly the supplies and the separate lives.
Alright, and you have to go back kind of a year plus there's a pretty dramatic improvement there on tonnage despite.
What is clearly still rainy weather.
A function of just getting the Oakland pets opened up it also have the benefit of the new mind fleet that was coming into service around that time.
Yeah and margin has been has been a bit advice.
Basically we've we've.
We've.
Initially the sort of payback the buyback the the pages.
Two areas, we used we should've little.
Little smaller pits into into no sign of inside period. During this process weeks to uncover the whole body and unlocked the value we need to make a lot more does uhm and say.
We reflected on the previous slate and then there's an upgraded the flight basically doubled the source of the flight and hence we've been out with a double double a move and I'm still looking for improvement on top of that.
Okay.
I was just looking at the other trust there the 12 months Rolling average employee turnover.
I'll have a secret an improvement from a year ago with it's still sitting north of 20%.
Is it I I recall from past mine too or a partial kind of drive of just a safety culture decision of management, saying, you're not fit to work here.
You don't Wanna, where you're safe, they got gargle and that kind of thing.
Is that still the case, so why you're north of 20% you're still seeing.
A bit of a safety culture unwillingness to adopt the standards that you guys are trying to implement to keep your workforce say for us.
Another dynamic that's kind of taken over the dominant Hawaiian causing the turnover.
That is a good question I was a child.
Uhm, just with regards to the Sycee them. If you haven't will get the figures and the total recordable injury frequency right improvement.
Certainly vein.
And certainly reduced in either assist that this has been an enormous improvement.
<unk> from the <unk> will <unk> when we first started the project back down to know that five point.
Five four which is which has been a great improvement. So there's a lot more buying by the workforce at this point in time.
And that's been fantastic.
Dominantly what was sitting in gym can sort of answered a little bit more to this is that.
Is that there are a few a few people that still taking up Iowa belief on the culture of safety.
Inside the percentage of sort of employees that leave generally due to personal reasons as those employees that are.
Terminated I would probably be around 50 50.
Opposite each so we still have active management of place long shot.
Alright, so I, just think that it's pretty pretty normal.
The normal rate Okay. That's it for me you guys. Thanks very much.
Thank you next question will be from Daniel.
I prefer.
<unk>. Please go ahead.
Yes, Hello, Michael and everyone a couple of questions.
The tip you remind me is there.
Do you have any option to go to arbitration if necessary.
Daniel Thanks, so that'll be the arbitration harm in the contract.
It is an STI it is sufficient FDI that the government is way renew the government is working through there are conditions within the FDI that that have defaulted.
Just remind me Mike FTAA stands for.
Financial and technical assistance agreement.
So basically where we provide financing and the technical expertise to the government to extract the resources and it's a 60 40 split after the cost of capital South.
We have fundamentally being a contract with the government and yes, there is and with every contract there is the ability to guys who arbitrage yes.
Okay great.
Second for hail, maybe that's M. A a simple question with the with the water issues I guess I've not been there.
It sounds like it's a trickier, unlike most north American minds in terms of mining in the wind.
And a wet weather because of the satellite skinny maybe just explain why it's more difficult in heavy rainfall then it would be elsewhere in North America.
If that's the case.
Like I think good marketing gyms living install ahmad sort of hand that one either Jim just surround tracer.
What were the areas of concern on and haven't met guiding and managing that.
Okay.
Part of my of my major rock.
Yeah.
Yeah. It it definitely around the nature of the rock I mean, we've been basically mining developing this site through initial pioneering down through the upper levels of the open pit mine and you'll find a lot of sans a lotta saprolite.
And then a lot of compressed material looks looks very competent and someday, we actually have to blast. So when you start to drive trucks over again rainfall. It just really turns into mush. So there's a lot about just getting through these upper layers getting down to a firmer base in more competent.
<unk>.
And that is the benefit of of opening the pit up in the center, which is better pit.
So typical conditions as Michael mentioned, we've had to bring in heavier greater equipment.
Looked at ways to keep some to active.
It's not typical.
I've worked in some very very wet minds.
Frontier of in the Highlands of Peru, it's quite a bit different where where the water can be trapped in long term permanent some 10 rock and pumped out.
We're really where mining through these benches and trying to something to them trying to connect assumption really just chasing around this perch water. So it is quite a bit different than us.
Other states that I have seen an extremely wet conditions, where it's where it's quite yeah. You have uhm, if you're pumping and some translation you can readily managed to water and escapes and hail we spend quite a bit of time trying to chase it through the sand labs.
As time goes on.
Where you and you open the pit up more you would be more into the base in to the the harder rock and this will be less of an issue is that a fair statement.
That's correct I think it was Michael brought it up previous see when we look at our longer term stays plan and we actually look at our longer term pit plan, we're tracking the amount of material in our block models by sans by satellites by she'll materials and also by what we call competent.
Rock.
We're expecting right now we're somewhere between say, 60% to 70% copay rock that will get up into the eighties past 2023, and then it remains fairly constant as your down deeper airs pit. So we obviously, we do expect us to improve in town.
Okay. Okay.
Daniel Lola I'm, sorry, also Dan just adding to that the advantage of going underground as well inside you're.
Are you looking at for that.
It's relatively the covenant rockers fellow is relatively dry from urge you to do.
Geological in Hartford logical.
Drilling and so I'm getting getting the underground up and running and then sort of having a sort of advice to the production from undergrad that nobody has an answer.
Certainly certainly assist and then for offset future is is how do we expand that underground to sort of continue that 90000 tons answers a year.
Production.
Hobbies and match the underground.
Underground loft and get lost in that for potential what we see as well so that stock that so that the couples the weather events from the from a bright proportion of the underground off the bill paid.
Right. It sounds like there's a bit of a learning curve, though just just in terms of going through this stuff because it is it.
It isn't.
Standard.
On the on the underground.
The immigrants, obviously going to be almost 100% in the competition rock is that.
That is correct yes.
Yeah, a little bit does that 100% of the conference off this rock.
Great. Thanks, very much guidance.
Thank you, ladies and gentlemen, as a reminder, if you do have a question. Please press star followed by one on your Touchtone phone.
And your next question will be from David Taylor Taylor asset management. Please go ahead.
Oh, Hi, there I've I've got more of a statement than a than a question, but I'd love to hear your comments afterwards, I just start off by sort of stayed in the obvious at the performance I mean, it's just it's just Phoenix.
Disaster I mean, you you just.
This might be one of the worst performing cold thoughts in the Galaxy and.
Now you're I found it frustrating your comment when somebody asked you about depute on what happened in your response was that the president.
As more things to worry about like Covid and when I sort of think about I'm, having a long term shareholder both institutionally personally and I think about different strategies here.
Be there being.
Proactive or reactive and proactive strategies in in the Philippines could could have involved with some of the things that make talked about in the past I got like a dual lifting or selling a piece of the asset to our local now we're selling asset outright a local sponsorship.
Our local board members, having somebody influential on your side you clearly didn't have the right people.
Who didn't have the year of the President's office instead of being proactive you guys were reactive and you rely on the courts, you always believed that the Philippines with Atlanta courts, Atlanta laws, but you lots at the local level you lost the provincial level and now I sort of listen to what your strategy is and you're only strategy. It is relying on the Supreme Court, but you've lost it every court level, which.
Which to me.
I think that's naive and it leads me to believe that there's more to it than.
Then covid in the present, having other things to worry about I I believe that the local governor anti minor was looking for a bigger piece of the pie has the ear of the President's office and if you are only strategies rely on Supreme Court, you're going to lose like you've lost it every single fourth level. So I guess my question is what are your alternative strategies your other than.
Relying on the courts, where you failed in the past.
Hello, Thank you for that David and.
We.
Sexually frustrated with the process.
The court of appeals in the.
And the Supreme Court process that we're looking at it it's really just about the injunction.
About the barricades, so that doesn't have any impact on the ti.
It was more about the injunction for a quick resolution to to the barricade.
We were planning to actually pull out from the from the court of Appeals before the the results.
But just choose the process, we sort of Mr. Indebted to do that so I will we're still considering that we still have the my age.
Major appeal through the regional court.
See on the Liberty, which is the initial Kai Sai that's something that we're still going through we've got to the office of the president and it has typing at the wall and we're still with the office of the President side, while we're still seeing positive action.
With regards to that we haven't had any negative negative comments back and and we're still in discussions with the with the government. So we're we're still considering.
That is a pathway for and we've had to make some difficult decisions with the workforce. So.
We're not relying on the courts with regards to the FTAA, we're relying on the discussions with the president and the work that we've done in and showing that the the government and the president that we're responsible responsible golf models and so there is still activity day I mean, it is still <unk> Ti and we're still working at.
Working with the group to to ensure that we understand.
Frustrations, because we're living with us rushes frustrations, if we die we understand yes. It is a lot more valuable than now hands.
But if this.
Have some some some definite trigger points to have a look at what else we need to do if if things so advanced or diamond bands and and we'll be sort of will be continuing to review those as we move forward.
But for us.
It has been the Sci has been.
Take him back to end of the working group and has been recommended by over the Palm Spotless financed.
In the months you Joe Sciences in the Bureau, and the Department of Environmental Natural resources the whole recommended.
As the.
<unk> I should be should be rolled over the line condition, you'll have a letter from the you have a letter from the finance Minister that you could operate without an FTAA in that paper proved to be completely worthless.
We had a letter from the <unk> not the not the department of honor that yeah.
No.
Yeah, I understand this continued dialogue, but I guess.
Isn't with to do something he would have done it.
Before you were required fire before you fire.
Basically all the let all the employees go in and the fact that you pulled I understand you called from the Appeals before there was a decision, but let's be honest I mean, a year went by before the Appeals court, even I mean, they never even decided on the on the case.
That's correct and we're still we're still.
We're still working through David or not.
So for US it's still it's still on this site that that.
We're still talking to the executive Secretary of the Department The Securities Department.
And we're still having positive engagement day.
We're still we're.
We're still working towards foreign Los <unk>.
Okay. This is my last question, then who got that your other than you being a bunch of Australians trying to negotiate in the Philippines. Maybe you can talk about food you have.
Senior standing in the Filipino community that is working on your behalf to get the ear of the president.
Yeah, we've got an internal resource.
The president of <unk> in country, and we're working with with.
Some of the congressmen as the governor roof supported province.
Working with those too.
Three people that have the lowest of <unk>.
Standing histories, and great relationships with the government officials.
Okay. Thank you and good luck.
Hey, no further questions at this time.
Offer I do believe there's one more person kibaki to ask the question.
Your next question comes from Pacyna with RBC capital markets. Please go ahead.
Yeah. It <unk>. It just just a quick walk from eight she's got Ya a hedging profile could you maybe just at longest strategy there and how many ounces you plan on hedging going forward in the near too.
Yeah, It looks tanks full with the at the moment I think we've gone around the bed.
27 29700.
Ounces H in New Zealand at the New Zealand 2000 dollar option.
And the risks and being the pre sales the to transfer the pre styles.
Historically, we've HAGE.
Just the cries answers and to ensure that we have a have a good margin is we operate within the prize. It has been a very like mining and milling developed a ton right, but a low grade. So it's really been to to ensure that we get a return.
And good margin from the house my cries operation Uhm.
We don't have.
That's <unk>, that's probably the way that we look at hedging at this point in time, and we don't we don't plan to sort of do any any aging in the future.
We have to deliberate into the Gulf <unk> mentioned and that sort of thing delivery in this quarter and we pushed this quarter and then quarter to next year.
Yeah, Thanks, but that's it for me.
Oh.
They seem to be no further questions at this time. Please proceed.
That concludes our webcast in conference call a replay will be available on our website later today on behalf of Michael Scott Mark Jim and the rest of the team. Thank you for joining us bye for now.
Ladies and gentlemen, this concludes your conference call My Cats for today, we thank you for participating and ask that you. Please disconnect your lines have a great day.
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