Q3 2020 Endeavour Mining Corp Earnings Call
Greetings and welcome to the end doesn't mind in third quarter Twentytwenty was <unk> web site.
[music].
Participants are in listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator was just such during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded today. It is now my pleasure to hand.
To the management. Please go ahead.
Thank you operator, and Hello, everyone. It's a pleasure to be here on or two or three presentation results webcast.
I'm sure that this would be a very exciting presentation as we have a lot to discuss today you would have seen though we also published our new life of mine tricky T. and Hyundai.
On the call I am joined by Sebastian who some of you might have seen easier are very insightful social media seed is currently in Ivory Coast also.
Also on the call are mark or Patrick.
Today's call will be followed.
By the usual format production will start with an overview.
You probably don't need to discuss the financials Mark will then take us through the performance of each mine, including the updated mine plans in one day, and then Patrick will move towards providing an exploration update.
We will try to be as quick as possible to live questions at the very end.
Before we start.
Please note our usual disclaimer.
And now I'll hand, it over to Sebastian to take us through the first section on page six.
Thank you much.
Before we start Im sure Youve all seen the announcement on Tuesday, which confirmed that we are in discussions with teranga regarding a potential.
Good are of equal style combination.
The discussions are ongoing and may or May not result in an agreement in respect of a potential transaction.
Any transaction would only be pursued by management and the board of Endeavour, if they believe that it represented a compelling value creation opportunity.
For our shareholders.
I want you all to however, rest assured we remain committed to our promises of generating strong cash flow deleveraging and paying dividends.
I do not intend to comment any further at this stage either in this presentation, Algerian QNX, which I hope you'll understand.
But it's okay. As you will see that there is lots of other exciting stuff to talk about.
For those who haven't yet had time to digest all the materials published this morning. This slide is a very good summary in short.
We are on track to meet guidance for the year.
We generated a record cash flow per share.
And I'm mentioning per share because it was a record in absolute as well, but given the completion of the same if a transaction is more fair and accurate to look at the per share.
We also significantly reduced our net debt with a 71% reduction over the last 12 months is.
In Q3, we reduced it by nearly a sales.
$300 million and expect to be net cash by year end if goal remains around 1900.
We also published new mine plan for our flat two flagship mines, who and then 80, which demonstrates.
Stronger.
Now the ability to generate cash flow over a long period and give us visibility to our cash flow generation.
And last but not least given that we have now a strong balance sheet and that we expect to generate significant cash flow.
Seen was on your life of mine plan, our two flagship.
Our board has declared our first dividend at an attractive yield.
Is exciting for me and the team to break this milestone given the work done over the last four years in building the right portfolio and put us in this position today.
We will go over all these items in depth and.
And in the upcoming slides.
Turning now to slide seven I'd like to update on our covered 90 in response.
We continue to operate at level, one of our business continuity plan, which is near normal operations with ENHANZE preventive measures in place such as temperature checks increased hygiene standards social this.
Dancing and regular testing of our workforce.
Thankfully West Africa has avoided the brunt of the impact of Cove in 19, so far while we have seen some impact from the pandemic on our business earlier on in the year. It was mainly around people movement and borders closing.
Thanks to the precautionary decisions.
Made and the significant efforts of our entire team we've been able to maintain our guidance and remain on track to achieve our targets for the year.
We continue to remain vigilant with the appropriate measures in place.
Moving to slide eight week.
We can see how we're tracking against our guidance for the year we continue.
Focus on our lost time injury frequency rate as a key measure of employee safety and we are pleased that this rate continues to track well below our peers.
As anticipated we had a strong Q3, and we are well on track to achieve our guidance in terms of both production and all in sustaining cost. This is driven by an expert.
Acted strong Q4, as we benefit from higher grades at Hyundai and the restart of the boom the mine.
We will also see lower waiting from the relatively higher H 1020 cost structure of CFO. Once we look at the pro forma full year.
This is in spite of a $45 per ounce.
This increase in royalties, which is driven by the higher gold price.
Moving on to slide nine.
We will look at these metrics in a little more detail starting with safety first this is of the utmost importance to us and our first priority.
As I mentioned, we continue to be well below.
This three average however, three lost time injuries over the past 12 months is is a reminder, we can never become complacent.
I would like to take this opportunity.
To congratulate Hyundai, which achieved $20 million last time free man hours and AG now reached 10 million lost time free man hours. This is.
Turning red collective efforts by the team on site.
On Slide 10, you can see the trend in production and all in sustaining cost on a consolidated basis for the past five quarters.
This is the first quarter, where we are reporting the results of our consolidated portfolio. Following the Swift integration of the center for assets in the summer.
In terms of production, we had a strong quarter, adding 95000 ounces in Q2, which represents a 64% increase quarter on quarter.
This increase is due to the addition of mainline Bongo and a stronger performance in our existing portfolio.
Looking ahead, we expect Q4 to be a record quarter as we've.
We benefit from higher grades from the Caribbean deposit at Hyundai as well as the restart of mining operations at bungalow.
Moving to slide 11, you can see the trend of our all in margin over the past five quarters. Our margin has increased by 119% since Q2 this year to 200.
$45 million demonstrating a strong performance following the acquisition.
We've also been able to take advantage of the higher gold price environment. Following the expiry of our goal color program at the end of June which saw nearly half of our production capped at the time at 50 or $100 per ounce.
Turning to.
Slide 12, and our operating cash flow before working capital as you can see this was a record quarter for us for cash flow both in nominal terms, but with an increase of $138 million during Q3, when compared with Q2 as well as on a per share basis due in part to the same AFE acquisition, which was accretive to operating.
Cash flow per share by more than 30%.
Increased production across the group and higher gold price were also significant contributors.
Turning to slide 13.
You can see the trend of our leverage profile, where we have steadily driven down net debt since completing the investment phase.
Sales and EGI and Hyundai.
As you can see from the graph here, we are in the backend of our debt reduction phase having brought the net debt down by $300 million industrial quarter alone.
This is a great achievement for the business and for our shareholders. As we are now quickly approaching net cash position.
And Doug.
Say that one slide.
Slide 14.
As mentioned earlier, we are pleased to announce that based on our expected robust free cash flow generation. Our board of directors have declared a first dividend of $60 million for the 2020 fiscal year payable in early 21.
The initial dividend equates.
It's to approximately 40.48 Canadian dollar per share and represented <unk> 0.61, 0.6% yield based on yesterday's closing price.
As you can see on this chart the yield of 1.6% already ranks competitively against our peers.
The first dividend sets the bar.
Passed to a sustainable dividend policy based on our capital allocation framework and our strategy of maximizing long term shareholder value.
Following the payment of this first dividend, we expect to declare future dividends on a semiannual basis with the goal of maintaining a similar annualized dividend yield and.
NGL, we have rich a target net cash position of $250 million.
I believe it is important to build a strong balance sheet buffer to be able to continue to pay a dividend during cycles.
Once these target cash position is reached we would be well positioned to reassess our capital allocation.
And priorities, which may include augmenting our shareholder return program through either increased dividends and or share buyback program.
Moving to slide 15.
These shows you why we are confident to be able to pay a sustainable dividends going forward.
Thanks to the updated mine plans and outlooks for both both EG and Hyundai we have visibility on long term cash flow generation.
As you will have seen this morning, we've just announced the Dayton mine plans for Haiti, and Hyundai to our flagship assets driven by 2 million ounces of reserve additions principally from recent discoveries.
Looked like at 80, and carry pump and carry waste at Hyundai as well as expanded mill throughput.
These additional reserves have allowed us to optimize demand plans to focus on both EG and Hyundai contributing 250000 ounces each per year sustainably with each mine confirmed.
With more than 10 years of mine life remaining.
We believe that the opportunity remains to continue to extend production at each operation through continued exploration success and fill the gap to maintain this 250000, mark on an annual production for each operation.
The combined annual production of both mines.
And is therefore expected to average approximately half a million owns 421, 25, and 465000 ounces for 2021 through 2030.
The chart here shows the details of the current and previous mine plans.
In one you can see the original plans while the.
The blue bars represent the added production from the mine plans announced today.
In aggregate. These plans adds an average of 106000 ounces or 25, 7% per year pseudo through 2025, and 170000 ounces or 58% per year from 2021 through.
Thousand 30.
And of course. These are just two mines out of our portfolio of six.
On slide 16, we can spend a moment looking at the five year outlook for the Eone hundred mines in more detail, but.
Both mines are expected to produce as I said SEC to.
150000 ounce a year each and this figures don't include further upside potential from near mine exploration.
The average all in sustaining costs for those two assets is $823, an ounce, which places them at the bottom of the industry cost curve.
With total M&A resources.
Of 8.6 million ounces, we're very optimistic we'll be able to continue adding to reserves as a result of our exploration campaigns and has demonstrated over the last few years.
We've already identified a number of targets, which we are busy assessing.
Looking at the calendar the fire.
Right. We are confident we can continue extending the mine lives to beyond 10 years in each case as a result of further near mine exploration programs.
When looking at mine performance and assessing the impact of our operation, we look beyond just production and cost metrics and consider our environmental footprint, including C. O two emissions.
We believe that predicting our potential impact is an important step in finding ways to further minimize this impact.
At these two operations, we have calculated that the intensity of our greenhouse gas emissions will be well below the industry average of 0.6 tons of tier two equivalent which is encouraging.
As miners continue to tackle climate change, we believe this will become an increasingly important metric and a differentiating factor.
Turning to slide 17, as I mentioned at the start of the call significant progress continues to be made our credit grow our Greenfield project in Cote Divoire.
During the quarter, we announced.
And third 108% increase in indicated resources to 2.5 million ounces at an average grade of 2.4 grams per ton of gold.
We also released the result of an initial PA, which was based on the original 1.2 million non syndicated resource and a 1.5 million ton per annum plant as you can see on the right hand.
On slide the economics, our ready quite compelling.
Based on the robust project economics, and the fact that we have determined that we don't need to do any further drilling for reserve conversion, we've decided to fast track Fedex Road to PFS stage, which we are targeting for completion now in Q1 21.
This will include.
Include a doubling of the processing plant size to 3 million tonnes per annum.
With additional nearby target still to be drilled we believe pettigrew has the potential to become a key asset in our portfolio, which is very exciting indeed.
Finally, before I hand over to.
Ari, let's take a look at the exploration side of the business on slide 18.
You can see on the right hand side, a breakdown of our exploration expenditure for the year to date.
The largest spends were at IGI and Hyundai as we continue to drill an attractive exploration targets at each mine.
We also continued to invest in Fedex.
As well as in some other promisingly engine targets.
As we move into 2021, we expect to ramp up exploration efforts on both boomco and manner.
I'll keep this slide brief as Patrick will comment later.
Turning to slide 19, you can see here that we remain well on track to meet our five.
Your exploration target set back in 2016 to discover 10 million to 15 million ounces of additional resources by 21.
Since then we've added 8.4 million ounces and this was done for less than $15 per owns discovered which is of course very competitive.
We are finalizing exploration plans for Malibu and Cds are strong opportunities for additional success.
Bergen Bango in particular has seen limited drilling since it was built and we have identified several promising near mine targets.
We look forward to updating you on this during the course of next year.
Slide 20 brings us to the end of the highlights section to summarize I believe we have created an attractive portfolio with diversified exposure and optionality across the asset lifecycle.
Following the acquisition of same hour for earlier. This year, we now have six producing mines, which are generating good cash flow and.
Going is to pay dividends.
In addition, we have near term growth potential from our four projects and long term upside from our extensive greenfield exploration portfolio.
I will now hand over to Andrey to take us through the financial results in greater detail.
Thank you Sebastian.
Hello, everyone I will start on on slide 22 with a snapshot.
The key takeaway here is that we are in a much stronger position year on year, mainly due to higher prediction for the group and full year of 80 and abuses integration of the center for asset during the quarter and gold price. This has contributed to strong increase as you.
Two as you can see here.
If we turn to slide 23 markets, where we can see the break down of the all in margin, which as a reminder includes a non sustaining capital.
If we look at the bottom line of this slide you can see that on a year to date basis, we are up more than doubled compared to the same period in 2019.
While on a quarterly basis, we nearly tripled all in margin.
If we move to the next slide net free cash flow you can see the continuous progress of our net free cash flow during.
During the year from them this year, our year to date net free cash flow before repayment or proceeds from long term debt.
<unk> improved by nearly $363 million.
And if we highlight some notable items here, we have taxes, Ed which has increased mainly due to increased corporate income tax payment that about.
And as you can see in 0.6 Q3 also includes.
Acquisition.
And the restructuring cost.
If we move to 2.9 of the slide you can see that we have repaid a portion of the off here, which we drew down in in Q2 as the progression during the covenant and Crazy.
Moving to slide 25, net debt and liquidity analysis.
This.
We'll take a closer look at our net debt and liquidity, we have prepared an analysis of our cash position starting with our cash position at the end of Q4, 2019 and ending with how we currently stand at the end of Q3 Twentytwenty.
And as you can see we we significant operating cash flow and we.
King and financing cash flow, we ended up the quarter with $523 million in cash.
This means that we ended Q3 at a net debt of $175 million, which as I. Previously noted is down significantly from from last year.
So this combined with the strong.
EBITDA performance as resulted in a reduction in the net debt to adjusted EBITDA ratio to just Europe on 29 times.
Next slide it provides a breakdown of our adjusted net earnings and for ease. We have noted the adjusting line items with the later on the right and table.
And if we look at the table will see that the largest item relates to the losses on financial instruments. This is mainly due to the derivative portion of the convertible senior bone, which has increased due to the significant increase in our share price in 2020.
Oney wells impacted by higher depreciation reserve from the gross deposits in northwest.
Nonetheless, our adjusted net on the increase on the growth on a per share basis compared to the same period last year as you can see at the bottom of that of the of the table.
In particular, our adjusted net earnings per share has increased significantly to one form 24 at quarter end nearly a factor of four.
And then slide 27 Latino I'd like to say that the financial review by looking at our adjusted earning per share and how it's trended over time.
And as you can see from from the graphic it has continued to grow steadily over the year and it's now sitting at 44% for the quarter up 47.
Person from from the same period last year.
Sebastian Liu.
Hi.
Thank you I realize that this is your last webcast as Joel.
Joanna as recently arrived and we'll be taking over as sales.
Before beginning of next year.
So that leave you is a nice stats you know hold the record within endeavor as CFO that has generated the most cash flow good timing.
You are interim CFO, we decreased our net debt by $298 million from $473 million to $175 million.
But given the products.
Anthony is higher weighted to Q4 and due to the continued strong gold price environment Jonah Im sure will quickly try to surpass you.
On that note mark over to you for the operational review.
Thank you Sebastian and Hello to everyone I Trust that you keep the type of low.
Okay.
Okay.
Starting on slide 29, and production bridge illustrates the performance year to date for both the pre acquisition assets as well as the pro forma business.
One day, and Tom showed increases which more than offset the expected take on AG and resulted in a pre acquisition production level.
400.
75000 ounces year to date.
Great achievement, given the challenges presented by targeted marketing more modest increase from the same period in 2019, which is typically a more challenging quarter given the land sales.
Once we add in the year to date impact of manner and book value we now.
Good Michael production of 723 cap now.
As you know we have recently restarted mining operations.
The production challenging year Nymex prices dotcom.
Yeah.
Moving to slide 30.
Ill start your price we will do this Monday.
As you can see on the chart production increase.
In Q3, due to higher prices, great, which more than offset slightly lower throughput.
All in sustaining cost decreased quarter on quarter, mainly due to a decrease in sustaining capital.
Oil prices in unit costs, and slot slightly higher sales volume, which more than offset higher royalty and higher marketing and Jean.
Carl.
On the bottom line and you can see the details.
Total tons mined declined by 14% normal rainy season impacts all total Campbell Oman increased 42%.
Due to the commencement of monetary policy within the mix will low strip ratio.
Overflows primaries in blue minus.
And Kerry pump complemented by quarter I.
And Martin was flat as oxide ore from carry pump offset an increased demand for short medium grade ore prices quite increased as we access higher grade ore from been grew nine central supplemented by Carrie.
Looking ahead to Q4, we are expecting to pay.
Some increase in production business keeps rate approximates.
Brexit right. They are expected to improve substantially or process time recoveries are expected to be relatively unchanged.
Turning to the updated loss of mine on slide 31, the key drivers behind the appetite of the mnemonics licenses, we will circle.
And then she has consistently outperformed most action plan.
We have added approximately 2.5 million ounces of mission.
And indicated resources ediscovery cost of less than $15, Brent, which have allowed us to add 1.4 million ounces to reserves.
It's worth noting that reserves that Harry.
With a gap and pump fuel sales have not yet been quoted and we expect you to have data by year end.
On this slide you can see how the detailed production Hogan Hyundai has been enhanced compared to the original study.
Similar to the area production chart, the white bars show the original mine plan, while the blue bars.
And so the incremental production.
There were a few more points that I'd love to execute on this chart.
Since that we've added more than 211000 ounces of gold production in 2021 to 2025, which represents a 21% increase over the previous plan.
The second is that the one day monarch has been extended by at least three.
Yes.
Continued opportunities for expansion from resource conversion, Newmont exploration, which Patrick will expand on shortly.
Moving to slide 32.
Let's take a closer look at the loan production statistics for Monday.
The wholesale price you'd be able to sustain 200 chip sales matches per annum.
Over the next five years and over 300000 ounces from 2025 for the following party without taking into account our expectations conversion from additional exploration upside.
All in sustaining cost a very competitive on the 870 of those plants surged 2025.
Currently it just.
Just about 900 goals plans over the last month.
Our goal is of course to continuously adjusting our life of mine plans with eight exploration upside to augment the production profile for the phone Bobby.
On slide 33, we completed a Mac which sites.
The indeterminate handbags in.
Despite the carrier area you can see the two new high grade deposit carry pump and carry west that and they're part of the updated mine plan as well as additional resources that will incorporate the future.
Turning to slide 34, you can see the monitor Dupont at Mumbai windowing piece will be sustained.
Thanks also for you guys with a lot of the operation. While the addition of the higher grade carry pump entirely with deposits has allowed us to display slow vital to deal with them online.
Keryx into getting comfortable with this deposit Hello, guys and carry pumping where they will contribute positively to extend mine life.
To reserves.
In the.
The benefit that the new on plan in Britain is sufficient time horizon to consider further improvement initiatives focusing on monitoring productivity plant throughput recovering costs.
It is resonating with the volume of ore carry past due to considering alternative options such as Apollo.
Another good potential project.
Who is the use of solar to supplement the grid, which is more expensive than between the past them work until the end the way Mr. Guy.
I will now hand over to Patrick to take us through our exploration program.
Thanks, Mark and Hello to everyone turning to slide.
35 now.
When we take a high level look at the exploration work today. If we include the cumulative quoted depletion on there is now a host of two total reserve enrollment of more than 3.4 million ounces within we the 2.8.
Dan on 13 reserves. This is an increase of more than 64% compared to the 2016 optimization study.
Which essentially means we have more reserves today than we did when minding began.
And we are indeed confident that we have several additional opportunities to add even more.
More.
Our main focus has been the carry out to date, which now accounts for 57%.
Total one day and I resource with 2.5 million ounces of indicated resources discovered over the past three years.
The area also high grade deposits with approximately.
Maybe 84% of indicated resource trading more than two grams per ton of gold.
Amounting to 2.1 million high grade ounces OPTILOAD very gold discovery cost of less than 15 thereafter arms. They are indicated on sales importantly, all of these deposits are winning talking just.
Two months of the plant.
This year, we also announced an updated resource estimate in early Q3 incorporating.
I'm feeling quite annoyed and 54000 additional indicated on sales force on tire Korea. This included the extension for the carry waste and carry centennial deposits.
Plus new maiden resource also nearby carry gap.
Sorry sales and carry pump Nazis deposits, we will soon start a new drilling campaign of at least 20000 meter in the Q4, which is focused on targeting extension in PLM exploration exploratory work.
We will continue to focus.
Some of the carry area until we're finished converting all the resource into reserves and we expect to announce maiden reserve for career center of carry gap. So some punk north sea in our year on the reserve update during Q1 2021.
We will then prioritizing the next target that out with.
Sales and 15 kilometres on the meaningful exploratory drilling in early 2021, and we look forward to seeing the results of that program.
With the excitement so lots to achieve but smoke signal to play for us would be back to you Mark.
Thanks, Patrick.
Within Nancy I'm sorry.
36.
You can say that production has decreased slightly since the last quarter as higher throughput and gold recoveries, largely offset the lower prices crowds only.
All in sustaining cost decreased due to a lower strip ratio and increasing gold sold higher recovery rates and lower unit processing cost.
And which were partially offset by higher unit volume and gene icon and higher royalty expenses related to the gold price.
Mani continue to prioritize peak capex during the quarter at the higher grade EG and Becker to deposits tight.
Taking a step back to look at mining activities over the past two years since the CIO plant began operation.
Mining in 2000, and owning was primarily focused on ore extraction. During 2020, we accelerated the in pit cutback in quarter, two and ethylene focused on this past the cutback effectively to expose additional rule. This will enable us to source ore from several deposits dropped most plant sales based on metallurgical characteristics.
We are confident the short term compromises will position itself for a stronger performance in quarter four and into 2021.
Production in quarter, four is expected to improve as the quarter through due to higher prices grades.
During the quarter is expected to be taught primarily from higher grade so far, though a doppler along with historical.
Which comes in stockpiles throughput and recovery rates are expected to decline due to the expected metallurgical characteristics of the high proportion of fresh tougher or.
Moving to slide 37, and looking at the updated mine plan similar to one day, we've been able to develop a Montana two things this operation.
As one of the cornerstones of our business.
Leasing at a rate of churn in 2000 ounces per year.
Reserves have increased steadily through ongoing exploration success, which has allowed us to progressively increase new throughput through various small capital improvement projects.
On the slide the blood culture I'd and.
Incremental production compared to the previous plan, which are in wine.
Well there have been some modest variation on an annual basis, we have maintained the ability to bring forward additional high grade discoveries are the increased production in the shorter term window, which is the time to 250, Anthony production for longer subject to continued.
That brings lot reply for example.
It is worth noting that the published last month plan is based on current reserves and don't paint capacity and does not take into account further pricing up price that are under planning and we'll see how it engineering, which will bring a range of benefits, including increased throughput increase recovery.
And reduce reagent consumption.
On Slide 13, you can take some additional key metrics for the five year period, starting in 2021, and what we anticipate the following five year period will look like as well as the total mine as it currently stands.
Headline numbers.
[music].
And new production of approximately 250000 ounces for the 2025 and an average of 230 sales.
Answers over in the living room online.
All in sustaining cost a very competitive at $790 per ounce for both the next five years as well as over the last month.
Moving to slide 31, we have recently received the money for the entire further losses there.
A lot in Paypal, which has held within a new subsidiary.
It's always hard to me to follow up.
Non extend and volume driven.
This license capacity existing look like deposit as well as several additional target.
Close proximity and will give us flexibility to bring additional discoveries into the mine plan in the future.
The bridge that was constructed breakfast to the devoted enables access to buy side that could valuable the polo losses as well.
On the next slide we have detailed the morning schedule across them.
At this.
Access to the low part deposit is underway.
We expect to finish all end compensation and hold our construction in the next four to six months for the weekend sat grade control drilling and infrastructure establishment ahead of the wet season in early 2021, this will enable us to commence mining like 20.
Condominium.
Patrick will talk about exploration plan shortly.
We will always advanced high grade option ahead of the lower guidance. It touches the contribution it is great to have that range of options and flexibility on.
Ill now hand over to Patrick.
Thanks Mark.
Turning to slide 41 have you can see on the map. The T. mine remains Ollie Ollie prospect Keyw is a.
Quite a significant number of extortion target.
Which are all within trucking distance of the plant.
As Mike already mentioned, so far since 2016, we have.
I mean, we ever discover of more than 2.3 million.
On sales of indicated resource.
I'm confident due to the quality of the exploration portfolio that we will continue to find more.
Since March 2018, our primary focus has been the black area and you can see.
We have been very busy during the year to date. The majority of our exploration has continued to focus on the block area with $13 million spent year to date comprising over 85000 meter of drilling.
During a choice to Taiwan 2020, we also carried.
Adult more drilling on the Nelson buffer overflow license area. These recognitions winning outlined that to look like represent only around 30% of the larger not so on Florida and Nobody survey of reading on these additional targets is ongoing with result pending on civil holds our goal is to do.
Vinay to new resource at some of these targets in 2021 and I look forward to updating you as we progress on that we also drilling.
Yes, I mean, your targets, including vast waste the store recur each father of E and the adapter southwest.
Now back to you Mark.
Thanks, Patrick.
On slide 42, I'll take you three months.
Well production remained flat from last quarter.
An increased proportion of new paid was comprised of higher grade threshold, which compensated for the expected reduction in planned throughput. This.
This all sourced from the data elevation of the north and South.
Which resulted in higher waste stripping and a corresponding decrease in Oman.
Looking to the last quarter of year, we expect production to increase as we prices higher grades and increased tonnage.
Mining is expected to continue principally in the north and tested.
Throughput is expected to increase following the end of the range.
Anything more recoveries are expected to increase slightly decreased due to greater volumes of the heart of fresh ore prices.
Moving to slide 43 production at count increased slightly from last quarter due to the recovery of some of the gold locked up money during previous quarters. This.
This offset the lower.
The grade recovery, right and tonnage SEC driven by the rainy season, and higher strip ratios associated with the candles and GE one piece.
We expect production to increase slightly during quarter four thanks to increased tonnage stacked during the process.
Money is expected to continue accountable and Gigi run.
During the remainder of the year, we set grades expected to be consistent with those in quarter three as low grade stockpiles supplement ore stacked.
Turning to slide 44. This is our first looked at have momentum on is performing at them in their operations.
A benches thought four times now over the past 12 months.
And we'll be hitting there again next week as part of their budget process.
This has enabled me to understand we are fresh and bought ROE and many of the chain.
With the completion of the sea working on.
Our focus is on why strip liner and maintaining strong production performance in the underground.
We have undertaken a review of exploration target.
We will commence drilling for both open pit and underground extension in quarter four.
We've also employed and experience general manager for manner.
As soon as we get an undergrad it soon.
This quarter production increased significantly.
One of the biggest improvements was a substantial increase in total comps.
Non due to an increase in equipment availability. This.
This allowed us to increase Omani by 19% in spite of a higher strip ratio.
Ore extraction focused on C and one appeal, while pre stripping was conducted at Warner.
In the underground Omani increased 43% versus quarter three.
Which is impacted by two which are related to implementation of preventative cobot non chain measures.
All processing increased as a result of higher available feed for the mill.
Looking ahead following a strong quarter three we expect production to decline modestly in quarter four due to the completion of.
The C. open pit or increase or for minor relates lower throughput and recoveries.
Operations will focus on non sustaining underground development and pre stripping of China, which is expected to increase both sustaining and non sustaining capital expenditure.
We will also initiate a 35 sales and made a drilling post.
For quarter four we.
With 27000 meters of RC and I haven't made as of core drilling plans.
The program is targeted at northeast continuations of oxide mineralization at Corona into open pit.
After the victims hasn't made its will be targeted at evaluating continuations of underground ore shoot.
The north face and southwest extension of C.
Maybe to begin on slide 45.
Similar to Atlanta, five at poultry supply today with another plant for next week.
Our general manager from Avi is now on site and good progress has been made the mobilization of Essex.
Page two of pictures, a large amount of the previous mining contracted slate in addition today.
The fleet the via mobile ARPU to sign.
Weve conducted in exploration or music, Patrick sales and drilling will also remain in quarter four.
As announced last month mining.
Pivoting successfully restarted a bundle, which will enable us to have a strong fourth quarter.
I'd like to thank the government of protein FSR for the partnership improving regional security and also just a rodent earn involved in getting this release out of the ground quickly impacted.
Not so real milestone for us and is a key factor.
Net to realizing the full benefits of the cemetery acquisition.
Production in quarter, three remained flat compared to the previous quarter as increase plant throughput offset the lower guidance no place.
We were able to extract some previously Brasil, which helped to offset the decline in software right now laid up to the rate commencement of mine.
[music].
That concludes my operational review I'll now hand back to Sebastian.
Thanks, Mark before.
Before we hand over to Jimmy I would like to reiterate the strategic importance of the honed in EG mines to our overall ambitions of being a strong dividend paying gold producer.
This chart is a need summary of how we have turned around this business and just.
Four years following a period of significant investment in hardware. It you can see that our portfolio is now better balanced.
As an attractive cost profile and gives us significant visibility into the future.
With the investment period now over.
Then that falling rapidly this quarter aided by a supported by a strong gold price, we've been able to achieve our goal of becoming a sustainable dividend payout.
I'm proud of the combined efforts of our exploration mine development and operations team, who have worked together to make these mines a resounding success.
Looking ahead.
Ahead, we have several interesting near term catalyst coming up with higher production expected about honed in one go in Q4 were expected to have a record quarter. We also expect to announce made and reserves for Capex centre anti gap in our year end reserve statement.
Turning to our gross portfolio, we plan to announce the accelerated PFS.
A greenfield Citigroup project during Q1.
With our first dividend announcement today. Our next goal is to seek a secondary listing to broaden our appeal to investors and drive incremental investor demand through increased index inclusion.
We have worked hard and invested heavily in recent years to build the platform that.
For half today.
I really believe this work is now paying off.
And we are looking good.
For the end of the year and into the future.
Thank you.
Thank you Sebastian RV market structure, that's a stellar adada sales.
Our job.
But unless it's lots of details, but I'm sure that our audience appreciates it.
This concludes the formal portion of recession, operator, we will now take our squad comment and of course question.
Thank you once again as a reminder, if you do have a comment or a question on todays call. Please.
Please press star one on your telephone.
For your name to be taken by the operator that star one if you have a comment or a question on today's call. If you wish to cancel this request. Please press the hash key.
Our first question.
Comes from the line of Raj Ray from BMO capital markets. Your line is open please.
Ask your question.
Hi, good afternoon, Sebastian and team.
My first question is on your dividend and congrats on stealing a first dividend.
If I'm not wrong, you basing it on a one person maintaining one plus 1.6% dividend yield and it's not a person data.
So if your earnings our free cash flow is that correct.
Yeah, that's correct I mean, the the intent is an chiller, we we reached $250 million of net cash on the balance sheet will maintain to sell the same level of yield.
And then once we have reached the $250 million net cash, which you know based on.
Different goal expectations throughout 2021 can come as early as a you know say Q2 Q3.
Then we'll be able to increase the dividend yield.
By distributing you know further to our shareholders.
Okay, Thanks, especially and my second question and if I'm not.
Wrong, you did mention about.
Until a share repurchase that you could look at.
And can you give us some.
Color on what valuation benchmarks.
Would you be looking at with respect to whether you would be by buying back your shares are not.
Sure well I think that the you know the objective for us is.
You know to come up and that will be probably as part of our year end result, with a a strategy on capital allocation that includes the buyback instrument.
Bye bye.
By a fair March when we'll publish our year end results.
We'll be able to to describe again, given the strong balance sheet, where we.
We are that as part of our capital allocation strategy buyback may become you know an attractive tools of returning.
Value to shareholders, if and only if the the share price you know continues to be significantly underperforming.
Okay. Okay. Thank you and then.
If I may just couple of more questions first up on your.
And were double bonds, if I'm not wrong. There is a 20 or 30 soft call provision provision that kicks in.
Larry 2021.
Now did this depends on where your share price is at that point and if it.
It's about the trigger pipes, but.
Do you have any thoughts on whether you'd be looking to.
Call that all you, let it ride to maturity.
Well I think you're right Raj I mean in in in February March from India, We have the ability with this call option.
I mean that we're going to exist as it but we we always said that our intent was that once we reach a strong balance sheet and we do believe that sales in particular to our two key assets.
We should you know in this current gold price environment continued to generate significant cash flow, which means that.
Once we are able to reach these $250 million net cash and we are able to continue to pile of cash.
Down the road, we'll make the assessment on whether from a capital allocation standpoint, it makes sense to us to call back these loan or not.
Okay. Thank you and then one last question maybe this is for Patrick I just wanted to get.
At the center of the strip ratio for lot plaque.
If I remember correctly.
He has had a low strip of two but the strip ratio has increased with the inclusion of a plaque and how's the profile for the strip ratio is that a higher at the beginning or as we go deeper into the.
Like deposits the strip ratio increases.
Thoughts there.
Hi.
Okay.
Yes, as far as I remember it yes is significantly higher than the key.
Because the mean.
Sure now are much more I would say the optical.
So for the exact number of the strip ratio I don't remember, what maybe mark who the answer on more detail because I know this has been included in our latest mining plan Mark.
Yeah.
Patrick her to step in here, it's about it's over.
Lower to one right he is less than two to one so it is more.
Great Rush to your question on timing.
The different deposits in the press release.
Figure seven of the life of mine press release, you have a table there with the pit sequencing. So the plaque shows that its coming into production.
In late next year and rents throughout the life of mine until 2028. So the idea is to blend the higher grade with some of the lower grade deposits to maintain this 250000 ounce flat profile.
Okay.
Okay.
Thank you very much that's it from me.
Thanks Ross.
Okay.
Thank you. Our next question comes from the line of Lawson Winder, Some via M&A Securities. Your line is open. Please ask your question.
Oh, hi, everybody I'm.
A really exciting dividend policy well played.
I just wanted to ask another question on that policy to sort of reinforce my understanding of it. So it is based on the yield and just hypothetically if your share price or to double from here. Your dividend payout then were doubled to $120 million.
Well I.
I think that if our share price you know.
Doubles, I think interest will be reflecting the strong balance sheet can defer to capture that we'd be generating so.
So we should be able to continue to maintain this at this level of yield. So so that's one and second as mentioned in the thing that.
We believe that returning value to shareholders in particular the ones that.
Supporting us over the last four or five years through the intensive capex phase of building honed in EG.
So once we've reached this 250 million dollar milestone.
Then instead of keeping a discretionary view on the on this policy will get more into a percentage of cash flow.
We generated by the company once we reach this $250 million. So the where we are excited is we have rich as we expected in 2020. This nearly net debt net debt zero now it's all about maximizing cash flow. We said that we wouldn't start any new projects in terms of construction before.
We need to which means the 21 is solely focused on maximizing cash flow and getting as fast as possible to this $250 million net cash position. So that we can continue to increase the return to shareholders and in parallel as we have the balance sheet and the cash flow will be able also to revisit what is the best capital allocation I mean foshan.
Our shareholders, including potential buybacks, depending on share price performance.
Hi, Thanks, so much for that fashion.
Just another thing you touched on there on the no capex in that 2021.
Hi.
However, I mean, you do plan to have a prefeasibility study out on static.
Twinpro and I'm just curious you know.
Assuming that pretty visibility yet previously only study is positive.
Are there any.
Permitting.
Type restrictions that that would prevent you from proceeding with at least some capex spending at that asset and 2021.
Well the.
We'll have to move as soon as we have sensible feasibility study will have to move to permitting.
Which you know is a process, which.
We are extremely familiar with in a in could you are as you saw with the recent look like permit our objective would be to have to be in a position to have a a completed.
Feasibility study and a and mining permits you know a ready by the end of the year. So that we can decide in terms of capital allocation, whether between kalina and vertical fitting who is the first one to go into construction starting in 22.
Great that's.
Fantastic color and then now.
On the on the listing last quarter, you said, you're looking at some secondary listing in either London.
Or New York, maybe out one could you just update us on that process and to.
From from this point forward could you see endeavor, possibly.
In two.
Additional listening so secondary and third some of your peers have done that.
Sure.
I think that you know.
Our view is that given our increased size. We believe it makes sense to have a second listing.
We currently evaluating the right.
The right venue most of the work to be Frank has been done a I would say that we really have the answer to the nishu. We're facing is in terms of timing. It takes time I mean to prepare them for New York and London.
This listing so I think there is no point in announcing a in or something that's going to occur in six months time announcing already into the venue I would.
I'd say that we are doing the work. So that you know by end of Q2, we only position to to announce.
To make the lifting happening, which probably means that we'll be announcing it as part of our.
Year end results. So yes, I mean, we are progressing very well on the on all that full steam we have a dedicated project team working.
Just that and we believe that that's an important catalyst also for our share price in 2021.
Okay, and then just any thought to.
Sales to listing.
New York, or London, and the <unk> and I would say that.
Still evaluating the merits between between the two.
Okay fair enough.
All right and then just one final question for me I'd like to ask sort of a conceptual question.
I mean, if I look historically at your sort of deposit strategy you guys have tended to go after.
As it is of course in West Africa that they tend.
King of the higher grade.
Large proportions of oxide material.
And I'm just curious how you would think about adding a potential refractory deposit to the the portfolio and how you might manage the risk associated with that and.
And the technical.
Technical challenge that that would come along with us.
Sure well I think that the given the quality of the portfolio that the that we have a am I thinking about him and the team have been you know really excited about focusing on identifying.
Short term nearby high grade oxide deposit enough. So far we continue to deliver on that front, we know that at some point, we might have a in particular on the on the nearby.
Not focus on on a bit lower grade.
And and we all know that in West Africa. They are lot also of refractory or.
I don't think it's on the agenda today, but you know I'm sure that the technically there's been a lot of progress dawn on treating refractory ore and a lot of our peers. You know are progressing on that so I think that you know down the road I am sure that that's something that the group you know will be a we'll be evaluating and might enter into but but.
We don't need to for today, which is good and this is why we're so happy with our in a life of mine plans that we published on the on the energy give.
Given the strong visibility that I think we're giving to you know to investors in the market on those on the life of mine plans with easy or to treat I would say.
Great.
Alright, thanks, so much international thank you everybody else.
Thanks, Thank you lost.
Thank you. Our next question comes from the line of Alright, Tariq from Credit Suisse. Your line is open. Please ask your question.
Hi, good morning, Thanks for taking my question.
On E T on the 10.
Your outlook I noticed in the outer years or are in or near the end of that 10 year period, There's a gap.
And one day. It you know from your comments it sounds like Kerry Center and carry GAAP would fill a filled that gap buffer E where do you see the exploration upside that would kind of filled that gap in the late.
Two years to get you to the 250000.
<unk> ounces per year. Thanks.
Okay.
Sure what I think you know Patrick could you know could confirm but Oh look black for example, a I mean, it's still a it was still open and we haven't finished.
So on the on the look like in a wider area. So a you know the team.
Team continues to be extremely excited by the multiple targets that we continue to identify on eating so it's clear that we're not short of ideas on the on target where to find more and more on so this is just a question of putting you know priorities and a as you tend to go more to the to the backend of the life.
If a mine plan nine to 10 years down the road, obviously you know it it's a shift in terms of priority in the end timing versus other more short term you know priorities on lot of mine side and so on so but he gave me that no. One is going to give a bit more color on the on all those different you know targets and potential.
Yes sure yes.
Yes.
As a separate account so there is some upside in the black People's eat sales.
But something to remember.
You need to you know we have been very fast and consolidating as somebody said before the quite.
Quite shallow open pittable oh oxide type of.
That being said, we know that we have some deeper potential weather.
For example, the nerve block keyed up flowing back at all too well initiate exploration stopped stopped at quite a shallow depth. So we know we have upside there, but on top of that as was mentioned.
Before reviewing the.
He is on station there is potentially no yes, the waste in the save a lot out they are actually on the E T way off.
Limited exploration was though maybe not for the 1 million ounce deposit, but we do believe that there is a very good chance to find additional tool to see on the odd thousand on sales the party.
The only de at least within the five kilometer I'd use on the T. So for US. It's just a matter of time just to fill that gap.
Okay. That's that's clear. Thank you and then my only other question was on royalties I know there are higher but is that a function of just the gold price.
Or are you.
Seeing any pressure from certain governments to try to revise the royalty.
Regime, because of covert budget deficits or just you know higher gold prices I'm, just trying to get a sense of so far it sounds like it's basically the gold price, but going forward yes.
There's really only a.
Yeah.
Yeah, I confirmatory solely gold price as you know in most other countries, where we operate the mining code is basically a scaling royalty based on gold price. So it's simply mechanically the effect of a gold price increase.
And just have you see.
In any pressure from any of the government to try to revise any of the mining agreements no Ana and I think that you know what I'd been advocating regarding no West Africa countries in particular, the French West Africa, where we operate is that because those you know mining codes do take into account you know higher gold price.
With this mix.
Ken isn't there.
They are already incentivized and therefore, they have no reason into a you know revisiting all that.
Okay, Great. That's it for me thank you.
Thank you.
We have no further questions in the queue. Please continue.
Well. Thank you everyone for your questions and attendance as there is no more questions. We'll now finished a call our worst remain available to address any questions offline.
For those of you that I've also seen on our web site, we published the virtual tours for anyone day, along with those mine plant.
And so we invite you to visit those.
Thank you everyone and have a good day.
Thank you bye.
That does conclude today's conference. Thank you to everyone who participated in today's call. You may now all disconnect speakers. Please standby.
Hi.
[music].
[noise] [noise].
[music].