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 on listen only mode. Following the presentation, we will conduct a question and answer session. If at any time during the call you need assistance. Please press star zero for the operator that's.
This call is being recorded on Monday November 16th 2020, I would now like to turn the conference over to on Mcdowell head of Investor Relations and Communications. Please go ahead.
Thank you Joe and good morning, and let me tell head of Investor Relations and communications welcome to <unk> third quarter, What's your what <unk> financial results Conference call on Friday, We released on third quarter. What's your what's your results press release Mdna and financial statements. These items are available on our website <unk> with me on that.
Color on <unk>, our CEO look on our CFO and Joanne Dudley our C. O on this call and presentation include certain forward looking statements information, we're free to the forward looking statements such and upper end in eggs and the three and nine months ended September Thirtyth Twentytwenty.
And now I'd like to turn the call over <unk> Chief Executive Officer.
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. The small number of recent community transmission cases in Mongolia.
The government doesn't and gold he has taken immediate action by implementing and all out readiness stayed true to the first after some book.
Well you told go and has not recorded any cases and we continue to work closely with them on billion authorities to prioritize day health and safety of all of our employees and the wider community.
Presenting with me today on July and Dokey and its culture and both of them of course will be available for the Q and eight following our presentation.
On Friday, we reported on 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 on recorded on all injury frequency rate of <unk> 0.17 for the nine months ending September.
And in particular, we commend the on your Togo 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 on for cost copper production for 2020 remains in a range of 140 270000 tons without full cost gold production trending towards the higher end of the range of 155 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 on and will you with Rio Tinto on the 10th of September and which Turquoise Hill and Rio Tinto agreed to jointly pursue the re profiling of all your told <unk> existing debt and.
Furthermore to seek to secure $500 million on additional debt.
In addition, and that's contemplated and BMO you took what's hill is actively advancing its examination and evaluation on financing options for your total going on that could address its incremental funding gap in the whole and Paul.
Thats options include additional debt from banks and international financial institutions, and the upstream most global medium term notes and a gold streaming transaction.
We expect the details of turquoise Hill's preferred funding options will be presented to Rio tinto for consideration and.
In accordance with the M. or you try and see the Thirtyth and stuff December this year.
We also expect the definitive estimate before yearend, which will factor in an estimate on the impact on cobot 90.
Based on our preliminary view of the definitive system that we have brought forward a base case assumption, what's sustainable first production from February 2023 to October 2022.
Well I'll focus on 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 you on cash cost and.
Mentioned early on when you told voice third quarter 2028, <unk> 0.03, which really is a testament to Oyu Tolgoi safety culture and discipline.
The bottom left chart, you'll see on you talked about has had another consecutive quarter of its mill operating above nameplate capacity with throughput and this quarter, reflecting the processing of harder on higher gold grade or.
Optimization, what implemented earlier and the euro.
That's resulted in accelerated access to higher grade ore areas on the open pit with an overall positive impact on cash flow.
2020 is on track to be a six year on a rope on meeting or beating on production guidance.
Focusing on on gold production, you can see the positive impact on the third quarter gold production on on C. on cash costs.
We expect expect a strong fourth quarter for gold production.
And of course, if commodity prices were to remain at current levels through 2021, and with our 2021 outlook on 500 to 550000 ounces of gold, we would expect to see a favorable impact on us youve on cash costs and cash flows.
With that let me now hand over the call to Cokes, and 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 quarter.
Revenue increased 26% from Q3 night team and.
And that was driven primarily by the 13% and 17% increases and the average copper and gold prices and.
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 20 acres and increasing copper production.
In Q3, 20, and 20 versus Q3 2019.
I had a positive impact on the unit cost basis for both the white and cash costs and all in sustaining costs.
The period on period decreased and all in sustaining cost with more significant and the decrease in and see when cash call and this was primarily due to the impact of lower open pit 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 Thirtyth 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 20 and 20 earnings release.
This estimate is still the standard book first production trending towards the earlier and much of our guided range and that's what the target and base case of October 2022 it.
It also incorporate commodity price it as well as assumptions around the impact of cold at night team.
Further we estimate.
Excuse me and further the estimate and the base case underground development capital cost of 6.8 billion.
And it does incorporate principal repayments on the existing project finance debt as well as interest and similar charges over the assumed area that the funding gap.
If we were successful and re profiling the existing debt. We estimate this will decrease our funding gap 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 and.
You would have seen we recently entered into a nonbinding and while you with Rio Tinto.
Indicating that turquoise Hill, and Rio Tinto will jointly pursue the re profiling of OTI existing debt 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 to present proposals curio for their consideration before the end of 2020.
Turquoise Hill continues to re profiling.
We continue to prioritize reprofiling as well and additional debt and other funding options ahead 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 like it.
And for time slide nine.
Hey, no signs de risking the underground development continued shaved off.
And what kind of the Nonsame target price <unk>, Patrick Hi Tech progress can teach her line, let me see I TTR twinkie expectations.
Based on the preliminary data from say the best and as we see sustainable test production and tie that 2020, which is ideally and range. We described and development capital of six point <unk> area, and what you need a middle and its price range.
The definitive estimate Don Hi, it's currently under if he thought patchy and that kind of low technical expense with average than you anticipated to be completed late acting chief pool.
On the ground lateral development progress continues relatively in line with the I.T.I. twinkie expectations and.
On T. supply this last quarter. It was not made and strategically slide in the third quarter and there's also say redeployed to focus on critical underground infrastructure to support production from panels IRI in particular, the underground and she has handling system one.
Looking forward, we expect the same subject to average <unk>.
Moving on to <unk> and then in mid 2021. This is a key nothstein towards sustainable Chris production.
On the ground drilling and open a characterization like me completion kind of on the right and the Nols and area panel, which will be the next area to non.
She's from the large size of penalty and decision has same night to consider the area, it's free lawn and gardens.
Drilling data collection and analysis. So there are nine and central and southern cautions that penalty on panel. One is expected to continue through 2021, and then to 2022.
With significant price that's on a just on if you are not day to the north and central areas of 10 on say expecting 2021.
Turning on focused on development and infrastructure, please and slide 10.
Shocked to see continued price normally.
Perhaps and wakes and thinking of shop strength Coldwell banker and.
Okay highly specialized test now I think he or she is it true retention on Goliat document they split pending.
Pending resolution of the recently and that kind.
I think the restrictions.
Mitigating the impact it's having on came on material handling infrastructure has been a key focus and the project and due to the decision to strategically very to protest and now we've seen improvements in productivity right.
We've seen and easy if restrictions you're lighting to on site personnel numbers and on <unk> ongoing improvements are expected the recently and that kinda cases, and on 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 from Q3 due to the rate decline and resources to support materials handling construction.
During the third quarter, and built and enhanced expression and time, including six skilled personnel to add two at all on the top by taking costs and this is saying.
And he Tang will be supporting book on our existing law suits and looking for new opportunities within the fact I think bacon.
And the Laski Turquoise Hill exploration.
And on the 50 to 100 kilometers dying around them on leases the current and how to exploration license with him and sign.
We've also started a geological survey on 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 month.
And you exploration came to looking to build enduring relationships with and neither the 10 and strike me touristic attic partnership and on time commitment.
Now I'll turn the presentation back Oh.
Yeah, Thanks very much on.
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.
And talk was progression from a tier one resource to a tier one operating EPS it becomes more and more evident for everyone to see.
Oh, you Tollgrade is forecast 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 on cash cost to decrease to first quarter levels.
Hold on the office assets in combination with a continued focus on operational excellence and an exceptional Mongolia and workforce on 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 on presentation today I'll, just remind everyone. If someone's on highlights of the or your total book Technical reports, which people east and August and.
On a consistent track record on operational excellence the turquoise Hill has demonstrated.
We've consistently met on 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 Togo generated $12.7 billion net cash flow after tax before financing costs between 2024 and 2030.
In addition to our copper production or your target is of course and lost and yourself gold.
Oh 2021 to 2030 production forecast anticipates that will you talk on the average opus, we haven't and 7000 ounces per year alone.
Allowing and additional they on Brazilians to operations throughout the commodity cycle.
Finally building up on your comments earlier on the government funding and liquidity.
I want and reiterate managements, and especially committees commitment and focus to progress the company's preferred 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, but on the best interest on the company.
We recognize the challenges remain 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 on Goliat and a number of important items progressing the development of the Palestinians from what we were told going to name, but a few.
It's obviously and you want to see that these also 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, and absolutely committed to progressing and executing on each one of them.
We do so with commitment at wholesale and the spirit of cooperation with all key stakeholders and ultimately of course with the best interest of our company Turquoise Hill and volumes.
And we will update the market on 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 took what's hill and it's one of the Premier Global Copa investments.
So this concludes our prepared remarks, let me now turn the call back to the operator for any questions on.
Operator back to you please.
Thank you.
Ladies and gentlemen, and we will now begin the question and answer session.
Did you have a question. Please press the star followed by the and one on your Touchtone phone you will hear my fleet on Prime day acknowledging everquest if.
If you are using a speakerphone, please let the handset before pressing any cash.
Your first question comes from Hayden Bairstow at Macquarie. Please go ahead.
Hi, Good morning, Ole I'm, just a couple from me to start off with especially and market lead to to answer the first and if I could just on 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 debt facilities and makes it harder than others to actually just sold every problem.
And then sort of re time and should do.
On them and and also good to see that new debt to you you're looking and getting the 500 billion is there any suit.
And he said the kinks to that and we need to be aware growth and then just secondly on and then operationally is so big and pretty well and I mean, the console and some on continues to get better the goodwill on the Schumi, particularly appealing right now on costs. So it seems that you understand what's really driving that and once you get more on the Grand old and as the work index actually go down so theoretically do cost a lot even from <unk>.
Thanks, and look you are happy to take them, So and you have to use and take the second one.
Michelle maybe you can yeah look you are happy to take the first one.
I'll do my best Dog, Thanks, and thing taking her 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 eye of buys we have commercial banks, we have different tranches.
We are you know.
EPA 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 forward 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 we do remain Rick we do remain confident and and operas fact.
Yeah, and maybe I can hand, it over to you.
Yes, Michael and thanks, Thanks, very much like and thanks, Hi, [noise].
Uh huh.
Good questions on the on the cost and my Oh, I'm, sorry, and they can outline quite well the impact to the general impact on on costs on on cash cost.
We intend to the next level of day tile to that that and milling costs on beefy, we've had one shop and not today and so we have one doesn't hold on plant in January and so that helps that the anti viral on price is saying call. We've also had some good ongoing optimization projects.
And creating good took home and Chen line as at the mine and to reduce cost and that's an ongoing saket.
Intensively on the ground on the relative true <unk> rights and the on the ground or if it certainly is on has got a higher trade <unk> right and then the hot and materials and the southwest <unk> Bye.
Lawless and they material coming out and the central piece I know, it's not like next strike <unk> and today, [laughter], and unfortunately, and but it certainly and we'll have a better.
And it's very put rights and then the SAP way channel. This athlete Pete Hi, guys sound like to answer any questions.
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 seeing your day, we will be looking to progress those discussions as we progress discussions with the lenders around the re profiling and.
And you know well, we'll have additional additional conversations with other lenders you know.
Should that be necessary or advisable, but of course on top of that we as tier cure on <unk>.
Absolutely focused on other forms of debt or hybrid and financing as well on that we have been doing a lot of work around a global and 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 off with the streamers. So we are looking at a streaming transaction again on the work there is progressing very well and is well supported on.
And is tracking the 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 they always get the Disney <unk> hundred 80, 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 move on to get well ultimately, where we want to get to a place where were on all of the different stakeholders fill come true.
So, bringing and you know.
Additional supplemental senior debt you would expect the supplemental senior to that to be on sort of first ranking security.
That's probably going to be the case or bonds as well.
You know the rest of it you're on the rest of it there there's different ways that you can look at it right, obviously and all about still subject to negotiation.
And you know, we'll just continue to work with you know.
The banks, the streamers stakeholders et cetera, and it comes to the right answer on you know the right now and are there.
Okay, great. Thanks for that.
Thank you and next question comes from Delta and Brizo 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 to that can you remind us under what conditions and riocan call and events of default.
Thanks Dalton.
So why why arbitrate right I would.
Well, let me say the following a caveat up and saying that the the arbitration proceedings and under strict confidentiality provisions, but what we can say is the following dolton.
Our funding plan as Luke.
[noise] mentioned is really to avoid a.
You know potentially highly dilutive rights offering and to find on two additional debt right like the likely 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.
You know their respective rights and obligations with respect to the financing process.
And really the objective of the arbitration is to clarify the provisions.
On the development agreements and we've got plenty of them Consigning, you know Rio tintos role and its obligations to support <unk>, Q and and and seeking additional financing for OTI.
And we think that you know additional clarity provided by the arbitration process.
Ultimately benefit both parties and to be clear you don't intend to well.
For this arbitration could 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, even talked 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 been spent some on its course standard will be able to move forward with the added clarity.
The second question Middleton I wasn't on how does the central I fully understood can you just repeat the question.
Oh sure, but before I go on to the second question. If I can ask a follow up on 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 was that that implies that you guys are on the same page.
Well I mean, the memorandum of understanding if you look at and what it does it sets out.
You know you could say.
What we agree upon so Rio Tinto and Turquoise Hill and what we agree upon is a.
And that we both want to pursue the re profiling on the existing debt.
And we both agree that we wanted to seek to raise an additional EUR 500 million that we then also say and the memorandum of understanding.
Above and beyond that T. EPS, you would like to and explore other options and blue coat with them because we believe ultimately that <unk>.
I would like to maximize the level of debt.
At the asset level right and.
Now I come back from I believe is on sort of adult and so its become really CLIA.
Yes.
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 because of that.
We felt and going to arbitration is the most helpful thing to do.
Because it is a.
And relatively quick process. It is a a process that is governed by quite strict confidentiality proceedings and it allows us to do this and what we believe the least adversarial im asset 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 to day, there are conditions under which they can call and events 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 public financing payments.
Unlikely and and just remind me under what conditions. They can call a notice of Stifel.
Yeah, I don't think I told and I would say Tonight. So this is quite complex can I suggest so there's lots of calls so I'd be pent up into default is is obviously something normally would be called by the lenders right I know that's not what you mean look.
Look there's a series of agreements out there right adult and I mean, I'd suggest almost we take it off line because there's lots of them. It starts off with a 2006 private placement agreement.
It goes on to you know the 2010 heads of agreement the 2012 memorandum of agreement.
All the way up to the 2015 financial support agreement that quite complicated they're 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 are all available and the public domain. So people can take a look at that and.
Yeah that quite complicated and in part and that.
That is maybe what explains why arbitration is helpful. Because we think that some clarity is required to help to help cover on that process.
Okay, Yeah, no problem and then maybe just one last one from me.
With regards to the government it sounds like you're on your.
Your teams engage with 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 far advanced are they and who do you have from tier two representing.
Youre negotiating changed.
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 right out and right yeah exactly so.
I'll try to answer this as quick T. and specifically as I can dolton. 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 and to some of this year and that's true and agreement going forward.
Focusing on.
What was called the Esso 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 we've now had since then a new government.
Come in that's not now and not so new anymore because were now in the middle of November dairy and dialogues happening.
And conversations have has 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 book right like everyone else and.
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.
[noise] 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 are possible.
And obviously, Rio Tintos, Pago and and various delegates by by the government depending on the book the work stream and stuff we're talking about.
Does that I don't want to go on to to my does that kind of on so your question built on.
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 on Dalton's questions and then pick confused on earlier you 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 until sometime in the new year. So I'm just confused about that.
And then I was also curious on how the government on Mongolia feels with respect to a stream 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 and gold and then maybe I'll I'll on skewed to deal with the first one if you if you're okay with that.
So on the second one how does the government and the feel about that look I mean, you know the honest on to is 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 on.
Important shareholder are they on 34% double your totally 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 you know make sure that the government has good visibility good involvement because ultimately we want them, we want that support right we compete.
Aside from them become speak for them, but certainly our intention our approach our attitude is that we very much and ups he 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 first question.
Sure I'll buy on 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 TR to use and sorry, our funding discussions with Rio and and NCR to use funding strategy more broadly so.
This this isn't just in respect of streaming it would be in respect of 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 forward or reos consideration and and ultimately obviously, we'll put those proposal.
Growth 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.
Ill 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 that perspective, the on of the r., 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 definitive 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, or as Joe on it. So that's something you are happy to to address.
Yes, hi, sorry, ours could you sounded a little bit more while I just wanted to try and get the I'm sure I'm, sorry, Mike Yeah sure I mean, there's some lots of disclosure how that definitive cost and scheduled 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 months ago or is this basically just a copy of the same report.
Right and it's a great question, because that I, Oh tight relatively close together and you know we still are going trash on price that [noise].
On the black a and and as I said on.
Well that certainly we got trend and it sounds [noise] on.
And we're not saying and material differences, but of course. This report does a and clean the effects all kinds head on and that on nine twice a day and so there are some there are some differences but site.
Yes, so we're not necessarily from any night and chat change and at this stage, but I'd teen range, right and we still guy and cash Sharon on price I sorry.
Okay.
They haven't you already disclosed that the there's no impact to the capital and schedule from Cove. It today.
Not necessarily we have chase. It says on results you know we've got the technical report and that's really then eight on did not include the impact from try that.
The and definitive and sent out thousand claims and the impacts of substance and warm to stand on today's high and just because that's the headline and if im sorry spin on it doesn't necessarily mean, we mean the day tiles that size.
And the impact to tie that and has had some impact if you like and they sit and everything worked to try and mitigate those impacts.
And then last summer and has had thing including me and you know, we still feeling on warts and.
But the entire eats within these estimates.
Okay. Thank you that's kind of just yeah, I mean just to.
Say slightly differently, maybe that the different investments around the corner right, but we are close to it and so weve given really preliminary indications as to where we seem to be on so theres a little bit of a health warning around that but at the same time, we are obviously quite well advanced true and that's why we felt it was appropriate and important to get the market. Some.
Visibility where are we on even though as John said earlier, we have not completed and finished the full governance process, yet, but certainly we have given the market preliminary indications as to where we are at the moment see book come out.
Thank you all.
Ladies and gentlemen, and somebody might just do you have any questions. Please press star one.
Next question comes from Craig 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 or is it like a binary outcome like all equity zero equity or is there a possible possibility of a and negotiated settlement something in 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 and or a set of agreements on the 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 three to four 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 on but the process and visits is that we go to arbitration. It takes about three to five months and ultimately the result a.
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. All I can say at the moment is if the process runs as envisaged this is what it would be.
On the five months.
And the binding result.
So give us to give us ultimate clarity.
And it's just a question on on hedges are you guys contemplating hedges over the next couple of years.
Sure and I might ask Luke to comment on that look you are happy to take them on.
Yeah that sounds like one from me on no problem I think Craig for the question. So.
So lift and we have had a lot of encouragement from from 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 on 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 were more interested in it 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 the 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.
On 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 on 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 from me a and.
Terms on the guidance next year it looks like it's a little bit lighter than what the technical report is insane for gold and copper production is your guidance based solely on the open pit or are you, including some of the development or a and next year and that guidance.
So are you talking about art I don't think Weve issued guidance for 2021, yet or you're talking about are 2021 gold outlook.
Correct.
Yeah. So that's the 500 to 550000 ounces.
Yes, yes.
Yeah, So I doubt will.
And obviously there is still some work that we we need to do to from up the guidance not just for bold 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 on 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 and you May proceed.
Thank you operate on so let me just briefly summarize and maybe what I think we've been able to tell you. This this morning. So you've seen this quarter on another strong operational and safety performance from all the team up or your toy and.
I think you've heard from us and that there's good progress towards their delivery on the definitive estimate later this year.
And these we've highlighted that the current and preliminary indications on 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 any potential impact us on 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 Luke highlighted the work on a range of non equity funding options and we expect to have 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 be book update the markets on any developments in this regard.
And in the meantime book remains from 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 Ah cobot remains with us.
For the foreseeable future on so with that let me. Thank you for having 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 enjoy the rest of your day.