Q4 2020 Pretium Resources Inc Earnings Call
All participants please standby your conference is ready to begin.
Thank you all for joining us this morning, welcome to the Protium resources fourth quarter 2020 conference call.
As a reminder, all participants are in listen only mode and the conference is being recorded after the presentation there'll be an opportunity to ask questions.
Conference call today is being webcast live and available along with the presentation slides on Pratt HIMSS website at P. R. E T I V M Dot com.
I will now turn the call over to Mr. Jacques Perron, Protium is president and C E O.
Thank you good morning, everyone and welcome to our fourth quarter, and 'twenty and 'twenty year, and operating and financial results Conference call.
'twenty and 'twenty has been an unprecedented year with exceptional challenges I want to thank our team for their continued hard work and dedication.
However, no year is considered a success unless it has accomplished safely.
And in 'twenty and 'twenty, a fatality provided that tragic reminder of the importance of keeping safety at the forefront of everything we do.
On today's call I will briefly highlight some of our key achievements from 'twenty and 'twenty I will Dennis on the call over to Patrick and good day, how our chief operating officer to provide some insight into our production and operating result.
Following GAAP Matthew Quinlan, our Chief Financial Officer will review financial highlights of 'twenty and 'twenty.
Finally, I will provide an overview of our near mine exploration results and our recently announced underground exploration drilling results before closing off with a look ahead.
At the end of the presentation, we will open the call for your questions.
Before we begin and note that our statements contain forward looking information and future oriented financial information based on certain assumptions and are subject to risk factors I refer you to the cautionary language included in our news release yesterday as well as the management's discussion and analysis for the same periods.
These are available on our website and have been filed on SEDAR and please note. All dollar amounts mentioned on this call are on U S dollars unless otherwise noted.
Despite the challenges faced in 'twenty and 'twenty, we achieved our annual production guidance for the first time and the company's history.
Nearly 348000 ounces of gold were produced that Bruce Jack and we generated a record free cash flow of $369 million.
This allowed us to significantly reduce our debt by $227 million after debt repayments. We ended the quarter with a cash balance of nearly 101 $175 million.
Other objectives achieved in 'twenty and 'twenty include accelerated underground development ramped.
Ramped up production through and average processing rate of 3800 tons per day increased thrilled that stope inventory.
<unk> the 147000 meters of in resource definition, Diamond and RC drilling as well as 28000 meters of resource expansion drilling and announced the discovery of the hanging laser zone just for kilometers from the Brewers Jack mine.
We have refocused our efforts in terms of health and safety and we are implementing changes to improve our safety culture.
We will do everything we can to avoid a repeat of the tragic event that occurred at the beginning of the third quarter.
Staying on the safety of our of our workforce remains our most important core value.
On February 10, and 2021, BC Norton health and declared a COVID-19 outbreak at the Bruce Jack Mine.
Protecting the health and safety of our work force and local communities, we implemented and hence outbreak protocols.
This included the restrictions on travel to and from the Brewers Jack non Cam while site wide testing was conducted and then assessment by B C and the Orchard house could be completed it.
It was determined that the majority of the positive cases were restricted to a limited cluster and on February 17, and travel restrictions were lifted.
Additional protocols and procedures, even up in collaboration with local and digital partners and BC, North and Hal I've been establish which includes testing of all employees and contractors.
Throughout the outbreak mine and mill production continued.
And at a reduced space for a few weeks.
The company is assessing the potential impact on operations and we will continue to closely monitor the situation and provide updates as appropriate.
This is a reminder, that COVID-19, and remains at risk and could have a significant impact over a short period of time.
I will now turn the call over to Patrick day reviewed our operational highlights for the fourth quarter and full year 'twenty and 'twenty.
Things are turning.
Turning to operations on slide seven.
And the fourth quarter and the fourth quarter, we process approximately 310000 dry tons of for through the meal equivalent to 3366 tons per day.
And for the full year, we processed approximately one 2 million ton of for whichever is out to 3000 and favored with 72 tons per day.
The mill operated below the permitted level of 38 on a tonnes per day due to scheduled and unscheduled maintenance and our focus on lateral development and stope and ability.
Yeah.
By the end of the quarter were successfully ramp up to on average processing rates slightly above 3800 tonnes per day and the month of December.
For instance costs were $217 per ton milled and the full quarter and we're one of the $95 per ton mill and the full year of 'twenty and 'twenty.
Bush and cost increased <unk> and the additional lateral development and definition drilling and cost associated with COVID-19 safety protocols, mainly related to employee salaries and travel cost.
And these protocol of increase goes by $5 per ton milled in the quarter and $6 per ton mill and the full year of 'twenty and 'twenty.
And the fourth quarter, we produced just over 88000 ounces of gold the mill feed average.
Eight Portland grams per tonne and the recovery rate was $97 four per cent.
And well work for you we produced nearly 348000 ounces of gold at an average grade of 325 grams per tonne at a recovery rate of 97 per cent.
When you look at the quarterly gold production for the year, you'll see that we have maintained our promotion level within closer to minus 5% of the midpoint of our guidance range.
This broadly understood that <unk> is a high grade variable deposits will continue to see fluctuation products shown on a quarterly basis, but hope to smooth that out over time.
Going forward. Our objective is to optimize production is always a quarter to quarter fluctuations and at the same time and look for opportunities to increase our production.
The 20th wasn't even the old reserve reconciliation was completed by evaluating the twenty-twenty mineral reserves against the Twenty-twenty meals actuals.
In 'twenty and 'twenty ore was mined from 69 stopes over 11 levels spending and there was a little distance of approximately 540 meter east to west and 310 meters now to solve itself.
The 20th when new meal Dashville contains approximately 4% more tons into 'twenty and 'twenty mineral reserve, probably primarily due to the mine to money auto reserve matter, you'll determine to be economic but the grade control program as well as greater than planned stope dilution.
Compared to 2019 mineral reserve and reserve reconciliation the Twenty-twenty mineral reserve gold grade reconciliation and improved from 32, 2% and 2019, 294% in 'twenty and 'twenty.
This improvement can be attributed to the inclusion of the mine gold factor and the update in 'twenty, two and even their old reserve model.
We expect to release, an updated mineral resource and mineral reserve estimate and rivers mine life of mine plan and the first half of 'twenty and 'twenty two.
The girl and jewelry Twenty-twenty mineral resource model and include portion of the jewelry and 2019 and December 2013 mineral resource models that are required the execution of a mine called factor and the mineral reserves there.
On the 20th went into mineral resource and mineral reserve, we loved it and.
Area of the value of the King zone with the result of an extensive and of the extensive 2021 drill program previous drilling and knowledge gained from more than three years of mining.
In order to improve our knowledge of the orebody and establish a mine plan to redo their projects and variability we have two main priorities. Our first priority is to increase access underground.
Lateral development will continue to advance at a rate of over 1000 meters per month.
To increase development rates will improve access to the increased development rates will improve access to new areas and increase our drilling inventory of stopes.
Our target is to have about 400000 tons of drill and still ready to be blessed.
Relative to a full quarter of production by the end of the third quarter of 2021.
And so providing more flexibility to improve blending from multiple areas and support and more consistent production.
Our second priority is to increase our understanding of the orebody abuse day with.
And if any valuable resources. It is important to have as much data as possible to properly is to me the greed and designing the mining approach to improve the local and modeling we have significantly increased the amount of definition drilling.
As you can see on this slide our development rate has been increasing and.
In Q1 of 'twenty 'twenty, we were affected by Covid related restriction.
We had to reduce the level of activities at site, but we recovered in the second quarter and the fourth quarter. We continued our trend of increased production.
Okay.
Turning now to <unk>, turning now to slide 12, we have a section view of the underground development looking north until recently mining has been limited to our lead to money, Arizona do Jack.
Good morning, arisen consists of for money level, each about 30 meter in height.
Earlier this year, we open up mining and the lower ore zone of the top 10, and 20 level, we know of free money arisen to operate from.
In 'twenty and 'twenty, we began developing access into the fault zone, which is just west of the Blue Jive fault on the 1200 and Trojans and 'twenty levels. We are starting to open and prepared these area for money later.
And the cig and hours of this year, we will increase access for mining from for mining from three to five areas, which will provide significantly more flexibility in terms of production compared to previous years.
Infill drilling to improve reserve definition and ahead of money was put on hold at the onset of Covid at the end of the first quarter to limit personnel that do that.
But at the end of the second quarter Diamond drilling activities resumed and continued through the third and fourth quarter with five of them and drill that on site.
Here on slide 13, and we have a section view of the underground development looking keys, you can see the drill target areas for the year are highlighted in yellow.
And in 'twenty and 'twenty, we complete approximately 147 meters of infill diamond and reverse circulation drilling.
And I will turn the call over to Matthew for an overview of holder for initial performance.
Thanks, Patrick.
We continued our track record of positive cash flows again in 2020 as we have every year since achieving commercial production in 2017.
For the year, we realized gold price of 1007 hundred $99 per ounce and increase of 28% and over 2019.
Revenue increased by a similar 27% due to consistent production and across periods.
In 2020, we sold approximately 348000 ounces of gold.
Net loss of 21 per share for the year was impacted by the sale of snowfield and the amount of 80 sales per share.
Adjusted earnings per share for 2020 increased by 72 per cent to 95 per share and were <unk> 28 per share and the first fourth quarter of 2020.
Adjusted earnings per share exclude the effect of the loss on sale of snowfield as well as deferred income tax expenses, both of which are noncash items.
You May note from our financial statements that the net loss for the year was due to a large deferred tax expense and access of our earnings before taxes.
The sale of Snowfield gave rise to a non cash deferred tax expense, even though a loss on sale was recognized and snowfield did not have any tax basis, therefore, no reduction and the loss could be accrued.
In addition, the proceeds received from the sale reduced our tax pools, giving rise to a further deferred tax expense.
I would like to stress that no cash taxes will be payable on the proceeds from these sales and sales snowfield and as we have stated before we are not and a cash taxable position due to capital expenditure pools and tax loss pools arising from the development and Bruce Jack We don't anticipate paying cash taxes for federal and provincial income taxes for three to four years.
Gold prices and once we are and a tax payable position, we anticipate paying taxes and a combined rate of 36 36, 5% of mine operating earnings.
Turning to slide 16, the year over year increase and revenues of $133 million to $617 million helped drive cash flow from operations to $317 million for the year and increase of 41%.
Operating cash flows reflect COVID-19 cost as well as higher year over year production cost and component or component of all in sustaining cash cost.
Total capital expenditures of $49 million and 2020 include approximately $27 million of sustaining capital expenditures $12 million of expansion capital and $10 million from additions to exploration and evaluation assets and the year.
Free cash flow reached a record of $369 $2 million for the year double the level of 2019.
In terms of quarterly results operating cash flow and free cash flow and the fourth quarter of 2020 were $89 million and $117 million respectively for.
Fourth quarter 2020 free cash flow of course includes the $100 million received from the sale of snowfield.
Consistent with our stated objectives, we used our strong cash flows to significantly reduce debt and made debt net debt repayments of $210 million and a year.
We ended the year with approximately $270 million and debt comprising of bank debt of approximately $171 million and convertible notes for $100 million cash on hand, and available liquidity, we're approximately $175 million and $335 million respectively at year end.
Turning to slide 17, <unk> and 2020 of $981 per ounce was within our guidance range for the year ASIC.
<unk> increased from $888 in 2019, primarily due to increased levels of lateral development and.
And drilling included and production cost as well as $24 per ounce of COVID-19 related cost and $20 per ounce related to the departure of former officers.
In summary, we successfully achieved our 2020 operating and financial guidance and generated record free cash flow.
Before I pass the call back to Jack I would like to note one accounting policy change we noted in our financial statements and MD&A that will take effect on January one 2021.
Moving forward, we will expense certain exploration and valuation and expenses rather than capitalize them on the balance sheet.
And this will only apply to expenditures for regional exploration, such as hanging glacier and will not affect the accounting treatment of exploration and drilling within the Bruce check mine.
And I just mentioned in 2020, we incurred approximately $10 million of such expenses.
This change and policy reflects the maturation of our business unit into and established mid tier mid tier gold producer.
It's important to note that the accounting policy change will not affect the calculation of free cash flow ASIC or total cash cost. However, as accounting policy changes such as these are applied retroactively to the inception of the company back in 2010, and there will be a number of changes to our historical financial statements. When we released and in the first quarter of this year.
With that back to you Jack.
Your map.
Stepping further out from the Bruce Jack mine, we hold over 1200 square kilometers of mineral claims and the Golden Triangle and V C.
Net 2020 regional exploration program on the company's Bowser claims included drilling at the hanging laser zone and other zones.
The highlights from the program was the discovery of episodes per mile style, Goldman and origination and the hanging laser zone located just for kilometers northwest from the Bruce checkpoint.
Zone of gold mineralization demonstrates the district scale potential that Bruce Jack.
We continue to believe the best value for our shareholders is to invest a portion of our cash flow and exploration of our existing claims and in particular near that Bruce Jack deposit.
In 2021, we expect gold production at the Peruvian mine to be in the range of 325 to 365000 ounces.
We forecast the processing rate to average 3008, and <unk> tons per day with an annual gold grades ranging from seven five to $8 five gram per tonne at the targeted gold recovery of 97 per cent.
We expect all in sustaining cost for 'twenty and 'twenty, one to range from $1060 to 1000 and $190 per ounce of gold sold.
And <unk> estimates in 'twenty and 'twenty, one reflect the investments and an accelerated rate of underground development.
And so have drill program and improvement oriented capital expenditures.
We forecast sustaining capital expenditures a component of ASIC to be between $50 million to $55 million. This includes the capitalized portion of underground development and drilling programs as well as well as improvement oriented expenses, such as starting to replace the haul trucks fleet.
To reduce cost and ventilation and maintenance and increased productivity.
We expect free cash flow for 'twenty, and 'twenty, one and the range of $120 million to $170 million at a gold price of 1000 and $700 per ounce.
The 'twenty and 'twenty, one free cash flow forecast includes expansion oriented capital expenditures, which totaled approximately $55 million to $65 million.
This includes construction of permanent camps and projects to support growth and to improve efficiency of operations there.
They are for free cash flow forecast also includes expenditures related to the 'twenty 'twenty, one near mine exploration program.
The 'twenty and 'twenty, one and Bruce Jack definition and expansion drill program is anticipated to total approximately one top 195000 meters of drilling.
Price, the definition and sustaining and resource expansion drilling.
Underground resource expansion and exploration drilling will target near mine zone with the potential to extend mineralization underground.
Initially six drills are planned to be deployed underground with an additional two surface drills to be added during the summer.
In 'twenty and 'twenty, we completed about 28000 meters of resource expansion drilling outside the resource shell and to the north of the valley of the Kings Zone.
This is the first time resource expansion drilling has been conducted that Bruce Jackson production started.
Yesterday, we announced the results from the first phase of 'twenty to 'twenty and 'twenty resource expansion and derail program, which included high grade gold intercepts as far as 300 meters from the current resource shell and as high as 2000, and 590 grams per tonne over one meter.
The North block zone is a is an exciting potential extension of the valley of the Kings deposit that Bruce Jack.
We have already committed to significantly increase our resource expansion and exploration efforts in 'twenty and 'twenty, one and the results from this first phase support our decision to make that investment.
Yes.
Looking ahead to 'twenty 'twenty, one we will continue to emphasize safety with a focus on what we can do to improve the safety culture.
We will also maintain our strict COVID-19 safety protocols to minimize the potential for another outbreak at site.
Based on our production and gold price estimates and we expect to generate a significant amount of cash this year.
We look forward to continuing to announce drill results the remainder of the 'twenty and 'twenty resource expansion drilling results are expected and our second quarter.
We will continue to provide results from the 'twenty 'twenty, one and resource expansion drilling throughout the year as they become available.
Looking further ahead, we will continue to advance our exploration efforts near mine, where we intend to build on our resources.
Thank you and that concludes the formal part of the presentation I will now turn the call over to the operator will open the lines for your questions on.
Operator.
We will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad, you'll hear atone and acknowledging your request. If you are using a speakerphone. Please pick up your handset before pressing any keys to withdraw your question. Please press Star then two we will pause for a moment.
As callers join the queue.
Our first question comes from Heiko.
Of H C. Wainwright. Please go ahead.
Hey, Thanks for taking my questions, it's nice to see everything used to accomplish throughout 2020.
And especially noting here your balance sheet and also highlight that the guidance you the skull price and 17 and other than that and so there's actually 2% below where we're at right now.
Can you walk us a little bit through the travel restrictions and Bruce Jack or like you know the issues that you've had and all your labor Force is currently reacting order any lasting issues has there been any longer term changes.
What are you seeing what are you hearing on the girl and please.
Good morning, I call. Thank you for your question.
I'll give you a better color and tap the world can.
Can add to our.
What I I'll provide but.
And are we were fortunate in 'twenty and 'twenty to be able to.
Operate the mine without any COVID-19 cases that site.
And positive Covid gave cases at site.
Unfortunately, we were we were worried that the after the holiday period that we might we.
And we might get some and back from people traveling and.
And coming back to site and.
And the virus to site and that that happened to us. So we we started to manage cases.
Monitor the situation.
And the number of cases, Inc. Increased quite rapidly because it was contained to a cluster of employees that were working together and not necessarily following all the proper rules and protocol and.
As you know it and.
We've been repeating worldwide for for a year now that it is important to washer and and where your math.
And be diligent and we found out that through all the tracing we've done that.
A small number of our employees.
We're not our contractors were not following the rules are.
And on that note I want to say that the majority of our employees. The vast majority of our employees are following their rules and are doing a great job, but a note and only takes a few to start to spread the virus and.
We are we started to highest day late people to a point, where a b C and northern Hal.
Decided that we had to control the situation by locking down the site so preventing people from traveling in and out and testing everybody to understand the extent of the.
Up the various.
People that are that were infected it take it took a net all about two days to test everybody and we got the results for fairly quickly add definitely during that period. The employees were concerned and we're worried then.
But I can tell you when we lifted the travel restriction on the on the 17.
Morale shot up by.
Thousands of percent.
As you can imagine that being stuck at site and not knowing when you're going to be able to leave and.
No.
Being afraid that the virus is around you and that's a it was a very uncomfortable situation for a lot of people, but it's much better right now.
And with that we have worked closely with our indigenous partner to implement new protocols and new new new rules and I'll, let Patrick explain what all our managing the situation now and what's the process too.
To mitigate the risk of adding another outbreak.
Yeah, so and.
In addition to respect the rules because its where is basically the main issue is when we're not respecting the rules.
We are now testing all of the employees when they're coming in five days after their arrival and move forward to let them leave the site. So basically it help us to better control of what we are doing.
We are also looking to actually.
Improve the testing protocol with Red and the thing we are in discussion with the auto reduce without.
And also we have some additional protocols because as you know a goose Jack we have three games and one Kimberly and tree one camp and the.
At the beginning of the Glacier and one and Cambodia operations. So we have additional protocols to control the access with the suppliers and contractors and also in addition to that.
We create what we call bubbles is mainly mainly now for where neither borders and war, leaving and northern territories.
Before to win the orders for that site immediately after that the R V.
They are living decided together and a specific vehicle and they are going back to the guarantee so we're just making sure and they are not exposed on the way to a potential.
To a person who is potentially infected so we.
And we improved a lot and a lot on this matter of Indian employees are pretty satisfied by this.
And you know and we are we.
And we will we will we will apply all of these protocols up to the momentum that for Bob.
The year to reduce will advise that we don't have to.
Okay.
Very comprehensive and good answer I appreciate that thank you. The other one I think I'm just trying to clarify something with your corporate administrative cost two quick things there.
It went up 13, 6% or two and a half million to $21 2 million. It looks like this is pretty much and increase in salaries and benefits do simple.
Alrighty, a termination expenses, but he was also offset by some share based comp.
Nonetheless, youre still looking at $18 million to $22 million for 'twenty and 'twenty, one and so the midpoint and that's $20 million first of all is the the.
The cash versus noncash is that and offsetting thing or is that on an accounting thing or what am I missing.
I hear Ya and I don't think Youre missing anything.
And you're Bang on and in 'twenty its Matthew Quinlan here in 2020, you're right there were certain termination expenses.
And then pursuant to those employment contracts.
For availing that wasn't.
When those officers left there was a certain and forfeiture of of their rsum and deferred comps and there was a much lower noncash component.
Going forward with obviously.
And we'll have guidance net for this year from 'twenty to 'twenty and 'twenty 'twenty, one of $18 million to $22 million of G&A there'll be higher component of RF rsum and deferred comp.
Because that is a.
Yeah.
And Theres, no forfeitures, but commensurately theres, a lower cash expense.
Does that help answer your questions.
Yes, yes, it does and it actually answers my next question as well and then I just have the just to follow up on that why do you still expect $20 million, because presumably that termination stuff was a onetime thing.
Hey, Youre right, but the forfeitures, we're actually quite quite large and.
And on page 27 of our MD&A.
There is some further details as to as to the quantum.
So just.
And just looking for that page right now the several million dollars was the effect on the on the <unk> expense.
Okay.
Got it.
Perfect. Thank you very much and I'll get back to you and I appreciate your answers.
Thank you.
Our next question comes from Anita Soni of CIBC World markets. Please go ahead.
Hi, good morning, everyone.
My first question is with regards to the reserve reconciliation that you guys provided versus what was no.
In 2020, and can you give us a breakout of what was and.
What was attributable to mining outside of the reserve and block and what was attributable to.
And so dilution excess stope dilution.
And then secondly on that would be.
<unk> announced that cost stope dilution. So what are you seeing in terms of dilution and what are your targets.
Thank you in terms of dilution.
And the reserve, we we plan on.
90%, 94% of money and recovery and 12% of dilution for.
For 'twenty, and 'twenty and turbo, if money and cost recovery, we are at eight three.
And and terminal dilution, we are 18 to so basically it's a.
The increase and dilution is explaining and part of it.
Okay.
Yes, and then and.
And so yes, that's explaining army.
And so would you say, it's more stope dilution on mining outside of the reserve envelope that would cause the 6% off on the grade.
And we'll see a 50 50.
Okay.
And then in terms of go forward or do you expect that similar types of dilution.
And going forward and 2021 is that what you guys are a factor and then when you took down.
The prior life of mine plan had $8 six for this year and then when you guys put out guidance and thank you for this call from the first opportunity perhaps talk to you about the guidance here.
And the.
And the grade went down from seven from $8 six or seven 5% to $8 five so I'm, just trying to and again I understand and understanding of the implications of that beyond 2021.
So I can say to you that for the dilution, we are still forecasting and hours of 12.
They don't want to lower the bar in terms of quality, so it's and.
And we are working really honor to lead to improve on dilution.
And in that way.
But we're still planning, 12% dilution going forward.
Okay.
And then for then why why was there a change and the reserve grade from what the life of mine plan had.
And given us what we should be looking for in 2021.
Hi.
And mainly sequencing and Utah.
And <unk>.
And and.
Yes.
And when we I have repeated this a few times and all that.
There is a difference between guidance and and the reserve and all.
And.
The reserve is.
Is one thing, but the guidance. We we always you know we have a variable on our body. So we guide we guide 775 to $8 five last year was seven five to eight six.
Why not eight six we could have used $8 six of this year, but we said seven five to $8 five because.
We know we're going to have variability and.
And I've learned in this business over the years that it's better to under promise and over deliver sales.
I wouldn't link that the guidance that a reserve that's that those are two different things in my mind.
Okay.
We do have to have something done just try to put us on models and usually the 43, one on one as you look to but I'll leave that point and second question and final one and then I'll leave that for some other people ask questions.
In terms of the cost.
Q4, the cost were up.
Quarter over quarter and is that the kind of unit cost range Youre looking for in 2021 and again you know are those and types of things cost unit cost and like the 210 to 15 level that you are forecast that you expect to see in 2022 and beyond or is there some kind of improvement that you'll see.
And <unk> versus 2021.
Okay. So for Q4.
For the main aspect to them and one is that we brought us lift on.
So it's and budget impact the unit cost per tonne for sure.
No matter, if that rate was higher and unexpected.
And also we have the seasonal effect on a quarterly basis for the quarter to the other one and winter operating cost for.
And our yard and then.
Summer on the year, we average one and one nine and fives so physically.
We are more or less.
Trending next year between two year to $2 15, and one on Refis.
I think if.
If you do if you do the math and Nita and you look at the cost we had and the fourth quarter.
And you will remember that we had that 10 day maintenance shut down to replace the either on the crusher on the ground. So if we had operated the full quarter.
At 3800 tonnes per day.
If you take that all day, you would have had a very slightly increased.
Increased variable cost for for reagents, and ball mill balls, and whatnot and the male but at the end of the day the cost would have been closer to 195 to 200. So if you look at the the average for the average for the between the quarter and the year, that's probably where we're going to assess.
For 'twenty 2021, and that at this point now that being said.
It's going to it's going to definitely depend on COVID-19 like and the first quarter.
We were impacted for a few weeks, we had to reduce throughput because we had people and isolation and we were running out of our operators are people to feed the mill. So so we had to reduce the throughput.
And.
And that's going to have an impact on our unit cost if we probably if we don't process.
3800 tonnes per day, but.
And with the mill that we have we have the ability to catch up so Q1, we might be a little lower in Q1 and will be better and the other quarters and and also in Q1, we have seasonality and I guess I think last time I checked we were up now to about 14 meters of snowfall that site last year, and we got 17 meters. So.
We have a.
About 90% temporary employee shoveling snow and the winter. So that's an additional cost that we don't have and the summer months. So.
Seasonality is an impact and also tonnage, but like I said, you know we had a slight impact and the last couple of weeks because of the Covid. If if we get back and were not impacted by Covid.
And I know anywhere between now and if you take the average between 195 and 2017 I think you are.
And youre going to be in the ballpark.
Okay, well, Luckily and backend loading with this gold price environment, and Q1 will be such a bad thing so anyway I'll leave it at that.
Okay. Thank you.
Our next question comes from Joseph Reagor of Roth Capital Partners. Please go ahead.
Hi, guys. Thanks for taking my questions.
Good morning.
Good morning, So I'm kind of following on from a little bit of what the needle is asking maybe asked in a different way.
Looking at this year's guidance to seven five to eight five.
And grams per ton is that.
It's another way of looking at that that you would expect something between you and.
And a 5% and 100% reconciliation.
Looking back at you said 94 for last year is that kind of what the guidance is based on or is it you know 80 to 95 like how would we think about that and a reconciliation kind of way.
No. The ASO said the seven five to eight point for our guidance is not based and it's based more on sequencing.
It's based more on price.
The stock is ready to be mined because the other one is backfill on up so it's more a question of sequencing I think if.
If you look for up to.
To me.
The reconciliation of 94% is for this year is excellent and it's in the range of the reserve and or if you are you can and as you can be and the range of 5% to procure received for reserve it's excellent.
And we have a horror body that is having a negative effects from the variability.
Because it seems to get to so in this regard we're not expecting.
For years, Inc. We are and the quake and so that's the sweet spot and turbo for reconsideration and dermis done in term of and there were agreed and.
I think the trend is to maintain more or less and we expect and next year, we're going to be better, but you know and I think we are where we are we may not be the.
<unk> are not moved at all on.
The reconciliation sector.
Okay.
Okay, Okay, so youre not like discounting a flat percentage either its.
And it's just one that's what's in the mine plan and depending on which stopes you opened.
Yes.
Okay, and nowhere more and talk to you and we spoke to you that we mined 60 million and sold this year and you know and.
It's a lot of scope for the lower tonnage of 3800 tonnes per day. So it cannot happen and next year, we will at year end or beginning of the year, we will shift from sold from one quarter to another one and it will affect so it's more of a sequencing them and try to earn and something else.
Okay and.
And then on the debt front.
And he goes for this year for further debt reduction and.
And specifically or any thoughts about refinancing whats left.
And a wall rates are low.
Well Matt.
And that can give you some more color, but as we mentioned last year.
One of our priority is to is our priorities is to reduce the debt.
But we want to work and the first half of this year to come up with a good plan, which is not finalized right now, but we want to build our plan and Matt can give you a little bit of color on that.
Thanks, Joe Yeah, we have a very strong bank group, a very supportive bank group.
We have a.
Largely undrawn revolvers youll see and.
And our financial statements that matures in 2022, so we are going to be looking to refinance the revolver and we also have the convert due in March that we need to address as part of that that strategy, but we're certainly not being complacent about refinancing we have a and action plan and we will update the market.
When that when that is done.
Alright, Thanks, I'll turn it over.
Thank you.
Our next question comes from <unk> Habib of Scotiabank. Please go ahead.
Hi, Jack and banking team and thanks for taking my questions.
Good morning.
Good morning.
Just a couple of questions have been answered so just a follow up question on maybe.
On <unk> question on Covid impacts.
Great to hear that you guys reiterated your 'twenty and 'twenty on guidance despite the.
On the Covid challenges that you guys faced in February and now are you noticing any impacts to your drill campaign or underground wealth and kind of going into the next couple of quarters based on what you what you saw it and and February.
Not really because and when we preordered.
Zoellick explained we are we were short of manpower because.
Fewer and resolution and some others what other available to reach the site.
We prefer to rise and our strategy, they're bullish on drilling and development, mainly because if you are on an underground mine and you're losing opportunities and development and production and drilling.
And a catch up so basically actually we maintained the pay the bill.
The accelerator and.
And.
The pace and the.
<unk>.
For the development and approach and drilling and we slowed on the mill as shown zone.
Explain this mill is is really efficient.
We can process flows and the more than 4000 tons for the easily so we will be able will be and the possibility to catch up going forward. So basically we are bullish on ourselves, we mitigate our risk to keep the developer and keep the provision and.
And before the approach on drilling on the forefront.
And we did not slow down more than expected the extortion drilling too because it's critical and crucial for us, but we know that we are we can process more of going forward and we can catch up on a timely manner.
Okay, that's good to hear.
And just my second question is on I believe you completed about 72000 meters of infill drilling.
In 2020 can you provide some color on this campaign was kind of in line with you on expectations and has that campaign and kind of provided any improved visibility.
Yeah well.
We got a.
And.
And so far the results.
<unk> our expectations.
And what I, what I can tell you as well.
What day one of the challenges that we have right now is when we when we drill and we take a sample.
Because our.
Lab at site is is <unk>.
Basically too small.
And on all the samples, we generate and we have to send samples outside to Altay lab and so right now it takes anywhere between 10 and 13 weeks for us to get the assays back.
Which is which is a which.
Which is.
Big Challenge when you you have to make decisions on where youre going to develop and where youre going to mine and.
So that's one of the reason this year, we're investing money and building a new lab and a proper lab that will be able to handle all our samples and give us a you know.
GAAP results within the one to two weeks instead of 10 to 13 weeks. So we did quite a bit of drilling in 2020, but we only got the results for maybe let's say I guess half of what we drilled we're still waiting for the other app. So.
The labs and in Canada, right now on and Vancouver, Theres labs that processing samples from Quebec, and Ontario, and some of our samples go down as far as per route to get to get the analyzed.
So it's a real it's a real challenge it's good to see the gold price that I, but everybody is drilling right now.
So it puts a lot of pressures on on on lab. So so with we expect to have our new labs operational and the second and the third quarter at the beginning of the third quarter. So when we get there we'll have a much better turn around.
And be able to.
Digest, the information and faster and that's one of the reasons that we decided not to update our resource and reserves. This year, because we drilled a lot last year, but we didn't really have the results from the drilling. So we will be on a much better place at the end of this year and that's why we were planning to update our mineral resource and mineral reserves.
In 2022.
Got it okay.
Thanks for that Jack and that's it for me.
Thank you always have a good day you too.
Our next question comes from Don Demarco of National Bank Financial. Please go ahead.
Oh, thanks, so much for taking my call Hi, Jack and team.
And great Phase one expansion drilling results released yesterday morning on match.
And those from the North block impressive grades over 2500 grams per ton.
Alex Festival are these high grade zones, and we know that they are within 300 meters and the pit shell.
Yeah, Don if you.
If you look at the sections and Ed.
Drawings.
And our at <unk>.
Favorable with the with.
And the relief that we issued yesterday.
And I guess it's.
Right there it's right next to the right and exited the development what were the North block is drilling outside of the resource shell, but basically what we're drilling there are extensions of.
The domains of the day, Okay, and we're starting to see new domains appear.
Appearing and it's the same style of mineralization. So the results. We're getting so far are very much in line and what the what we get at the U K. So it's early days, it's only a few holes.
We're going to get the results of the second phase and Q2, and then and on and we're going to do a phase of drilling which has already started but that's.
It's exciting it's head on when you see numbers like that and and you see that.
You are very close to your existing infrastructure, it's an area, we could access and a fairly easily but first thing and we have to do.
Before we rush into the zone with a five meter by five meter diamond drill hole were going to have we're going to drill and what.
And we're going to try and not to repeat the mistakes of the past and we're going to drill and understand what we have and then we're going to go in there and position ourselves properly and and get going with mining but.
And I am credit I'm pretty confident this is going to turn out and do a very good zone for us.
Yes, that's great and maybe just continuing on that than certainly the grades are high and what about the.
What are your thoughts on the intercept with are those also consistent with some on some of what you've found lagoon and the reserve areas and Valley King.
Yeah, well, it's a it's fairly typical.
And.
Yes.
Yeah, what we emphasize is the high grade, but around these <unk> zone, there's a there's.
A large halo of lower grade material.
And it all between I don't know between two and five gram per tonne and so when you blend everything you can you can develop significant size stopes, but that the first thing we have to do is do all the drilling understand what we have.
And do the interpretation and then we can start to build the corridor that we want to mine within those domains.
Okay, Great and then and when I look at the scope of your 2021 program I don't see North block lifted like in light of these results that you released yesterday will you modify your 'twenty one program to go go back in and do a little bit more drilling there.
And on what we have.
And then and that if there is a long and there's a section that we.
We show and the presentation and you can you can see that we're going to have that's all the areas that we'll be active and 2021 for the 195000 meters of drilling and we're going to do and Nord block as part of that and so we drill phase one and phase two in 'twenty and 'twenty and we Havent started the free.
<unk>, three now and Nord block, which is.
Higher fans and longer haul so that that's going to be done this year.
As part of their full that the program with all the other zones that we're going to be drilling and 21.
Okay, great maybe.
And maybe just shifting gears on too.
And obviously your strategy this year is to increase the net.
And the drilled off inventory.
How do we know if you're making progress on on your objective here I mean, what is it.
Something that is just looking at maybe reduced production and grade volatility quarter over quarter or is it going to take several quarters to really know if you're progressing.
But from our I think what should we look for.
Yeah, there's two aspects to this.
I think first the first one has to look at our drilling inventory at the end at the end of Q2 Q3, I think we were 150 or 153000 tons of inventory and patent and others.
And you were 256, so we went from 150 to $2 56 at the end of the year and.
And then on we're going to continue to grow that inventory and our objective as Pat said is to get to 400000 tons by the end of Q3.
As we build that inventory I think what what's going to be different for you and for you guys. In particular is we're going to be able to and we're not quite there yet, but we're gonna be able on when we do these earning calls to give you a a very.
A good understanding of what's coming for the following quarter, and that's when and where youre going to see that we can weaken and we can shoot we can predict we can forecast what's coming for the following quarter a lot more accurately.
Okay.
Okay, Great and just maybe my final question, perhaps related to this so like as you drill off the strength of this inventory and you've got this mill that can run above nameplate.
What about making a more substantial increase to the mill throughput what are the bottlenecks. There I think it was related to the tailings, but if you could remind me what that what that is.
Well there is two major items that.
And that we need to think about that number one it's our permit.
And we're capped at 1.387 million tons per year. So if you divide by 365, it's 3800 tons per day, but the capex not the daily cap its a yearly cap.
Order to increase throughput, we would have to go for a permit amendment and in order to do that and we want to make sure that does.
The lake will be able to handle additional volume.
So we so we're doing we're going to do technical studies this year and on the flip side of that it's to make sure of demand and supply we have.
We have one the ramp we have a limited number of vehicles, we can put in there and so we need to think about the logistics and and and the productivity and whatnot to see how far we can we can push the mine to be able to increase throughput.
Okay. Okay. Thanks, so much for that that's all for me.
Okay. Thank you Don.
Our next question comes from John Tumazos of John Tumazos, very independent research. Please go ahead.
Okay.
Hello.
Hello, and good morning, John I have a hard time to hear you John.
Yes.
Okay.
Oh shut off the other cost please I'm sorry Chuck.
I am doing my best.
Jack.
And what's your body.
Stock Youre doing great and your stock is 10 times earnings and Tara and Kurdistan and almost.
[laughter] IRA and John that's a good that's always a good question and I are our priority right now with our cash is due to focus on our depth and focus on all of that the nice thing is we want to do to improve the.
And the value of the project and that drilling and whatnot and.
We're not just there yet at the point, where we can start to make decisions on buybacks stock our dividend. This. This this is a while first it's not it's not like it's a board decision.
As for day board to make that call but.
I would say that.
Definitely that's something for this year, it's going to be something.
And maybe where maybe we're going to start to think and 2022.
And.
Hi can I ask another question, Chuck and I might be overreacting to the freeze and the press release and improve the understanding of the ore body.
We've mined about 1 million ounces of gold and for a 5 million ounces of ore and some development mark very close to the or.
So you have a pretty good bulk sample by now and I understand the ore body.
Is it really the case that the ore body is variable. It is the way God made it maybe got and haven't doesn't understand the ore body well.
Should you state your reserves as a range of grade rather than a single point.
I think the Ni 43, one on one rules for sort of a fantasy deterministic single point numbers are off and not realistic and give your annual guidance is a great range and gave your cash flow guidance is it grade range and just admit that it's a hard ore bodies estimate.
Well it is.
And of all of everything you said John.
And God, and then and then and and the regulation.
It is a hard body.
A difficult our body to estimate.
And.
Yes, we are buying quite a bit and that ore body. We have a few a few years of mining so far and we're still learning about it but we truly believe here that with the work we're going to be doing this year and and all of the drilling we're going to do and there's all kinds of other technical work that we're doing we're not just doing drilling.
Looking at all the data and everything we've learned over the years.
We feel strongly that when we do our 2022 update and we're gonna have a much better understanding of the <unk>.
We're going to be able to to put together a much much better resource reserve update than what was done and the path.
I have great confidence that you'll do as much as God could do.
Thank you Jeremy.
Hi, Matt.
Thanks, John.
Our next question is a follow up from Anita Soni of CIBC World markets. Please go ahead.
Okay.
Hello and nature.
Sorry, I was on mute there.
And just to follow up in terms of the dilution target for <unk>, how can I get some color on I know youre still targeting 12, but can you talk about how youre going to get it from the current levels back up to the 12% or what was like what will change over the course of this year.
Hello Noah.
And we have a lot of things that we're working on and actually were working on the on the quality of the base. So we can improve the pace. You have also the fact that you can mine over your pace and third to mine under your base through.
We have the drilling that we are working virtually.
We have the undercuts and.
We also what we are what we will implement this year is we will monitor.
And precision of our blessing holes.
So that's something that we will we initiate and allows these.
So basically it's all and also we are we are we are using our technology techniques for blessing, we're using electronic detonators no matter of that we will review the timing so we.
We are working on with where we stand and I actually and it's also and Zurich relationship.
And it will depend on the majority of our stopes or are they and involved but they are heating degrees. We have some war maybe more on 70.
So we are we will invest to get more on the cable bolting on being able to reduce the dilution we have and the economy.
Russia and all to do this is what we will we will assess.
And the basically it's what it is in terms of recovery.
There is another aspect too.
We are working on on this with the recent purchase of local and with a remote jumbo to drill and blast the.
The big piece of rugged outdoor and remaining and the stopes that we cannot extract because we remotely.
Rewards growth, who drums to finalize the cleanup of the stopes and so the fact that we have this new equipment improve also the recovery on our sites.
It's not a it's not one action it's a it's not a problem. It's a robotics and is coming with a lot of combined solution and.
And we are actively working on both actually.
It goes for us and Sabra <unk>.
For the recovery for Us and redo the division is essential because we have others.
And there's other screens and we have a I agree and ore body. So we are we want to prune the quality before quantity.
And that's what is important and lower case.
Yes, thank you very much.
Thank you. This concludes the question and answer session I would like to turn the call back over to Mr. Pat on for any closing remarks.
Hey, Thank you everyone for dialing into our earnings call. This morning.
We appreciate all the comments and questions and the more interesting ones.
We look forward to updating you in the coming months and.
I'd like to remind everyone that.
We are living under unprecedented times and.
It's important for everyone to follow the guidelines and the restrictions and to avoid.
Any major health issues.
So once again, we would like you to do anything.
We would like to thank our team for their dedication and hard work as we continue to operate Bruce shack without everyone's effort nothing would be possible, so stay safe and have a great weekend.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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