Q3 2020 Turquoise Hill Resources Ltd Earnings Call
Good morning, ladies and gentlemen, and welcome to the Turquoise Hill resources third quarter 2020 results conference call at this time all lines and in listen only mode. Following the presentation, we will conduct a question and answer session and fun.
Any time during this call you need assistance. Please press star sales for the operator.
This call is being recorded on Monday November 16th 2020.
I would now like turn the conference over to want Mcdowell head of Investor Relations and communications. Please.
Yes go ahead.
Thank you, Joe and good morning, and let me tell.
<unk> head of Investor Relations and communications welcome to <unk> third quarter 2000, <unk> financial results Conference call and Friday, We released our third quarter point you to what she results press release Mdna and financial statements. These items are available at our website <unk> with me and the color or <unk>, our CEO look cool.
Our CFO and Joanne Dudley for C. O <unk>. This call and presentation include certain forward looking statements information, we're free to the forward looking statement section of R&D and <unk> for the three and nine months ended September Thirtyth.
And now I'd like to turn the call over Chief Executive Officer for.
Thank you all day and good morning to everyone. Thanks for joining us for our second quarter 2020 financial earnings call.
It's been the better part of a year now since the cold at 19 and damning has entered our lives. We note a small number from recent community transmission cases in Mongolia.
The government doesn't and Goldie has taken immediate action by implementing and all out readiness stage true to the first after somebody.
Oh you total it has not recorded any cases, and we continue to work closely with them and only and authorities to prioritize to health and safety of all of our employees and the wider community.
Presenting with me today on July and Lucky and eat the Colts and and both of them of course will be available for the Q and eight following our presentation.
On Friday, we reported our third quarter results and update the markets on operational performance progress at the underground development and.
Turquoise Hill's liquidity and funding plans.
Well, you talk and recorded and all injury frequency rate of <unk> 0.17 for the nine months ending September.
And in particular, we commend the all your total team for the quoting and outstanding AI and.
<unk> 0.03 during the third quarter of 2020.
The open pit operations continued uninterrupted through the third quarter.
And for cost copper production for 2020 remains in a range of 140 270000 tons without for cost gold production trending towards the higher end of the range of hundred and 55 to 180000 ounces.
We now estimate that took what's hill has enough liquidity to meet its requirements into the second quarter 2022.
A base case incremental funding requirements has decreased from $3.623 billion.
You will also recall that we recently announced and and will you with Rio Tinto and the 10th of September and which Turquoise Hill and Rio Tinto agreed to jointly pursue the repo funding level your total <unk> existing debt and.
And so the more to seek to secure $500 million and additional debt.
In addition, and that's contemplated and BMO. You took was filled is actively advancing its examination and evaluation all financing options for your total going that could address its incremental funding gap and the whole when Paul.
Such options include additional debt from banks and international financial institutions, and upstream assets global medium term notes and a gold streaming transaction.
We expect the details of took what's hills per foot funding options will be presented to Rio Tinto for consideration.
In accordance with the and where you prior to the 30 for stuff December this year.
We also expect the definitive estimate before yearend, which for factor in an estimate of the impact of Cobot 90.
Based and our preliminary view of the definitive system and we have brought forward a base case assumption for sustainable first production from February 2023 to October 2022.
Well I'll focus development capital cost remains within the range of $6.6 billion to $7.1 billion with a base case of $6.8 billion.
Slide six showcases spoke the excellence of the Oyu Tolgoi team and the contribution gold and provides two I'll see one cash costs.
I mentioned earlier all your total voice third quarter 2028, <unk> 0.03, which really is a testament for all your talk for safety culture and discipline.
The bottom left chart you will see all your total has had another consecutive quarter profit smil operating above nameplate capacity with throughput and this quarter, reflecting the processing of harder and higher gold grade for.
Optimization, what implemented earlier and the real assets.
That's resulted and accelerated access to higher grade or areas off the open pit with an overall positive impact on cash flow.
2020 is on track to be a six year in a low of meeting or beating our production guidance.
Focusing and gold production you can see the positive impact of the third quarter gold production on I'll see you on cash costs.
We express expect a strong fourth quarter for gold production and.
And of course, if commodity prices were to remain at current levels for 2021, and with our 2021 out of 500 and 550000 ounces of gold we would expect to see a favorable impact on US you want cash costs and cash flow.
With that let me now handover the call to cultivate our chief Financial Officer Luc.
Thanks, all and good morning, everyone.
For those of you following along and I can get you to please turn to slide seven and I'll provide a summary of our key financial metrics for the.
Corridor.
Revenue increased 26% from Q3 night team and.
And that was driven primarily by 13% and 17% increases and the average copper and gold prices and.
Not together with an increased and copper sales volumes.
The increase in revenue contributed to higher cash generated from operating activities, which was also positively impacted by more favorable working capital movements.
In Q3, 2021 compared to Q3 2019.
The 28% increase and copper production.
In Q3 2020 versus Q3 2019.
I had a positive impact on the unit cost basis for both the one cash costs and all in sustaining costs.
The period on period decreased and all in sustaining cost with more significant and the decrease and see when cash call and this was primarily due to the impact of lower open and sustaining capital expenditure and Q3 2020 vs Q3 2019.
I can get you not turn to slide eight.
Turquoise Hill had 1.3 billion of available liquidity at September 30 up 2020.
And we expect that to be sufficient to meet our requirements, including our operation and underground development into Q2 and 2022.
Our estimated base case incremental funding requirements.
We've reduced that to 3 billion and that's from 6 billion as reported and our Q2 and 2020 earnings release does.
It's estimated that day in a boat first production trending towards the earlier and much of our guided range and that's what the target base case of October 2022 it.
It also incorporate commodity price as well as assumptions around the impact of total bit Knight team.
Further we estimate excuse.
Using further the estimate and the base case underground development capital cost of 6.8 billion.
And it does incorporate principal repayments and the existing project finance debt as well as interest and similar charges over the assumed area that the funding GAAP.
If we were successful and re profiling the existing debt. We estimate this will decrease our funding GAAP by up to 1.4 billion.
Of course, our estimate our estimate the remaining liquidity and funding gap will continue to be impacted either positively or negatively by various factors many of which are outside our control.
You would have seen we recently entered into a non binding and while you with Rio Tinto.
Indicating that turquoise Hill, and Rio Tinto will jointly pursue the Reprofiling about do you think this thing that and also seek to raise additional debt.
Further the company is actively find out actively advancing financing options such as global medium term notes and gold streaming and minimizes incremental funding requirements and we are currently on track for that proposal curio for their consideration before the end of 2020.
Turquoise Hill continues to re profiling.
We continue to prioritize reprofiling as well as additional debt and other funding option and the head of equity.
And you have these options if implemented would have the effect of reducing the company's incremental funding requirement.
Their successful implementation may require us to achieve alignment and agreement with the relevant stakeholders, including Rio tinto existing lenders and the potential new lenders and of course, the government of Mongolia.
Well you will all understand that that could be impacted by market conditions and other factors and that many.
Many of these may not be completely within our control.
We want you to be confident that we are nonetheless, absolutely determined to continue advancing turquoise Hill preferred funding strategy.
And with that I will hand over to Joanne our chief operating officer.
Thank you. Thank you.
For time slide nine.
She lost time de risking the underground development continued free achieved the spot.
And what kind of its non train ticket price <unk> Heidrick <unk> high grade and teach her line, let me see I T. R 20 expectations.
Based on the preliminary data from say, that's and as we see sustainable sales production and tie that 2020, which is ideally and range. We described and development capital of 6.8 billion, which is near the middle of its price range.
The definitive estimate GAAP. It's currently under if he thought patchy and that panel and technical ex that's with average do you anticipate it to be completed late in chief for.
Underground lateral development progress continues currently in line with the I.T.I. twinkie expectations.
And piece of pie that last quarter, it doesn't make sense strategically slide in the third quarter as resources. They redeploy decides some critical underground infrastructure to support production from panels IRI in particular, the underground materials handling system one.
Looking for which we expect to see some text for everything.
And to be and <unk> and names and meet 2021. This is a key non sign towards sustainable pest production.
Underground drilling and already captured aside from like me completion for kind of the right and northern area panel true.
Which will be the next area to non.
She said the large size of penalty at the scene has same night to consider the area, it's free lawn and gardens.
Drilling data collection and analysis for there are nine and central and southern cautions that penalty on panel. One is expected to continue through 2021, and maybe 2022 we've.
With significant price tag on a day or Don if you are not day to the north and central areas of penalty expected from 2021.
Turning our focus to development and infrastructure, please and slide 10.
Shot to continues to have price normally with price from like the thinking of shop strain for overall advance and.
Okay highly specialized tests now I think he or she interest cover tend to non-GAAP and yet you meant they split pending.
Pending resolution of the recently and that kind.
Hi, these restrictions.
Mitigating the impact of private non cash on the test time and you start to has been a key focus for the project and due to the decision to strategically rate growth, it's not always seen improvements and productivity right.
We've seen and easy if restrictions for lighting to on site personnel numbers and although ongoing improvements are expected to recently and that's kind of cash she didn't know volume I potentially impact timing and then he said the relaxation and this is something we'll need to actually cut costs like.
Underground development progress slide from 5.5 equivalent kilometers and Q1 key to tickle 0.7 equivalent comedy and Qiss right for the rate decline and resources to support materials handling construction.
During the third quarter and built and enhanced ex I've spent time, including six skilled personnel to add two at all and the top I think I said this is saying.
And he Tang will be supporting quick on our existing losses and looking for new opportunities within the fact I think bacon.
And the Laski Turquoise Hill exploration.
And the 50 to 100 kilometers dying around them on Lasik current and how to exploration license we didn't sign.
We've also started to GE physical sales I'm, one of and leases and says I will be completed in Q4 and the results will be crisis and he ticker did have the following non.
And he likes what actually came to looking to build enduring relationships for their neighbors and demonstrate each respect at the partnership and long term commitment.
Now I'll turn the presentation that total.
Yeah, Thanks, very much John.
So before we wrap up our presentation today I wanted to just briefly take stalks and highlight that that's a work advances and our underground production eventually ramps up.
Total gross progression from a tier one resources to a tier one operating EPS it becomes more and more evident for everyone to see.
Oh, you told credit is for costs to be the world's force, along just popped up and yourself when fully ramped up trailing only escondida respite and color we see.
And there's always told there continues to capitalize on its scale significant resource base and higher grade underground ore, we expect to see one cash cost to decrease to first quarter levels.
Quality of these assets in combination with a continued focus on operational excellence and an exceptional Mongolia and workforce and expected to establish a competitive and profitable producer that is well positioned to perform even during the low points and the commodity cycle.
Turning to slide 12, and competing and presentation today I'll, just remind everyone that some of the highlights of the or your total for technical reports, which people east and August and.
Consistent track record of operational excellence, the turquoise Hill has demonstrated.
We've consistently met our production guidance with best in class safety performance and the ongoing optimization of the open pit continues to enhance our cash flows, which then in turn and support our underground development.
Yes, the middle you total the generated $12.7 billion net cash flow after tax before financing costs between 2024 and 2030.
In addition to our copper production Oh your targets of course and losses would you sell gold.
Oh for 2021 to 2030 production for cost anticipates that all your total average over 307000 ounces per year alone.
Allowing and additional layoffs Brazilians to operations throughout the commodity cycle.
Finally building upon the EPS comments earlier, and the government funding and liquidity.
I want and reiterate managements, and especially committees commitment and focus to progress the companies for Fad funding strategy.
As you've heard from us were examining and evaluating several non equity options.
We're actively engaging with market participants to develop solutions that aren't the best interest of the company.
We recognize the challenges and Maine, and there are still and number of important milestones to be met including the recently announced decision to go to arbitration with rebates and so.
The ongoing discussions with the government and Goliat and a number of important items progressing the development of the Palestinians and for your total going to name, but a few.
Good day, obviously and you want to see that these all for medical issues to be tackled and that is exactly what we're going to do.
We have a clear plan for each one of the task ahead.
Well, absolutely committed to progressing and executing on each one of them.
We do so with commitment, but also and the spirit of cooperation with all key stakeholders and ultimately of course with the best interest of our company Turquoise Hill in mind.
And we will update the market and progress as and when appropriate.
Looking ahead to the rest of our 2020 fiscal year.
We are focused on continuing to execute our plans safely and deliver the guidance we have provided to the market.
We look forward to finalize and boosting that estimate, which we expect to further help to solidify turquoise Hill and it's one of the Premier Gogo Copa investments.
So this concludes our prepared remarks, let me now turn the call back to the operator for any questions.
Operator back to you please.
Thank you.
Ladies and gentlemen, and we will now begin the question and answer session.
Do you have a question. Please press the star followed by the one on your Touchtone phone you will feel that's me Tom price acknowledging everquest if.
If you are using a speakerphone, please let the handset before passing any cash.
Your first question comes from Hayden Bairstow at Macquarie. Please go ahead.
Hi, Good morning, Ole I'm, just a couple from day to start off with especially and market lead to to answer the first and if I could just from a bit reprofiling discussions I mean, there's obviously not one single and that facility here and is there anything specific among some of those that facilities and makes it harder than others. So actually just sold out of repayment.
That's true right I haven't share do.
All of them and and also good to see that new debt to you looking and getting the thought would be and is there any sort of.
And he said it keeps to that and we need to be aware growth and then just secondly on.
Operationally is so big and pretty well and I mean, the console and some on continues to get better the good law, the schumi, particularly building right now and costs. So it seems that you understand what's really driving that and once you get for underground ore and as the work index actually go down so theoretically do cost a lot even for <unk>.
Thanks, and look you are happy to take them, So and you have to use and take the second one.
Yes, John maybe you can yeah look you are happy to take the first one.
I'll do my best Dog, Thanks, and thanks Hayden for for the Quest and so.
When you think about Reprofiling, you're right that the current syndicate has a different types of lenders right. We have the I apologize we have commercial banks, we have different tranches.
We are you know.
He see a type lending as well. So so you know each one of those categories will have.
Slightly different perspectives, and you know they'll come out come at it from a slightly different starting position.
From our perspective, we do believe all of that can be managed and you know we we definitely look look for to the opportunity to engage with each one of those different classes of lenders, but we do think.
We do think you know all of that can be managed and and you know individual sort of issue issues can be can be worked through and can be managed so we do remain Rick we do remain confident and in that respect.
Yeah, and maybe I can hand, it over to you.
Yes, and coupon. Thanks, thanks, very much like and thanks, Hi, [noise].
And so they had a good questions on the on the cost certainly Oh, I'm, sorry, and they can outline quite well.
The impact to the general intact tell and on cost and Cashcall [noise].
In time for the next level of day tile to that for the milling costs and you see we had one shop and not today and so we have one there's and I'm plant in January and.
So that helps that the anti viral price is saying call. We've also had some good ongoing optimization projects, including good per common share inline as at the mine and to reduce cost and that's an ongoing socket.
Intensively on the ground and the relative.
True <unk> rights for the underground or if it certainly is has got a high of Trayport right and then the hot and material from the south west pit by low.
Lawless and they material coming out and the central <unk> site, it's not like next strike <unk> and today, [laughter] and unfortunately, and but it certainly and we'll have a better throughput rights and then the SAP way down and the southwest Pete Hi, guys sunlight and saying it.
Question.
Hey, and hate and listen I forgot I forgot the second part of your first question. So let me, let me backup and answer that quickly in relation to any additional debt I.
Obviously any additional supplemental senior debt, we will be looking to progress those discussions as we progress discussions with the lenders around the re profiling.
And you know well, we'll have additional additional conversations with other lenders you know share.
And that would be necessary or advisable, but of course on top of that we as New York you are oh.
Absolutely focused on other forms of debt or hybrid and financing as well and so we have been doing a lot of work around a global medium term note programme and those.
And all that work is progressing well into timeline. In addition to that we've had good discussions.
And you know good kick offs with the streamers. So we are looking at a streaming transaction again. The work there is progressing very well and is well supported.
And is tracking to timeline. So I think you probably would have seen and recent press releases that we are looking to provide a proposal to Rio tinto for their consideration and before the end of this year and we are still on track to be able to do that and apologies that was an important part of your question that I didn't fully answer.
No good and there's always that the the need for 500 and easy Super coolers that old gonna be equally rank in terms of credit or is there going to be a bit of and older in terms and as that gets right.
So all of that is still under discussion and and and subject to negotiation Hayden So I can't get too far and the detail. There ultimately we want to get well ultimately, where we want to get too as a place where where I'm all for the different stakeholders for they'll come true.
So, bringing and you know.
Additional supplemental senior debt you would expect the supplemental senior to that to be a sort of first ranking security.
That's probably going to be the case for bonds as well.
You know the rest of it you're right the rest of it there's there's different ways that you can look at it right, obviously and all of that still subject to negotiation.
And you know, we'll just continue to work with you know.
The banks the streamers stakeholders ex after and it comes to the right answer or you know the the right now and are there.
Okay, great. Thanks for that.
Thank you and next question comes from Dalton Plateau at Canaccord. Please go ahead.
Hi, Thanks, guys good morning.
Oh can you help me understand the context around this arbitration and you know why you elected to go to arbitration. So soon after announcing a memorandum of understanding and then as a follow up for that can you remind us under what conditions Rio can call and events of default.
Thanks Dalton.
So why why all the trade right I would.
Well, let me say the following a caveat that by saying that the the arbitration proceedings and under strict confidentiality provisions, but what we can say is the following dolton.
Our funding plan as I salute.
[noise] mentioned is really to avoid a.
You know potentially highly dilutive rights offering and to finance through additional debt right like he likes the bonds and stream.
It's become apparent in our discussions with Rio Tinto that really.
Their approach to financing is not compatible with our preferred funding approach and that there is a difference of opinion between the parties as to you.
Their respective rights and obligations with respect to the financing process.
And really the objective of the arbitration is true clarified the provisions.
Well development agreements and we've got plenty of them concerned.
Concerning.
Rio Tintos role and its obligations to support T, a Q and and seeking additional financing for OTI.
And we think that you know additional clarity provided by the arbitration process, well ultimately benefit both parties and to be clear, we don't intend to for.
For this arbitration to be.
HM.
To be adversarial and any home, we think it does provide clarity, which ultimately benefits.
Both parties.
So that's the process dolton that you've embarked upon I think we said in our press release that we expect this to take three to five months.
And and and.
Once that's and once that's and run its course, then we'll be able to move forward with the added clarity.
The second question, both and I wasn't ahead of the central I fully understood can you just repeat the question.
Oh sure, but before I go on for the second question. If I can ask a follow up from what you just said.
I think that's what I'm not understanding if there is a difference of opinion, that's causing you to go to arbitration.
What's the memorandum of understanding for my understanding is that that implies that you guys arms and page.
Well I mean, the memorandum of understanding if you look at and what it does it sets out you.
You know you could say, what we agree upon so Rio Tinto and Turquoise Hill and what we agree upon is.
That we both want to pursue the re profiling assets the existing debt.
And we both agree that we want to seek to raise and additional 500 million that we then also say and the memorandum of understanding.
Above and beyond that t. acute liked to and explore other options and Lucas with them because we believe ultimately that.
I would like to maximize the level of debt.
Assets, the asset level right and.
And.
Now I come back from my previous onset adult and so its become really clear to us.
Over the over the remaining or recently as part of these discussions that.
You know I'll approach and the process to to get US now that we have different different views different interpretations and.
And because of that we.
We felt and going to arbitration is the most helpful thing to do because it is a you.
And relatively quick process. It is a process that is governed by quite strict confidentiality proceedings and it allows us to do this and what we believe the least you know at this area and that's up because clearly you want to continue to work together with Rio Tinto going forward.
But to get the clarity we believe it's important it's important for us and and for all parties to be able to then ultimately move forward without financing plan that that we would like to put in place.
Got it Okay and then my second question I'm just to clarify my understanding is that.
And ER Reos guarantees on you know all the financing for the day the conditions under which they can call and event of default if.
It becomes clear that certain payments, whether it be the capital of finished and project or you know make the lender the profit financing payments.
Unlikely and and just remind me under what conditions they can call a notice of default.
Yeah, I don't think I told and I would say Tonight. So this is quite complex and I said that so there's lots of off so I didn't have intercepted fault is is obviously something normally would be called by the lender side that I know that's not what you mean look.
Look there's a series of agreements out there right adults and I mean, I'd suggest almost we take it off line because there's lots of them. It starts off with the 2006 private placement agreement. It goes on to you know for 2010 heads of a dream and there's 2012 memorandum of agreement and.
All the way up sued for 2015 financial support agreement that quite complicated that quite complicated and of course, the and will you as well so.
If you want to have a detailed discussion we can do that but they are quite complex, they're all available and the public domain. So people can take a look at that and.
You know that quite complicated and in part and that is maybe what explains why arbitration. He has helped for because we think that some clarity is required to help to help cover and that process.
Okay, Yeah, no problem and then maybe just one last one for me.
With regards to the government it sounds like your your.
Your teams engaged for them in terms of working through some of the the differences and are trying to come up with a new terms I guess what form of those discussions taking how hard fast are they and who do you have from tier two representing.
Youre negotiating team.
Sure. Thanks to all of them. So I think what you're probably referring to is really the parliamentary working group resolution that was passed in late last year, and Paul and break that out and right yeah exactly.
So.
I'll try to answer this as quickly and specifically as I can build and so we've had plenty of discussions in the first half of per year that ultimately them culminated in the signing off the amended power agreement right or the power source framework agreement.
That was signed and I'm into Somalia, This year, and that's true and agreement going for what you know focusing on.
Oh, it was called the S O P. P. The state owned and funded power, Paul and as the New base case, the preferred approach and and that's on our website at agreement. That's now then we had an election and Mongolia and the summer and.
And we've now had since then a new government come in and.
That's not now and not so new anymore because for now in the middle of November dairy and dialogues happening.
And conversations have have happened.
It's not helped if you liked by the travel restrictions to covert because we obviously are very limited and our ability to fly into country, but what we have been able to do is to hold discussions remotely books right like everyone else.
And that's what we do in terms of who is involved from a t. acute perspective, it's a number of us I'm certainly involved a low.
Tends to be involved.
Other people too, but as we focus on funding power or some other more strategic matters.
Luke and I, probably I would say the ones who tend to be the most involved in those discussions and that's a working group that we that we apologize for us.
And obviously Rio Tintos Pago and then various delegates by by the government depending on what the work stream and stuff we're talking about.
Does that I don't want to go into too much is that kind of answer your question built and.
Yeah, no. That's good context, thank you very much.
Thank you and the next question comes from Orest Wowkodaw at Scotiabank. Please go ahead.
Hi, good morning, and following up on Dalton's questions and then pick confused earlier you indicated that you expect to submit.
I think streaming potential streaming options to Rio tinto by year end, but it sounds like the arbitration is not going to be around the funding, it's not going to be settled and until sometime in the new year. So I'm just confused about that and then I was also curious on how the government and Mongolia feels with respect to a stream.
And and whether they're supportive of that type of financing or not thank.
Thank you.
Yeah. Thanks, Luca you happy if I, maybe take the second question in relation to the government of from Gold and then maybe I'll ask you to deal with the first one if you if you're okay for that.
Or its not the second one how does the government jobs and feel about that look I mean, you know the honest onto it is and we can't speak for the government of Mongolia, and they will speak for themselves and their a sovereign and sovereign country right, but what I would say is that we are constructively engaged and engaging in a dialog with them. They obviously and.
Important shareholder they own 34% double your total and they're an important stakeholder right. We are operating in that country and as such we are very keen to have that active engagement and ultimately that support.
We also think that the funding plans and we have in mind. So I now speak for Turquoise Hill.
Should be attractive to the government of Mongolia, or certainly on negative for them put.
But of course, we do need to have the dialogue with the government and the government entity as a shareholder as we progressed the work as Luke is progressing the work and we need to and make sure that the government has good visibility good involvement because ultimately we want though you want that support right we compete.
Right for them, we can speak for them, but certainly our intention our approach our attitude is that we very much and obviously you want to work.
Elaborately collaboratively with the government and and we think we'll have a good case true to convince them, but what we expect to be able to put forward is also something that will will make sense for them and.
So that we can ultimately get to support.
Luke are you happy true to address or his first question.
Sure I'll buy Oh definitely do my best and and thanks for the question so.
It does and I think I think the sort of key the key sort of point to get across in relation to that first question is that.
Independent of the arbitration.
We actually think weak and continue to advance our funding discussions and Trx you sorry, our funding discussions with Rio and and NCR to use funding strategy more broadly so the other.
This this isn't just in respect of streaming it would be in respect of out of G.M.T.N. and other things as well.
Specifically related to the screen [laughter] and and I suppose I suppose it's also important to say that ultimately will put you know what we're doing the work to get ready to put proposals for word for Reos consideration and and ultimately obviously, we'll put those proposal.
Sales in front of radio out at and when we feel is the appropriate time, but we are at the moment still on track to be able to do that before it before the end of the year, we're doing a lot of work to be able to do that and the intention before the end of the year as to what you know proposals in front of for.
For their consideration and to start those discussions with Rio.
I don't think there's anything related to the arbitration that there isn't anything that I'm aware of that would prevent us from doing that we do very much think that we can progress. These other discussions with radio sort of in parallel with what what needs to be done from the perspective of the our but arbitration.
So hopefully that that that's helpful and provides a bit of additional context there.
Okay. Thank you and then just as a follow up I'm <unk>. Your defended I guess, the OTI to fit into the estimate is due shortly here is there any reason to think that it's going to be any different than the technical report that came out a few months ago.
Thanks, Orest, Joe and his so set something youre happy to to address.
Yes, Hi, sorry, Chris could you just talk a little bit more I, just want to try and get the I'm sure I'm sorry, yeah.
Yeah sure I mean, there's some lots of disclosure how that definitive cost and schedule left and that for phase two will be released before the end of the year and my question was is there any reason to believe or to think that this is going to be different or materially different than the technical report on OTI that was put out only a few more.
Go or is this basically just a copy of the same report.
Right and it.
Great question, because that I, Oh God, it's relatively close together and you know we still are going to cash parents price that [noise].
On the black and as I said and I.
Well that suddenly we got trend and itself [noise] and we're not seeing material difference and that is cool <unk>, Dallas and clean the effects all kinds that ER and that and nine twice a day and so there are some there are some differences but.
Yes, so we're not necessarily from any might attack change and at this stage, but I'd teen range right and we still guiding cash Sharon and price I sorry.
Okay, and they haven't you already disclosed that the there's no impact to the capital and schedule from Cove. It today.
Not.
Not necessarily we have chase it says and results you know they've got the technical report, that's really and eat I did not include the impact of hybrid or the and definitive extent daus and thousand claims and the impacts assets, such as warm and stand and.
I want to die is high and a day.
Because that headline and if im sorry, and one doesn't necessarily mean that we'd be in the day tile for size and that the impact to tie that and has had some impact if you like.
And they certainly they would to try and mitigate those impacts.
But nonetheless sound and has that thing included in net and you know, we still were feeling warts and the detail each meeting this is Dennis.
Okay. Thank you for its kind of just yeah, I mean just to say.
Say slightly differently, maybe that the different investments around the corner right, but we're close to it and so weve given really preliminary indications as to where we think we are so theres a little bit of a health warning around that but at the same time for obviously quite well advanced too and that's why we felt it was appropriate and important to get the market. Some.
Visibility, where we all even though as John said earlier, we have not completed and finished the for governance process, yet, but certainly we have given the market preliminary indications as to where we are at the moment she will come out.
Thank you all.
Ladies and gentlemen asked I mean my interest she have any questions. Please press star one.
Next question comes from a credit Hutchison at TD. Please go ahead.
Hi, good morning, guys.
I follow up question on the arbitration process when you exit the arbitration do you expect to have clarity.
And just like a binary outcome like all equity and zero equity or is there a possible possibility of a and negotiated settlement something between in terms of your funding shortfall.
Yeah. Thanks, Craig So what I would say is.
The.
Let me sort of back out maybe for a second here.
So.
We've gone to arbitration under a set of agreements under those set of agreements arbitration is a is the mechanism.
That governs.
To resolve the issue it is a binding.
Process, a binding outcome at the end of the day.
I think we said before it is expected to take between you know three to for three to five months something on those lines.
That doesn't mean that because you know we could you know never get to that stage. If we were to to agree anything before hand, but the process and visits is that we go to arbitration. It takes about three to five months and ultimately the result.
We'll be binding on on both parties.
But is there a possibility to its immediate it's like you know you guys come to some kind of resolution and the middle and is that a possibility.
Well I think that's always possible Craig right and it's and that's always possible right, so, but I I can't predict that or Ah or all the time and necessarily what might happen and all I can say at the moment is if the process runs as envisaged this is what it would be.
And the five months.
And the binding result.
So give us to give us ultimate clarity.
And it's just a question on and hedges are you guys contemplating hedges over the next couple of years.
Sure and I might ask Luke to come in and that look you are happy to take them and.
Yeah that sounds like one for me and no problem I think Craig for the question. So.
So lift and we have had a lot of encouragement from for you guys from our share holders around hedging.
And I do want to do on a day to all of you that we are actively looking at it.
We're not quite you know at a position where we can commit to anything at this time, but the work is being done to see up hedging it's something that's and the best interest of the company and and you know we.
We would hope and and you know the near future you know, possibly even you know as part of our you know it sooner rather than later, we would we would hope to be able to provide a bit more clarity there, but I can obviously say at the moment that where we're interested in and we're active and.
Simply looking at it and it is something that that that we might be able to do.
Are there any restrictions in terms of hedging this would be a real.
So.
There are I mean, I I don't want to comment specifically on on on Reos view on hedging obviously, the broader the broader agreements that sort of govern the relationship between T. Our Q and Rio you know put limitation generally.
And but but you know we are looking at options that we believe.
Can be executed even with the sort of.
Take taking and you know the the broader context into consideration we are still looking at options that we think could be executed.
And and and not the stuff that we're actively looking at at the moment.
Like purchasing ports.
Yeah, So I'm I'm, Craig I'm not quite at I know you'd probably want me to be very specific here, but not quite at that stage, yet where I can be that specific but but but we I mean, we do have you know good support we are looking at that we've looked at a variety of different.
And options and including the ones that did that you just mentioned and we've tried to narrow it down to ones that we think from a t. art you perspective could be executed and and and were just doing the work now to to verify that's the case to source endorsements that kinda spot.
Okay that makes sense and maybe just one last question for me in terms of and guidance next year. It looks like it's a little bit lighter than what the technical report is insane for for gold and copper production is your guidance based solely on the open pit or are you, including some of the development or.
And next year and that guidance.
So are you talking about art I don't think Weve issued guidance for 2021, net or you're talking about are 2021 gold outlook.
Correct.
Yeah. So that's the 500 to 550000 ounces.
Yes, yeah.
Yeah, so I doubt well.
And obviously there is still some work that we we need to do to from up the guidance not just for gold but for all.
All of the different areas, where we issue guidance with there's still a bit of work that we need to do to from all of that up and not something that we we tend to kind of do in December and January timeframe. Historically, that's that's usually about when we do it.
And the.
The outlook that we've got at the moment. The 500 to 550 would would include I mean, we wouldn't be just looking at <unk> and open pit, we would be we would be taking into consideration anything we might be able to get out of the underground and 2021 as well, but it is just it is just an outlook at this stage and we are.
And doing the work to from that up so that we can issue guidance and the next couple of months.
Okay. Thanks, guys.
Thank you there are no further questions you may proceed.
Thank you operator, so let me just briefly summarize and maybe what I think we've been able to tell you. This or this morning. So you've seen this quarter from another strong operational and safety performance from all the team up or your total going.
I think you've heard from us and that there's good progress towards their delivery of the definitive estimate later this year.
And these we've highlighted that the current and preliminary indications are the fastest name of production is expected to come and at the lower and that the range I E October 2022, and a base case with Capex remaining within the range with 6.8 billion as a base case, we will need to monitor and.
Assess and the potential impact of the national locked down that we are seeing at the moment in Mongolia and that was just extended over the weekend until the first and December.
We are progressing as loot highlighted the work in a range of non equity funding options and we expect a lot more visibility such that we can have something to update you on before the end of the year.
And of course this other work that needs to be done in a range of other areas with all stakeholders, including of course, we have center as well as the government of Mongolia that is happening and we will update the market on any developments in this regard.
And in the meantime, what remains for me to say is extending our best wishes to all of you stay safe and do please remain vigilant and as we've just seen how a total it remains with us.
For the foreseeable future so with that let me. Thank you for a hub and joined US on this morning's call and we'll close up the cold and this thank you very much everyone.
Ladies and gentlemen, this concludes the conference call for today, we thank you for participating and we ask that you. Please disconnect your lines and trying to most of your day.