Q4 2020 OceanaGold Corp Earnings Call
Ladies and gentlemen, and welcome to the Oceana Gold's 2024th quarter results and Investor Day webcast and conference call. At this time all lines are in a listen only mode, but following the presentation. We will conduct a question and answer session and if at any time during this call you'll be quite immediate assistance. Please press star zero for the operator.
This call is being recorded on Thursday February 18th.
Five P M Eastern time, and I would like to turn the conference over to Sam Poser. Please go ahead.
Yeah.
Sylvie good evening, good morning, and welcome to oceanic Gold's 2020 results and Investor Day webcast and conference call I understand from <unk> Senior Vice President of corporate development for Oceana gold.
Joining today by members of their management team, including Michael Holmes, President and CEO, Scott Mcqueen, Chief Financial Officer, Sharon Flynn EVP sustainability, Jim Whittaker Executive General manager of the Haile operation.
David way.
Executive General manager of New Zealand, and Philippine operations, Craig theory, EVP exploration and Marc Cadieux, Chief Development Officer.
Before we proceed note that the references in this presentation adhere to international financial reporting standards and all financial figures are denominated in U S dollars unless otherwise stated.
Also note that the presentation contains forward looking statements, which by their very nature are subject to some degree of uncertainty there can be no assurances that our forward looking statements will prove to be accurate as future results and events could differ materially.
I refer you to the disclaimers on the forward looking statements in our presentation.
I'll now turn it over to Michael Holmes, President and CEO of <unk> Michael.
Thank you Sam.
Good evening, good morning to wall.
Hi, everyone is staying healthy and thanks for joining us today to review, our 2020 results and outlook for the company.
Turning to slide three delivering on our commitments is that mandate.
This includes executing on our operating plans, making prudent investments and being a responsible gold mining company.
We are excited about our future net long term vision for shareholders and this chart says it all increasing gold production lowering costs and growing margins in excess free cash flows.
We expect to bring online three new underground mines and expand our existing open pit operations.
All in geopolitical stable jurisdictions.
What's also very exciting about this chart is that we have a significant upside potential as a game changing prospect me why he fireeye Keira Paula deposit known as W. K P.
He's just outside this five year plan and we are looking at opportunities to bring it into this plan.
Additionally, we have made good progress at the DPI and are committed to restarting the operations once the FTAA renewal is finalized and thats, bringing it into the plant.
These two potentials are not included in this outlook.
All of this slide us.
Turning to slide four.
And before we jump into the outlook, we reflect on 2020, where we ended the year with a series of positive outcomes and developments.
We achieved several of our key initiatives, while navigating and operating environment complicated while the effects of a global pandemic to.
To ensure we stayed on track to deliver on our commitments both from the near term and the long term.
We delivered on our revised guidance with how delivering an exceptional fourth quarter, despite managing the ongoing external factors.
Wahid assessing restarted at the end of the year, and we announced a couple of Dicey Guy we achieve first gold production at Martha underground, which continues to ramp up nicely.
Adding to an already robust fourth quarter, we hit key milestones for our growth projects through out the year and successfully strengthened our balance sheet to ensure delivery of projects on optimal timelines irrespective of the DPI status.
Moving on to slide five.
The health and safety of our workforce is Paramount and we continue to drive a strong safety culture across our organization.
Although our health and safety record is one of the best in the industry, we strive to do even better.
The COVID-19, global pandemic impacted all of us personally and professionally and.
And I commend our team for their agility and commitment to safety to the extent that it was in our control.
Our protocols kept at work aside from alongside.
And we will continue to have these stringent safeguards in place for the remainder of the year.
I'll now turn it over to Scott, who will go through the 2020 results out of you. Thank you Scott.
Thank you, Michael and Hello, everyone.
As Michael said the next few slides summarize our fourth quarter and full year 2020 financial results.
Pleasingly, the fourth quarter was our strongest quarter of the.
Delivering approximately one third of their full year production at the lowest cost.
Hi, adult styles from both <unk> and <unk> combined with the resumption of production that why he delivered $169 million in revenue from $61 million EBITDA in the fourth quarter.
More than four times that recorded in the preceding quarter.
For the full year, just over 310000 ounces sold.
Aligned with our higher average annual gold price generated just over $500 million in revenue and $130 million in EBITDA.
<unk> transitioned to a state of operational standby during the quarter, reducing holding costs materially.
During 2020, we didn't say $36 million, including $9 million in the fourth quarter to restructure the DPI workforce and maintain the asset and the state optimal state we continue to progress the renewal of the S. T I E.
Net profit was recorded in the fourth quarter of the spot noncash headwinds, including unrealized currency translation losses, and some charges, reflecting enhancements to our final rehabilitation plans it briefly.
However, based on the results for the first three quarters on the full year, we recorded a net loss of $150 million, which included the aforementioned DPA, a holding cost plus the $18 million impairment charge previously recognized.
Yes.
Small negative operating cash flow reported in the fourth quarter largely reflects the reversing impact the 36000 ounces physically delivered into the gold prepay arrangement during the quarter.
Along with an $88 million tax payment in respect of Air New Zealand operations.
That said the full year operating cash flow of $199 million was relatively unchanged year on year.
Investing cash flow reflected the capital plans to the the decrease year on year, primarily due to lower capital spending.
Plus the sales of non core equity investments and other surplus assets undertaken to enhance liquidity in 2020.
Cash from financing reflects the $50 million debt drawdown in the first quarter and the price stays from the issuance of shares settled in the fourth quarter price net of finance lease activity.
Turning to slide seven from that capital investment.
At 2020 capital investment program focused on progressing our organic growth pipeline.
Fourth quarter capital expenditures totaled $72 million, while either half of which was allocated to growth investments.
<unk> $36 million.
Packing infrastructure started the haile expansion from $6 million to $8 million at Y E.
Martha underground development continued.
Totaling 2300 meters during the quarter.
For the full year growth capital investment totaled $150 million and this was primarily divided between the aforementioned growth initiatives the tile and Hawaii.
Exploration spend titled $23 million for the full game day.
A major factor, saying why he district with 28000 meters of infill and extension drilling were completed during the year and continued to yield very strong results.
Turning to slide eight.
Which provides a snapshot of our balance sheet.
As at December 31, our total available liquidity was $229 million, including 179 million cash from net.
Debt stood at $134 million.
As previously discussed we have been actively managing our liquidity in response to the suspension of operations at the <unk> as.
As well as a near term risks associated with the COVID-19 pandemic.
In 2020. This included executing the gold prepay arrangements to re price all in better Alon operating cash flow with a near term growth plan.
The wealth reported equity rise.
And finally in December the refinancing of our revolving credit facility, which increased to $250 million with a maturity extended from 2021 App until December 2024.
After having taken these steps we believe we can now move forward with confidence and commitment to deliver a promising value enhancing growth projects, while at the same time retaining their full value and optionality in the hands of the shareholders.
The Nathan we are prioritizing reinvestment of cash flow into a high margin growth projects, which we represent.
Represent highly attractive investment returns and will drive long term sustained value for shareholders.
As we move through this period of investment net.
Production margins increase forecast from shifts to allocating free cash flow to shareholders and debt.
I'll now turn the presentation over to Michael who will provide additional detail on the company's short term and longer term capital.
Thanks, Scott and moving on to slide nine.
We're excited about our five year plan and beyond.
We are working diligently to drive shareholder value by investing in what we believe to be one of the best organic growth opportunities in the industry.
The acquisitions, we made at the low point of the gold cycle have allowed us to focus internally to drive value.
As Scott just cited our ability to drive long term value for shareholders is predicated on the prudent capital allocation and maintaining the optimal balance sheet structure to fund organic growth.
Turning to slide 10.
The drive for long term sustainable value for shareholders is underpinned by excellence in ESG performance and a responsible marketing practices.
Delivering on our commitments is a core value price you're on a go and for us that means achieving at 'twenty 'twenty, one guidance as well as progressing organic price on budget and on time.
In addition, restarting the DPI remains a key focus for ethane.
Through the 2020 festive holiday period, we had several meetings with the Philippine government agencies upon the direction of the president to finalize change related to the FTAA renewal.
The discussions were very productive and we remain cautiously optimistic of rain dolson true.
The precedent for approval.
Before we go into the day trials of our 2021 expectations, Sharon Flynn, our EVP of sustainability.
We'll take briefly take you through our top rated ESG performance and focus.
<unk> has over 20 years of experience designing and implementing sustainability strategies with global companies. Thank.
Thank you sure.
Thanks, Michael.
Great.
It's a pleasure to be here to discuss the subject.
<unk> net income.
Yes.
Turning to slide 11.
We have operated the responsible bank loans for the last 30 years.
<unk> robust ESG across the company.
That's correct yes.
Yes.
These key areas, including climate change.
Our city human rights and the responsible gold mining principles.
We are progressing our approach to climate change with the development of more classical targets related to this very bullish.
Sure.
This concludes that commitment.
We reported on our climate change more in line with the task force on climate related financial disclosures, otherwise known as gcs.
By the end channel.
Sure.
This year, we are working to establish interim 2030 targets with a focus on Decarbonising mine production clean net.
GNL offsets.
Thank you.
And physical risk assessments to identify the impacts of climate change on our land spend the rest of the assets and infrastructure.
Implementation of our biodiversity standard is a key focus for us from.
From 2021 operation.
Thank you.
And management approach is consistent with our corporate standard which connects to no net loss in areas of natural habitat and net adds with critical habitat.
In line with our human rights policy and global Best practice.
And how we respect and protect human rights across our operations.
One day.
Estimates will be finalized from Q1, and we will report the results in our 2020 sustainability report.
Outlets.
At the end of 2020.
Received assurance on our first phase of compliance.
Council's responsible gold mining principles on.
From 2021, we will continue to progress towards the goal of 100% compliance by the end of 2022.
<unk> and compliance will be externally as Sharon at the corporate level and yes.
Our overall ESG performance has been recognized by the major ESG ratings agencies and most recently from the a rating with MSCI and an outperformer ranking by sustain Olympics, putting us among the elite ESG for farmers in the mining industry.
We are also ranked fourth overall in the industry through the Bgs third party reporting methodology.
Our focus is to ensure that we remain on the forefront and global best practices. When it comes from the sustainability performance.
With that I will turn it back over to Michael.
Thanks for that sure.
And moving to slide 12, our organic growth.
Over the next three years, we expect to deliver three new underground mines and attractive jurisdictions, all of which will leverage existing infrastructure.
Currently we look forward to expanding existing open pit operations at <unk> and <unk>.
Two of the three new underground mines will come online this year in New Zealand, Martha underground, which we achieved first production in January ahead of schedule.
And Golden point underground, which will achieved first production in the fourth quarter of this year.
At Haile, we began preparing ourselves to commence total development of the Haile underground in the second half of this year with first production expected in the fourth quarter of 2022.
At W. K pay although it is not contributing to the five year plan, we are looking at opportunities to bring it forward in a responsible way.
<unk> represents a very good opportunity to develop a new high grade low cost underground gold mine that will leverage the existing process plant at ball I hate.
Permitting and exploration is ongoing.
Setting the stage to realize the full potential of the greater Wahid district, well into the next decade.
Turning to slide two day.
Our lives right again, how robust our organic growth pipeline is while many of our peers are growing through M&A. Today, we are growing significantly through prudent investments in our opportunities that leverage existing infrastructure personnel and our track record as a responsible mining company.
To that end, we are forecasting 75% high production and 25% decrease costs over the next five years, representing not only a production growth but margin growth.
We also expect that growth investment to decrease over the next several years as we bring the organic growth projects online.
Meaning we can then consider the allocation of capital to shareholder attendance and deleveraging the balance sheet.
Turning to slide four day.
Most specifically on 2021, we.
We expect 20% higher production at lower all in sustaining costs from 2020.
With strong production from Hyle and Wahid.
Our guidance has factored in risks that we continue to face across the company.
Specifically related to the ongoing global pandemic, which is still being actively managed particularly at how we.
We have layered on additional risks related to whether the lives at how given the year. We've just had last year.
Resulting in lower mining movements and reduced production.
The good news for this year is that mining of the high grades at Haile is slated for the first half of the year.
We have a healthy capital budget that will sustain production levels and allow for growth over the.
Over the near medium and long term sub.
Subject to any potential to accelerate the wip projects. We believe this she is at peak capital year.
Particularly for growth capital as we bring on a significant organic growth projects over the next few years.
Exploration will continue to be one of the main drivers for growth, particularly in New Zealand, where we see multiple opportunities to convert inferred resource and extend mineralization, especially at W. K P.
I will now turn the presentation over to Jim Whittaker, Our executive General manager at Haile operations to go through Hal. Thank you very much Jim.
Thank you Michael.
We have made significant improvements in mining and milling productivity at Haile this year as well as step changes and retaining and training personnel in project development.
We continue to view hail is plus 200000 ounce producer at a life of mine as pick up less than $900 per ounce.
We're on the right path and acutely focused on ensuring hail cheez its full potential, particularly as we execute on development of our underground opportunities.
Before we review the 2021 outlook I would like to point out that our focus on health and safety has gone very well.
Amidst the global COVID-19 pandemic last year, we cut our accident frequency by half and delivered a record year of safety performance.
The health and wellbeing of our employees is a top priority for us and we remain focused on maintaining a safe operating environment for our workers and contractors.
Looking ahead to 2021, we are focused on delivering on our commitments and our 2021 guidance was developed with that in mind.
We expect to produce more gold year over year at lower ASIC.
We have provided you with more granularity on the operation to Liberty These expectations, including our estimates of mining and milling rates grades and recoveries, which are appropriately conservative given the last two years of operations.
Turning to slide 16.
What I can share with you is that 2020 was a challenging year.
Was an extraordinary year from a weather and health perspective, and sometimes the best laid plans don't work out as seamlessly as you would like.
<unk> recorded rainfall that was one of the highest on record and 25% higher than the 35 year average.
In addition, the global COVID-19 pandemic set in and at Rabbit, South Carolina and hails local community.
Nearly all of our 500 plus workforce.
I spent two weeks in precautionary quarantine.
This is in line with our Covid management policies to limit the spread of the virus in the workplace.
Out of those 500, plus precautionary quarantine 63 positive cases of Covid have been diagnosed.
Thankfully all have recovered and notably our strict protocols in place have prevented the spirit at site thus far.
The weather and COVID-19 disruption in workforce resulted in haul truck utilization rates of 57% of available time in 2020, which was much lower than our expectations for the year.
And we now have a mine plan with <unk>.
It is extremely sensitive to us achieving our mining advance rates.
That said, we are focusing on what we can control and we have the right work streams in place to mitigate these risks moving forward and deliver on our current and long term expectations.
For example, when it comes to weather.
Constant focus on haul roads ramp design improvement pit dewatering tactics that main bench stamps has dramatically improved our ability to work through inclement weather periods.
This is reflected by the steady increase in mining rates display despite the excessive rainfall and absenteeism.
And through our workforce turnover rates have decreased significantly we continue to actively recruit to mitigate this turnover and illness related absenteeism.
Covid continues to be a challenge for us in 2021.
As of early February we have 24, new positive Covid cases, among our workforce and we continue to manage this risk and to date, given our strict health and cleaning protocols in place we have prevented the spread of Covid at site.
Turning to slide 17.
Despite the impediments, we faced in 2020 the team has kept the operation moving forward in all aspects of mine activity and project development.
We achieved total mining movements of 38 million tons in 2020 up over 50% from 2019 and concurrently reduced mining cost by 25%.
The commissioning of the 19, new Komatsu 730 trucks helped with this initiative.
And effectively increase hauling college capacity by 30%.
With reduced impacts to operations from external factors, we would expect to move a lot more material, which provides upside for production and unit costs in 2021 and beyond.
We attribute ongoing improvements in mining productivity to haul road construction increasing truck loading.
<unk> constant availability and improving manageable utilization.
As Youll see on slide 18.
Process plant milling rates and associated costs.
I have also improved significantly.
The plant's performance has benefited from the planned expansion to increase milling throughput and the installation of the ICL in mid 2019.
Full year 2020 mill feed achieved $3 5 million tonnes from the $3 2 million tons, a year before and at times, we were hitting annualized run rate of three nine to 4 million tonnes.
Recoveries also improved materially over 2019, averaging 80% at significantly lower feed grade and milling costs decreased 9% year over year.
What in circuit material proved to be a challenge for us, particularly in the fourth quarter given the wet material from more mining in the bottom of snake phase III and.
And drove down our annual average drilling rate.
However, we do not view this as an issue that we can't manage or.
For which we would have a material impact to operations.
2020 figures over prior year's results show significant improvements across the board total material mined increased.
Ore mined increased no feed increased recoveries generally improved and costs improved.
Turning now to slide 19.
Progress, we've made from improving mining and milling productivity helps us to deliver an optimized near term and life of mine plan.
For 2021 over 60% of production is expected to be delivered in the first half of the year as we complete or mining and snake phase two and reach higher grade ore portions of Ledbetter phase one.
We expect to continue development of Ledbetter phase III, and hail phase, one and transitioned or mining and mill zone phase II in the second half of the year.
The optimized life of mine plan at Haile will require additional tailing storage capacity and peg storage facilities to ensure we have match site infrastructure with material balances.
We expect to invest $60 million to $70 million in these areas. This year, while continuing to simultaneously advanced the development of the Haile underground.
Over the life of mine the capital investment will ensure hail can achieve its full potential and more we.
We envision Hale is the plus 200000 ounce producer at sub 900 dollar ASIC.
The near term capital investment supports this vision and generate attractive life of mine free cash flow, particularly through the expansion of the asset underground as you see on slide 20.
Yeah.
We finalized the optimization of the Haile underground feasibility study last year, including pursuit of a bottom up mining approach with cemented rock backfill.
Surface infrastructure contracts had been issued for construction and portal development to access the horseshoe ore body in Q3.
First stope production is on track and expected by fourth quarter of 2022.
We see an exciting underground future for hail supplementing the open pit operations and it is our desire to increase the life of the underground project through the drill bit.
Turning to slide 21.
The future of hail is underground as we continue to explore and envisage matching the underground life of mine with the open pit license line.
Transition to underground mining results in minimal additional surface disturbance.
<unk> to use waste to backfill.
The decreased need for more pegged waste dumps improved operational flexibility and extends the life of mine.
As you can see horseshoe underground is one of several underground exploration targets at Haile, which was recognized as part of the original due diligence.
These target stretch over one kilometer from horseshoe in the east to palomino in the southwest.
In 2016, we drilled off the upper portion of course shoe with some excellent results that we now have converted to a reserve of approximately a half million ounces.
Along with substantial inferred component still to be converted at deeper levels.
Significant extensions to Horseshoe also remained to be tested as highlighted on the figure on the left with approximately 64 meters at 15 grams per tonne of coal.
<unk> was the next opportunity to be drilled with a substantial inferred resource of approximately 600000 ounces being booked in early 2020.
As part of this work we also identified the horseshoe extension target formally snakes U and price these targets with excellent drill intercepts. In addition to the large conceptual target is still to be tested call at Aquarius.
Each of these substantial opportunities will be advance over the next several years.
The.
Any is in the final stage of the supplemental environmental impact statement process to expand to have operation.
We are expecting the imminent release of the draft Mcis document from the Army Corp of engineers.
The quickly progressing a virtual 45 day comment period for the public.
Yes, yes, yes will allow continued development of the existing hill footprint expansion of the TSS and pegged out and development of the Haile underground.
The day, there had been no objections by any stakeholder group to the SaaS and at this stage the company anticipates receipt of a record of decision after the comment period and completion of this process by mid year.
It's been my pleasure to share than many exciting activities, we have going on at Haile and I'll now turn it over to David way, our executive General manager for New Zealand and the Philippines to review, our Mccray's, Hawaii operations and your organic growth.
Thank you, Jim and Hello, everyone.
I'll spend the next few slides reviewing their net price and why he operations in New Zealand.
A jurisdiction that we intimately now.
And in which we are operating successfully in volume of three decades.
Beginning on the price is.
Asset that continues to be an attractive source of free cash in our portfolio.
Given the relatively low capital intensity and industry, leading mining and processing unit costs.
But 2021, we expect to increase production without guidance range between 155, and 165000 gold ounces.
At an all in sustaining costs of approximately 11 $100 per ounce.
Without any hedging at the price, we expect it to be a substantial source of free cash flow.
After investment to deliver the mine life extensions that we announced in 2020.
Turning to slide 24.
Okay.
In the second half of 2020, we announced the mine life extension, I think price, including our expectation to produce over 1 million ounces at all in sustaining costs of approximately $1 per ounce through 2028.
The development of Golden point underground and additional open pit opportunities at deep down in this mills and guide 10.
The primary sources for the extension.
As you can see we have additional open pit sequence over the next five years.
Including the stage one round Hill open pit.
Which is a smaller open pit at Ravenhill for which we do not require to relocate the process plant.
Moving on to slide number 25.
Golden point underground development is well underway with first gold production expected in the fourth quarter of this year.
Eventually Golden point underground will replace production from Fraser's underground.
Total development commenced at the end of the fourth quarter of 2020 after receiving key permits.
Receipt of these consents for both Goldman points and the open pit opportunities is a testament to our track record of environmental stewardship and social engagement in the region.
Turning to slide 26.
Our focus today is on delivering the current life of mine all sources through 'twenty and 'twenty.
While continuing to evaluate other brownfield opportunities within them at price district.
We are currently accelerating our exploration focus at with price.
Convert resources to reserves.
Better define our assets in development and deliver the enormous potential we see today.
Okay.
Turning to why he.
And the development of Martha underground on slide 27.
We were pleased to announce first production after advancing nearly 75 kilometers of development in 2020.
Okay.
First gold production was achieved at the very end of 2020, and we will continue to ramp up mining to steady state mining rates as the year progresses.
We will continue to best process in the first quarter ahead of the planned mill shutdown in March to install a new segment will show.
Which remains on schedule for completion in late second quarter as originally planned.
Yes.
Once back on we will have continuous production.
At Martha underground.
As previously forecast, we expect wahid to produce between 35 and 45000 ounces of gold in 2021.
Ramp up of gold production will continue and we expect a steady state production rates of 90 to 100000 gold ounces per year.
Turning to slide 'twenty earnings.
Development of the Martha underground continues to progress on budget and on schedule.
And in our view this as a producing assets with significant upside potential.
Following our successful 2020 infill drill campaign.
We converted inferred resources and increased margin indicated resource at <unk>.
36% to 1 million ounces of gold grading five two grams per tonne.
We also revised the operation was exploration target two five to 7 million tons with a grade of four to five.
Grams per tonne gold.
To date, we have added ounces to the resource at an all in cost of $20 per ounce.
We expect to drill an additional 27000 meters at Martha underground with a focus on resource conversion and extension in 2021.
As well as complete a feasibility feasibility study, including an initial mineral reserve while the end of the first quarter of this year.
Turning to slide 29.
Located 10 kilometers to the north of why he will.
We continue to believe that Wi Fi will grow into a multi million ounce deposits and our recent drill results from the 2020 program call like this.
W. K P is a major discovery with a resource of one 1 million ounces grading between 12 and 13 grams per ton based on currently 35000 meters of drilling thus far.
In 2020, the company completed approximately 4000 meters of extensional and infill drilling of the east scrubbing volume to further delineate the resource.
The Scribing, Brian is only one of three currently identified major mineralized structures at W. K P.
Drilling to date is identified in excess of a thousand made a strike and a current vertical extent of at least 200 meters.
The east scrubbing buying system remains open in multiple directions.
Okay.
Our next mineral resource update for W. Tightly is expected in mid 2021.
Other.
It is important to note that we believe that drilling at W. Kegley will continue for several more years and beyond including throughout production.
Thus far we have added ounces at an all in cost of approximately $17 per ounce similar to the team's performance to date at Martha and.
And in 'twenty and 'twenty, one we expect to use two rigs to complete at 10500 meter drilling campaign with a focus on infill drilling at the east grabbing brine and extensional drilling for all three major mineralized structures at W. P.
Okay.
Moving on to slide three.
As shown on the slide the results consenting process is a critical path item to advancing our organic growth projects. It widely.
The results consenting process is highly prescriptive, which is a good thing.
More importantly, we have intimate knowledge of it and the regulator along with the stakeholders no oceana gold as a successful responsible mining company that takes no shortcuts and is engaging with key stakeholders throughout the permitting process.
We kicked off the considering price last year with the side of stakeholder engagement and feedback processes.
Along with finalizing the scope elements and assessment of project index.
These engagements and is an assessment activities are expected to continue into the first half of 2021.
Leading to a formal consent application submission to the <unk> district, and Wildcat a regional counsels by early 2022.
Okay.
This is followed by a four month open comment period, when the regulators review and engage on all submitted concerns and ultimately the council will submit its recommendation with a hearing and decision over the next five weeks.
Once a decision is made there is a six week appeal period, when anyone who has been involved in the process can appeal the decision.
From there any appeals chemical of engagement between the company and the appealing party.
If there's no resolution in this way in the mess. It goes before the environment Court of appeals to further hearings and a decision.
This process could take up to 12 months.
Our base case assumption is based on the permitting process proceeding to the environment growth.
For the full duration of 12 months and puts first production from W. Tightly at 22006.
We are investigating opportunities, where we can responsibly bring underground operations at W type fee into our five year plan.
Whenever wip is in production it will be a major contributor of free cash flow through the business and socio economic benefits for new zone.
We have estimated over 300 jobs for the communities in the car Mandel, along with a significant amount of in country investments.
We are also looking at W. K P. Bina side of the art operation potentially utilizing an all electric modern fleet.
With that I will now turn the presentation back over to Michael to discuss the shipyard and our company's long term vision.
Okay.
Thank you David and thanks for the IV on the exciting growth ahead of Us in New Zealand moving on to slide 31.
<unk> and its potential restock represents one of the most significant near term catalysts for the company.
So <unk> is a world class operation with a fantastic Filipino workforce and one of the most.
And one of the most responsible mining operations on the planet.
We believe the DPF has been and can continue to be a significant source of jobs social development taxes and revenues that are critical to contributing to the Philippines' COVID-19 recovery.
However, the timeline for renewal is uncertain. Despite several positive meetings held prior to the 2020 year end.
We appreciate the patience of our shareholders have had with this process and I share your frustration.
But our resolve remains strong to restart operations and included in the five year plan and beyond.
Turning to slide 32.
With the permanent layoffs, the majority of the workforce in the second half of 2020, our expected timeline for resumption to full operations has now extended ups.
Months, primarily driven by the considerable time and effort required to rehire and retrain, our highly skilled Philippine workforce.
We remain in dialogue with the appropriate representatives that national and local levels on the renewal status and currently our understanding is that the FTAA renewal.
<unk> with the department of finance the signature before reimbursement to the office of the President.
In the meantime, we are maintaining the depot in a state of operational standby planning for the transition to full production when the renewal comes true.
Once fully ramped up the DPI will produce approximately 10000 ounces of gold and 1000 tons of copper per months.
First quarter all in sustaining costs.
In summary, we're focused on what's to come we are confident of our organic growth delivering real value over the long term and that is critical to creating shareholder value.
Turning to slide 30 for the future by Xi'an. The gold is in two attractive jurisdictions, New Zealand and the Americas.
Progressing most promising organic growth projects in these regions is expected to deliver significant growth.
High cost production within the next five years and this includes building three underground mines and expanding existing iPhone pits, while continuing to explore the greater Wahid district.
On slide 35 actually on the gold is a resilient and dynamic gold model with a strong and sustainable future.
And although our current valuation certainly does not reflect this organic.
Our organic growth pipeline is one of the best in the industry and represent decades of opportunity for our company.
My team and I look forward to delivering that value.
Thank you and net back descent.
Thank you Michael So that concludes our formal presentation segment of this webcast I will now turn it over to the moderator to facilitate the Q&A session over to you Sylvia.
Ladies and gentlemen, if you do have a question. Please press star followed by one you touched on the phone you will then hear a three Tom prompt acknowledging your request.
Should you wish to withdraw your question simply press Star followed by two and if you are using a speaker phone. We ask that you. Please lift the handset before pressing any Keith. Please go ahead and press Star one now if you have any questions.
And your first question will be from Levi Spry at Jpmorgan. Please go ahead.
Good morning, Michael and thanks, Thanks for the call and all of the day to all which some still to work my way through it might be just two questions on costs and then one on funding side.
Firstly <unk>.
Just the longer term target of 200000 ounces at non houses.
So all in sustaining cost.
When is that.
When does that come true.
Can you just talk me through that ILUVIEN.
Okay. Thanks Les volume.
Information and trying to sort of give the the runway of of what we're doing with regards to the organic we'll find that as we sort of move through this year with regards to sort of understanding the impacts and where we are.
The idea was bringing the underground online is to get to that sustainable 200.
As announced production.
And as we bring the underground and the hi, Brian as we open up the open pits. So I will say that in the next couple of years and then we will continue that that process going forward.
Yes, yes, so it's still a sort of a bit of difficulty matching the 43, one I wanted to slightly higher production rates at Taylor.
Yes, Okay I'll work my way through that cost set at.
<unk> net.
Why.
So in the PCI for W. P. I think you talked about 627, all in sustaining costs can you just kind of put that in context and again, how that profile might look like for the next of the hobbyists.
Yes, as we sort of ramp up.
Martha underground so youll say that this year's cost is predominantly based on really only putting half well less than half of that 400.
And that 380000 tons through the process planning of the process plant can build up to $1 2 million tonnes.
So as we ramp up the Martha underground, you'll see those costs coming down then we'll start including the Gladstone iPhone page.
That will take the sort of the processing abilities up to that $1 six and then W. K P comes on top of that <unk> will have the ramp up is from 2000 and 2006 based production that will be ramped up.
A year and a half.
Before he gets into full production then was cost coming true.
Yeah, Okay. Thank you.
And just one on the on the funding for Scott.
So there's an extra 50 available in the facility I assume you would draw that pretty soon.
Confirming are there any say pays or anything related to that and just.
Secondly, I mean does that mean theres nothing due until December 'twenty four for the year.
Requirements.
Atlanta.
Yeah, Thanks for that.
But yes, that's nice day pace.
But that's the revolving credit facility available for us to draw.
All going well.
We shouldnt need to draw that anytime soon but it's available there and thats the intent to have it available. So we can be.
Be flexible in our approach moving forward.
Okay, Thanks, and so and that's what is drawing as Jude December 24, there is nothing in between.
That's right, yes Hello.
Fully at full repayment at December 24.
Alright. Thank you. Thanks, Thanks for taking my questions. Thank you.
Thank you as a reminder, ladies and gentlemen, if you do have a question. Please slowly press star followed by one on your Touchtone phone.
And your next question will be from Habiba. That's total bank. Please go ahead.
Hi, Michael and team and thanks for taking my questions and obviously, thank you for providing all this detailed guidance.
I've got several questions I just might ask a couple and then pass it over to the rest of the people on the call. My first question just on here.
Obviously, you had a really strong quarter.
With the high grades coming in.
Is that.
Talked about that is expected to continue into the first half should we.
Assume.
That that's going to continue as as similar kind of grades into Q1 and Q2 GAAP.
Give us a little bit color on that.
Yeah.
Yes.
The.
Getting to the better grades did did happen.
<unk> found is that.
60% of that growth will come in the first half with us in the second quarter.
I suppose.
Higher than that first quarters is what we're sort of looking at as we sort of square up some of the features that we've been working on at the end of last year.
And then just on that should we then assume a force.
Half weighted year in terms of consolidated production as well or does why he kind of replace some of that.
Lower production in from hail in the second half.
Yes, that's correct, Hawaii sort of risk ramps up in the second half of the period and replaces some of the highest production the first off from a crisis pretty well steady game all the way through it.
Got it.
And then just sticking with Hale.
This question might just be directed to Jim then.
In terms of contingency obviously it looks like.
Added income contingency for Covid and weather.
For 2021 guidance now can you give us any sort of color in terms of what kind of contingencies are payers for downtime or absinthium or even equipment availability youll.
Compared to what you saw in 2020.
Yeah sure Thanks for that question.
These are things that we've worked on a lot of learning a lot from the 2020 year and then taking it into where we wanted to position guidance for 2021.
There's two main issues there.
One is looking at what the fleet can do obviously, there's a lot of variables that affect utilization.
The availability isn't really too much for concerns through the suite, because it's new and also on the planned its fairly constant, but it's actually the utilization of the equipment that we're focused on.
Thats affected by.
By whether it's also affected by where we are in the ore body as Michael mentioned going to an underground is going to give us an optional phase with a higher grade.
But we will continue to dig through the upper parts of hail.
Into the 2023 year and then it would be really widened out we'll be able to really push the productivity of the open pit and as Michael said as well as having the underground is a feat. So a lot of the concern that we had when we said guidance is around the total utilization of the property, what we see as material.
And also what we see as last year with respect to weather and and then under the shadow of Covid affecting <unk> and pushing us to think of new ways that we can handle absenteeism through the through the operation.
And just I mean in terms of the downtime that we just saw downtime approximately about 60 gains last year is that kind of similar to what you're expecting in 2021.
Yes that was a factor that we use that to your to the guidance.
Was the total downtime that we'd see on our site both in the mine and also possibly in the plant as well.
Okay sounds good thanks, Tim and just.
My last question before I pass it on.
Moving on to <unk>.
Obviously, you've talked about having several meetings with the Philippines government officials in December.
Is there any kind of.
Part of the negotiation that spending.
I'm basically asking us.
The office of the President come back with any additional demands or any of the other negotiations that are pending.
Thanks.
It's an interesting question the technical working group.
That was put together.
By the different departments on the instruction of the off price in the present.
I have worked with this either that over that period currently what we're seeing most of ours is.
Clarification and further information.
<unk> short by by the government bodies not necessarily.
Changing to the to the negotiated terms such that's what we're currently seeing and that sort of the conversations that we're having backwards and forwards at this point in time.
Got it okay.
Thanks, a lot again guys.
Thanks for taking my questions and I'll jump back in the queue.
Thanks Tavis.
Again, as a reminder, ladies and gentlemen, if you do have any questions. Please slowly press star followed by one ensuring that you hear the tone after passing each Keith.
And your next question will be from Mike Parkin from National Bank. Please go ahead.
Hey, guys just one question.
What the water.
And in terms of rainfall exceeding what the technical report.
It was based on do you see any need for additional discharge capacity.
For what's accumulating in the tailings facility.
We need to kind of bring forward additional tailings lifts.
<unk>.
To accommodate for the capacity of the excess water that you've kind of experienced year to date.
Not year to date to date.
Okay.
Yes.
Thank you.
Jim do you want to answer this one.
Sorry, Michael sure that that's actually a great question, it's in it and it.
Is in line with a couple of very important kind of triggering projects that we have currently ongoing and that are part of the 43 101 with respect to the tailings. Yes. It is the target of ours to reduce water in the tailings and that actually pushes off capital future list that.
That is currently in the Florida true in one and that is based around and in pond evaporation system. We're currently designing and that will have running in Q3 of this year and that will effectively start to evaporate at a higher rate of water and tailings in the.
The other part of the question of the water that is in the mine and in the ponds and in the pits.
It's also something that we manage on a daily basis, but it also requires an expansion of the existing water treatment plant that is also currently in the capital plan for 2021.
Alright, thanks for that.
Any further questions Mike.
That's it from me thanks very much.
Thank you at this time, we have no other phone questions.
Well. Thank you all for Theres, a couple of questions that have been forwarded to us.
From different means so the first one here, which I'll read out.
Is related to the five year plan basically states here that it looks like a very compelling.
<unk> five year plan with with production going in the right direction and costs going down.
Based on this here what is what are other factors that could improve the.
This chart that you show in the repeatedly in the in the presentation.
Thanks, Sam and thanks to all of US in the question through.
It is a compelling.
<unk> and its something that were working on and continuing to try and improve the.
The two catalysts that I mentioned that wound in the plan is that the DPA.
<unk>, which will have a significant step change to the to the business into the plant.
And the other one that we're working on as well is to try and bring the why he W. K P project.
Ford and so if we can if we can work with the government.
In a responsible manner to look at.
Fast tracking some portions of the plan and certainly get into the into the development.
That was shown in the in the development.
Development project plan.
And bringing that forward then we can actually access the ore body earlier and get that into the five year plan. So they are the two catalysts that we are working diligently on and continue to work on it does show a very good margin growing margin as we sort of progress through the year.
And then Sidney working with.
The Grand and the open pit to improve the efficiencies.
And the productivity is the other pilot plant.
Okay.
Michael next question here is related to W. K P exploration.
Says here that much of a drilling to date has been focused on the east graben vein.
What are the plans to drill out the other veins and more broadly what are the plans for the exploration program at W. K P over the next several years.
Total debt.
Very good question and we have been focusing on building the reserve around <unk>, which is which has been sort of the major major focus that we have got all Craig I'll hand that question over to you to probably add a bit more color to the exploration plan that we do have in that in that district and net.
Interest deposits.
Okay.
With tissue.
Sorry.
So with that done thing price of Milan at this point in time.
With the eastern Graben volume there is the multiple bands of that to the to the footwall of the volume and so we will continue.
Continue exploring.
So as we as we do it.
And then stepping out from the taste stream in the.
And.
The Western Graben zone.
So.
And our process is to ensure that from the platforms that we've currently got we can actually improve the confidence within the within.
The resource attended to reserve and then do the stiff add drillings as we move forward.
I think this year, we've got around about 28000 meters or 30 odd thousand made as planned.
And that will be.
Combination of both.
Resource conversion drilling and expansion drilling.
Alright. Thank you. Michael next question here is just related to <unk>, specifically can you comment on any changes to the support that you guys have from the community from the communities around the GPO has it changed or they could do they continue to be supportive and what efforts are they making too.
Push for the FTAA renewal.
Yes again, thank you for that question. It is something that we're very cognizant of.
We had been working very very well with the immediate community.
We as everybody knows one of the focuses was on getting critical supplies to demand to ensure the integrity of the mine and that was done and.
And that has continued.
And continued with the assistance of the Barron's I kept them in the council. So we're now in a position where we have got a good supply of critical.
Hugh.
At Sot inside the community is still very supportive.
And the community.
Yes.
We are heavily invested in getting the mine up and running.
The numerous times to the office of the president showing their support and we have some great support from from one Val.
One of the provinces from bias.
The governor and the Congressman from one of the provinces that supporting us as well.
Happy and pleased to say that the support has been continuing with the good work and the good.
At work and the good.
Relationships that we do have on the ground. So thanks very much.
Thanks, Michael last one that I have here on the list is related to hedging does the company plan on pursuing additional hedging programs going forward.
At this point.
No.
Just coming out of the hedging program for from the price and we generally hedge at mid price to lock in the margins.
Currently I think we are.
Sort of.
Looking at a higher gold price, albeit there is some volatility to EBIT Sydney, a solid gold price in the future, but it's certainly something that we will continue to monitor but.
But we don't have any.
We don't have any plans for continuing the hedging at this point in time.
Okay. So Michael there is no questions on the queue I haven't received any other questions. So that concludes our webcast and conference call. A replay will be made available on our website later today on behalf of Michael Scott Mark Sharon David Martin.
Craig and the rest of the team. Thank you for joining us bye for now.
Thank you Les.
Ladies and gentlemen, this does indeed conclude your call for today once again, thank you for attending and at this time, we do ask that you. Please disconnect your lines.
Okay.
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