Q4 2020 Pretium Resources Inc Earnings Call
All participants please standby your conference is ready to begin <unk>.
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.
The 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 the over to Mr. Jacques Perron Protium is president and C E O.
Thank you good morning, everyone welcome to our fourth quarter and 2020 year end operating and financial results Conference call.
20th when he has been an unprecedented year with exceptional challenges.
I want the thank our team for their continued artwork and dedication.
However, no year is considered the success unless it has accomplished safely and in 2020, a fatality provided the 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 2020 I will demonstrate the call over to Patrick Good day, how our chief operating officer to provide some insight into our production and operating results.
Following GAAP Matthew Quinlan, our Chief Financial Officer will review financial highlights of 2020.
Finally, I will provide an overview of our near mine exploration results and the recently announced underground exploration drilling results before closing off with the look ahead.
At the end of the presentation, we will open the call for your questions.
Before we begin note our statements contain forward looking information in the future oriented financial information based on certain assumptions and subject of 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 the file on SEDAR. Please note. All dollar amounts mentioned on this call are in U S dollars unless otherwise noted.
Despite the challenges faced in 2020, we achieved our annual production guidance for the first time in 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 the significantly reduce our debt by $227 million after debt repayments. We ended the quarter with the cash balance of nearly 101 of $175 million.
The other objectives, achieving the twenty-twenty include accelerated underground development ramped up production to an average processing rates of 3800 tons per day increased drilled the stope inventory complete.
<unk> completed 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 the repeat of the tragic event that occurred at the beginning of the third quarter.
Being in the safety of our of our workforce remains our most important core value.
On February 10, 2021 be seen the Oregon Health declared a COVID-19 outbreak at the Bruce Jack Ma.
Protect the health and safety of our work force and local communities, we implemented enhanced the outbreak protocols.
This included the restrictions on travel to and from the Brewers Jack non Cam while site wide testing was conducted and then the assessment by D C. Northern 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 travel the restrictions were lifted.
Additional protocols and procedures, even up in collaboration with local and digital partners and BC Norton Health I've been establish which includes testing of all employees and contractors.
Throughout the outbreak mine and mill production continued, albeit 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 of remains at risk and could have a significant impact over a short period of time.
I will now turn the call over to Patrick the reviewed our operational highlights for the fourth quarter and full year 2020.
Tanjug turning to operations on slide seven and.
In the fourth quarter and the fourth quarter, we process of approximately 310000 tons of for through the meal equivalent to 3366 tons per day.
And the for the full year, we processed approximately one 2 million ton of for which average out to 3000, the favored the 72 tons per day.
The mill operated below the permitted level of 38 of the tons per day due to scheduled and unscheduled maintenance and our focus on lateral development and stope of the ability.
Yeah.
By the end of the quarter, we successfully ramp up to an average processing the rates slightly above 3800 tonnes per day in the month of December.
For instance costs were $217 per ton milled in the full quarter and we're one of the $95 per ton mill and the full year of 20 of 20.
Total cost increased due to the edge the additional lateral development and definition drilling and costs associated with COVID-19 safety protocols, mainly related to employee salaries and travel costs.
These protocol of increase goes by $5 per ton milled in the quarter of $6 per ton mill and the full year of 2020.
In the fourth quarter, we produced just over 88000 ounces of gold the mill feed average.
Eight Portland gross per ton and the recovery rate was 97, 4%.
Well word of for you we produced nearly 348000 ounces of gold at an average grade of one five grams per tonne of recovery rate of 97 per cent.
When you look at the quarterly gold production for the year, you will see that we have maintained our promotional level within plus or minus 5% of the midpoint of our guidance range.
It is broadly understood. The blue Jack is the high grade variable deposits will continue to see fluctuation products shown in the quarterly basis, but hope to smoothed out thought out overtime.
Going forward all of our objective is to optimize production resumes of quarter to quarter fluctuations and at the same time look for opportunities to increase our production.
The 20th wasn't even the old reserve reconciliation was completed by evaluating the 20th when the mineral reserves against the 20th when the meal the actuals.
In 'twenty when the ore was mined from 69 stopes over 11 levels spending and the result of distance of approximately 540 meter east to west and 310 meters now to solve itself.
The 20th one of the meal Dashville contains approximately 4% more tons into twenty-twenty of mineral reserve revenue, primarily due to the mining to mine the auto reserve material determined to be economic by the grade control program as well as greater than planned stope dilution.
Compared to 2019 mineral Reserve reserve reconciliation the 20th when the mineral reserve Gold grade reconciliation of improved from 72, 2% in 2019, 294% in 2020.
This improvement can be attributed to the inclusion of the mine gold factor and the updated the 20th wouldn't 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 sales of 'twenty to 'twenty two.
The current jewelry Twenty-twenty mineral resource model include portion of the jewelry of 2019 in December of 2013 mineral resource models that are required the execution of a mine called factor in the mineral reserves the.
For the 20th when the two mineral resource and mineral reserve, we loved the Hunter.
The area of the value of the King zone with the result of an extensive of the extensive.
The extensive 'twenty 'twenty, one 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. The production 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 drill out of inventory of stopes.
Our target is to have about 400000 tons of drill the stove ready to be blessed equivalent to a full quarter of production by the end of the third quarter of 2021.
So the providing more flexibility.
To improve blending for multiple areas in support of more consistent production.
Whereas the second priority is to increase our understanding of the orebody abuse debt.
If any of our renewable resource it is important to have as much debt the possible to properly is to meet the agreed and designing the mining approach to improve the local modeling we have significantly increased the amount of definition drilling.
As you can see on the slide our development of rate has been increasing in the.
Q1 of the 20th whenever we were affected by Covid related restriction, we aim to reduce the level of activities outside but we recovered in the second quarter and the fourth quarter. We continued the trend of increased production.
Yeah.
Turning now to <unk>, turning now to slide 12, we of a section view of the underground development looking north until recently mining has been limited to only two months of Arizona Dooms day.
Good morning, or arisen consists of for money level, each about 30 of meter in height.
All of this year, we open up many of the lower ore zone of the twin Dent when the level, we know of three money arisen to operate from.
In 'twenty 'twenty, we began developing access into the fault zone.
Which is just west of the Blue Jive fault on the 12 under the Trojan towards the levels. We are starting to open in prepay of these area for money later this year.
In the second half 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 of production compared to previous years.
Yeah.
Infill drilling to improve reserve definition of ahead of money was put on the old at the onset of Covid at the end of the first quarter to limit the personnel at the Rosa.
By the end of the second quarter of Diamond drilling activities resumed and continued through the third and fourth quarter with five of them and drills on site.
Here on slide 13, we of a section view of the underground development of looking keys, you can see the drill target areas for the year of highlighted in yellow in.
In 'twenty, one day, we don't need of approximately 147 meters of infill diamond and reverse circulation drilling.
I will turn the call over to Matthew for an overview of all of the financial 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 $1799 per ounce, an increase of 28% over 2019.
Revenue increased by a similar 27% due to consistent production 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% to <unk> 95 per share and were <unk> 28 per share in 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 in excess of our earnings before taxes.
The sale of Snowfield gave rise to a non cash deferred tax expense, even though the loss on sale was recognized as snowfield did not have any tax basis. Therefore, no reduction in the loss could be of crude.
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 the sale of sale of Snowfield and as we have stated before we are not in our cash taxable position due to capital expenditure pools and tax loss pools of rising from the development of Bruce Jack We don't anticipate paying cash taxes for federal and provincial income taxes for three to four years of car.
The gold prices and once we are in the tax payable position, we anticipate paying taxes at a combined rate of 36 36, 5% of mine operating earnings.
Turning to slide 16, the year over year increase in revenues of $133 million to $617 million helped drive cash flow from operations to $317 million for the year, an increase of 41%.
Operating cash flows reflect the COVID-19 costs as well as higher year over year of production costs and component of component of all in sustaining cash costs.
Total capital expenditures of $49 million from 2020 include approximately $27 million of sustaining capital expenditures $12 million of expansion capital and $10 million of additions to exploration and evaluation of assets in 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 in the fourth quarter of 2020 were $89 million and $117 million respectively.
Fourth quarter of 2020 free cash flow of course includes the $100 million received from the sale of snowfield.
Consistent with our stated objectives and we used our strong cash flows to significantly reduce debt and made debt net debt repayments of $210 million in the year.
We ended the year with approximately $270 million of debt comprising of bank debt of approximately $171 million and convertible notes of $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> in 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 in production costs as well as $24 per ounce of COVID-19 related costs and $20 per ounce for 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 of shock.
I'd like to note one accounting policy change, we noted in our financial statements and MD&A that will take effect on January 1st 2021.
Moving forward, we will expense certain exploration and evaluation expenses, rather than capitalize them on the balance sheet.
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 Jack mine.
As I just mentioned in 2020, we incurred approximately $10 million of such expenses.
This change in policy reflects the maturation of our business units into an established mid tier mid tier gold producer.
Important to note that the accounting policy change will not affect of the calculation of free cash flow ASIC or total cash costs. However, as accounting policy changes such as these are applied retroactively to the inception of the company back in 2010, there will be a number of changes to our historical financial statements. When we release them in the first quarter of this year.
With that back to you Jack Hey, Thank you Matt.
Stepping further out from the Bruce check mine, we hold over 1200 square kilometers of mineral claims in the Golden triangle in BC.
The 2020 regional exploration program on the company's Bowser claims include the drilling at the hanging laser zone and other zones.
The highlights from the program was the discovery of epic the remodel style Goldman of organization and the hanging laser zone located just for kilometers northwest from the Bruce Jack Daniel.
Zone of gold mineralization demonstrates the district scale potential of that Bruce Jack.
We continue to believe the best value for our shareholders is to invest a portion of our cash flow in exploration of our existing claims and in particular near day, Bruce Jack the deposit.
In 2021, we expect gold production of debut stacked mind to be in the range of 325 to 365000 ounces.
We forecast the processing rate to average 3800 tonnes per day with an annual gold grades ranging from seven five to $8 five gram per tonne at the targeted goal of the recovery of 97 per cent.
We expect all in sustaining cost for 'twenty 'twenty, one to range from $1060 to $1190 per ounce of gold sold.
The <unk> estimates in 2021 reflect the investments in an accelerated the rate of underground development comprehensible comprehensive drill program and improvement of oriented capital expenditures.
We forecast sustaining capital expenditures a component of the basic 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 the expenses.
Such as starting to replace the haul trucks fleet to reduce cost of ventilation and maintenance and increased productivity.
We expect free cash flow for 2021, and the range of $120 million to $170 million at the gold price of $1700 per ounce.
The 2021 of free cash flow forecast includes expansion the oriented capital expenditures, which total 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 2021 near mine exploration program.
The 2021, Bruce Jack definition and expansion of drill program is anticipated to total approximately one top 195000 meters of drilling comprised of 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 the underground with an additional two surface drills to be added during the summer.
In 2020, we completed about 28000 meters of resource expansion drilling outside the resource shell to the north of the value of the Kings zone.
This is the first time resource expansion drilling has been conducted that Bruce Jackson of production started.
Yesterday, we announced the results from the first phase of 22 2020 of resource expansion. The rail program, which included high grade gold intercepts as far as 300 meters from the current resource shell and as high as 2590 grams per ton of over one meter.
The North block zone is the is an exciting potential extension of the value of the kings deposit that Bruce Jack.
We have already committed to significantly increase our resource expansion and exploration efforts in 2021 and the results from this first phase support our decision to make that the investments.
Yes.
Looking ahead for '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, we expect to generate a significant amount of cash this year.
We look forward to continuing to announce the rail the results the remainder of the 2020 resource expansion drilling results are expected in the second quarter.
We will continue to provide results from the 2021 of the 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, who will open the lines for your questions.
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 a tone of 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 <unk> of H C. Wainwright. Please go ahead.
Hey, Thanks for taking my questions, it's nice to see everything you've accomplished through all of 2020.
The especially noting here of your balance sheet. It also highlights of the guidance uses of gold price of 17 other than the allowance of there's actually 2% below where we're at right now.
Can you walk us a little bit through the travel restrictions of Bruce Jack or like you know the issues that you've had.
The whole year of 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 ground. Please.
Good morning, I call. Thank you for your question.
I'll give you a bit of color on tap the will the can.
Can add too.
To what ill provide but and.
We were fortunate in 2020 to be able to.
Operate the mine without any COVID-19 cases that site.
And at positive Covid gave of cases at site.
Unfortunately, we were we were worried that the after the holiday period that we might we.
We might get some impact from people traveling in.
And coming back to the site and bringing the virus to site that that that's happened to us. So we we started to manage cases.
Monica the situation.
And the number of cases increased quite rapidly because it was contained to a cluster of employees that were working together and not necessarily following all of the proper rules and protocol.
As you know it.
We've been the repeating worldwide for for a year now that it's important to watch are and then where your math.
And the diligence and we found out that through all of the tracing we've done that.
A small number of our employees.
We're not all of our contractors were not following the rules.
And on that note I want to say that the majority of our employees of the vast majority of our employees are following the rules and are doing a great job, but in all of it only takes a few to start to spread the virus.
We are we started to highest of late people to a point, where a b C. 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.
Update of the various.
The people that are debt were infected.
It took a mineral about two days the test everybody and we got the results for fairly quickly.
And at the during that period of the employees were concerned and the worry then.
But I can tell you when we lifted the travel the restriction on the on the 2017.
Morale shot up by.
Thousands of percent because as you can imagine that being stuck at site and not knowing when you're going to be able to leave in.
No.
Being afraid that the virus is around you and it'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 partners to implement new protocols of new new new rules and I'll, let Patrick explain what all of our managing the situation now and what's the process too to mitigate the risk of adding another outbreak.
So 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 are coming in five days of throw the arable and the forward to let them leave the site.
So basically the.
Ill close two of a better control of what we are doing.
We are also looking to actually.
Prove the testing protocol with rabbit. The thing we are in discussion with the auto reduce without.
And also we have some additional protocols because as you know of Bluejack.
The <unk> one Kimberly the entry one camp of the.
Yes.
At the beginning of the Glacier and won the main camera. The operations. So we have additional protocols to control the access with the suppliers and contractors.
And the OXXO in addition to the.
We create what we call bubbles is mainly mainly now for where neither of borders the award of living in Northern territories.
The forward to when the artists of the site immediately after the D. R.
The are living the together in the specific vehicle and they are going back to the of guarantee. So we're just making sure that they are not exposed on the way to of potential to a person who was potentially infected so we.
We improved a lot in the a lot of in this manner of Indian employees of a pretty satisfied by this.
And you know we are we will we will we will apply all of these protocols up to the moment the probability of.
The total reduce will advise that we don't have to.
Okay.
The very comprehensive and good answer I appreciate that thank you. The the other one I think I'm just trying to clarify something with your corporate administrative costs of two quick things there.
They went up 13, 6% or $2 5 million to $21 2 million. It looks like this is pretty much of an increase in salaries and benefits due to the.
The variety of termination expenses, but he was also offset by some share based comp nonetheless.
Nonetheless, Youre still looking at 18 to 22 million of for 2021, so the midpoint of that $20 million first of all is the the.
The cash versus noncash is that the offsetting thing or is that on the accounting thing or what am I missing.
I don't think youre missing the missing anything.
You're bang on into in 'twenty, its Matthew Quinlan here in 2020, you're right there were certain termination expenses.
And then pursuant to those employment contracts countervailing that was the right one.
One of those officers left there was of certain forfeiture of of there are issues in the deferred comps. So there was of much lower noncash component.
Going forward with obviously.
We have guidance for this year from 2020 of 2021 of 18% to $22 million of G&A there'll be a higher component of the RF rsum and deferred comp.
Because that is a.
Yeah.
There is no forfeitures, but commensurately theres, a lower cash expense.
Does that help answer the question.
Yes, yes, it does and it actually answers my next question as well and then I just have the day.
Just to follow up on that why do you still expect $20 million because presumably the debt termination stuff was the one time thing.
You are right the forfeitures, we're actually quite quite large.
And on page 27 of our MD&A.
There are some further details as to as to the quantum.
So the.
I'm just looking for that page right now the <unk>.
Several million dollars was the effect of the on the <unk> expense.
Okay.
Got it okay perfect. Thank you very much I'll get back the Hugh 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 with regard to the reserve reconciliation.
As provided versus what was milk in 2020 can you give us the breakout of what was.
What was attributable to mining outside of the reserve and block and what was attributable to.
So dilution of excess stope dilution.
And then secondly on that would be.
The amount of excess stope dilution. So what are you seeing in terms of dilution of one of your targets.
Okay in terms of dilution.
In the reserve, we we flow.
90%, 94% of recovery of 12% of dilution for.
For 2020 are in terms of money in current recovery, we are at eight three.
And in terms of dilution, we are 18 to so basically it's a.
The increase in the dilution is explaining the part of it.
Okay.
Yeah and then.
So, yes, that's explaining the Remy.
So would you say, it's more stope dilution the mining outside of the reserve envelope that would.
Cause the 6% off on the grade.
I will see a 50 50 split.
Okay.
And then in terms of go forward or do you expect that similar types of dilution.
Going forward in 2021 is that what you guys for factor again, when you took down.
The prior life of mine plan had eight 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 guidance here.
The.
The.
The grade went down from seven from $8 six of seven five to $8 five so I'm just trying to understand I understand and understanding of the implications of that beyond 2021.
So I can say to you that for the dilution we are still the forecasting in the hours of 12.
I don't want to lower the bar in terms of quality so for.
We are working really honor to lead to approval of the dilution the trend is.
In the in that way.
But we're still planning 12% of of dilution going forward.
Okay.
And then for them.
Was there a change in the reserve grade from what the life of mine plan had.
I have given us.
What we should be looking for in 2021.
Hi.
Mainly sequencing of Anita.
The.
And in.
You know when we I have repeated this a few times and all the.
There is a difference between guidance and the reserve.
The.
The reserve as the is.
Is one thing, but the guidance, we we always we have a variable of our body. So we did we guide we guide 775 to $8 five last year with seven five to eight six.
Not the $8 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.
I've learned in this business over the years that it's better to under promise and over deliver so.
I wouldn't link that the guidance that the reserve that those are two different things in my mind.
Okay.
We do have to have something no cash I'm just trying to put it in our models of unusually the 43, one on one as you look to you about all of that point in the second question and final one that also means that for some of them for other people to ask questions.
In terms of the costs.
That Q4 of the costs were up.
Quarter over quarter and is that the kind of unit cost range Youre looking for in 2021, and again are those the types of things cost unit cost 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.
Versus 2021.
Okay. So for Q4.
The main aspect of the main one is that we brought sales lifts tongue.
So it's and budget impact the unit cost per tonne for sure.
No matter of the grade was higher than expected.
And also we of the seasonal effect of the quarterly business for the quarter to the other one in the winter of operating growth of four.
Are there other than <unk>.
Summer on the year, we average one of the 400 195, so is it cleared for Wii.
We are more or less.
Trending next year between two year to $2 15 in the 195.
I think if you do if you do the math of Nita and you look at the costs, we had in the fourth quarter.
You will remember that we had the 10 day maintenance shut down to replace the either on the crusher on the ground. So if we had the operated the full quarter.
At the 3800 tonnes per day.
If you take that all of the you would have had the very slightly of.
The increase variable costs for for our reagents and ball mill balls and whatnot in the mail, 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 that at this point now that being said.
It's going to it's going to definitely depend on COVID-19 like in the first quarter.
We were impacted for a few weeks, we had to reduce throughput because we had people in isolation.
And we were running out of the of operators are people to feed the mill. So so we had to reduce the throughput.
That's going to have an impact on our unit cost if we broke the if we don't process of the the 3800 tonnes per day, but.
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 than the other quarters end and also in Q1, we have.
Seasonality that GAAP I think last time I checked we were up now to about 14 meters of the snowfall that site last year, we got 17 meters. So we have a.
About 90% temporary employee shoveling snow in the winter. So that's an additional cost that we don't have in the summer months. So.
Uh huh.
Seasonality is an impact and also tonnage, but like I said you know we.
We had the slight impact in the last couple of weeks because of the Covid there.
If we get back and we're not in fact that the by Covid.
Anywhere between if you take the average between 195 in 2017, I think youre going to be in the ballpark.
Okay, well Luckily.
Backend loading with the gold price environment in Q1 won't be such a bad thing.
I'll leave it the bot.
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.
So I'm kind of following off 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.
Grams per ton is that.
It's another way of looking at that debt.
You would expect something between you know an eight 5% in the 100% reconciliation you know looking back at the 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 didnt of reconciliation kind of way.
No the ASO.
The seven five to eight points of our guidance is not base, it's based more on sequencing.
Base more of them.
For the stock is ready to be mined because of the other one is the backfill or not so as more of the question of sequencing of the thank you.
If you look of up to.
To me.
The reconciliation of the 94% is for this year is excellent with some of the range of the reserve you know if you are you can end of the issue can be in the range of 5% of the procured received for reserve it's excellent.
And we are of horror body that is the negative effects of the variability has received significant soon for you Dave. So in this regard the we're not expecting.
Julia of ink, we are in the sequence of the sweet spot in terms of.
Reconciliation in term of tonne in term of in terms of agreed.
Think of the trend is to maintain more of a lesson that we expect the next year, we're going to be better, but you know in the and I think we are where we are when the it's not base the.
Guidance or not maybe not all of.
The reconciliation sector.
Okay.
Okay. Okay. So the youre not like discounting of flat percentage either.
Just one that's what's in the mine plan, depending on which stopes you open.
Yes.
Okay. So no remind me of talk to you. The we spoke to you that the remaining 60 million this year.
The it's a lot of scope for the lower tonnage of 38 on the tonnes per day. So it can happen. The next year, we will at the yearend or beginning of the year, we will shift from sold from one quarter to one other one and it will affect so it's more of the sequencing then factored in something else.
Okay, and then on the debt front.
And the goals for this year for further debt reduction specifically or any thoughts about refinancing whats left.
While rates are low.
Well.
Matt can give you some of our color, but as we mentioned last year.
One of our priority is to is our priorities is to reduce the debt.
But if we want to work in the first half of this year to come up with the 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.
The largely undrawn revolver as Youll see in 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 an action plan and we will.
<unk> 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.
Hijacking the 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 the <unk> question on Covid impacts.
It was great to hear that you guys reiterated your 2020 guidance despite.
The Covid challenges that you guys faced in February now are you noticing any impacts to your drill campaign or underground development kind of going into the next couple of quarters based on what you what you saw in the in.
February.
Not really because when we preordered zonk.
The <unk> explained we are we were short of manpower because.
Fewer than the deletion and some others what other available to reach the site.
We are proud of raising our strategy the Polish from drilling in the development.
Mainly because of if you are in the underground mine and you're losing opportunities in development and production drilling.
You cannot catch up so basically actually we maintained the pay the.
The the.
The the accelerator and the.
The pace in the.
The.
For the development of the approach and really and we slow down the middle of Sean Zou explained this mill is really efficient.
We can process slows me more than 4000 tonnes per day easily. So we will of vehicles will be in the possibility to catch up going forward. So basically we portion of ourself, we mitigate our risk to keep the development and keep the provision.
For the frozen during in the forefront.
And we did not slow down more than expected that the.
Of the exploration drilling too because it's critical and crucial for us, but we know that we are we can process more of going forward that we can catch up in the 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 if this campaign was kind of in line with your expectations and has that campaign kind of provided any improved visibility.
Yeah well.
We got.
We did a lot of drilling in the second half of of the year.
And.
So far the results match our expectations.
What I, what I can tell you as well.
What the 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 for.
Basically two small.
And all of the samples we generate we have to send samples outside to outside lab has the 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 of.
Big Challenge when you you have to make decisions on where youre going to develop and where youre going to mine.
So that's one of the reason this year, we are investing money in building of new lab and a proper lab debt will be able to handle all of our samples and give us.
The 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 of half of what we drilled we're still waiting for the other app. So.
The labs in Canada, right now in Vancouver, Theres labs that processing samples from Quebec, and Ontario, and some of our samples of go down as far as per route to get the to get the analyzed.
So it's a real it's a real challenge is good to see the gold price that I, but everybody is drilling right now.
So it puts a lot of pressures on an on lab. So we.
We expect to have our new labs operational in 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 of faster and that's one of the reasons that we decided not to update our resource and reserve. This year, because we drilled a lot last year, but we didn't really have the results from the drilling so we'll be in a much better place at the end of this year and Thats why we were planning to update our mineral resource and mineral reserves.
In 2022.
Got it okay.
Thanks for that Jack in the that's it for me.
Thank you always have a good day.
Our next question comes from Don Demarco of National Bank Financial. Please go ahead.
Well, thanks, so much for taking my call Hi, Jack and team.
Some great phase one expansion drilling results released yesterday morning.
Sales from the North block compressive grades of the 2500 grams per ton.
Alex Festival are the high grade zones, we know that they are within 300 meters of the pit shell.
Yes, Don if you.
If you look at the sections of the level of drawings debt.
At avail.
The available with the with the.
For the relief that we issued yesterday.
It is.
Right. There it's right next to the right next of the development what were the North block is.
The drilling outside of the resource shell, but basically what we're drilling there are extensions of the.
The domains of the the okay, and we're starting to see new domains appear.
The 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 the UK. So it's early days, it's only a few holes.
We're going to get the results of the second phase in Q2, and then no no no we're going to do a phase of drilling which has already started.
It's exciting when you see numbers like that and you see that.
You are very close to your existing infrastructure, it's an area we could access in a fairly easily but first thing we have to do.
Before we rush into the zone with the five meter by five meter of Diamond drill hole were going to have we're going to drill and what.
We're going to try 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 in and get going with mining but.
I am credit I'm pretty confident this is going to turn out the end to a very good zone for us.
Okay, Yes, that's great and maybe just continuing on that then.
Any of the grades are of high what about the.
The with what are your thoughts on the intercept which are those also consistent with some of the some of what you've found within the reserve areas of the value of King.
Yeah, well, it's it's fairly typical.
You have.
What we emphasize is the high grade, but around the <unk> zone there is of theirs.
A large halo of lower grade material.
Between I don't know between the two and five Gram per tonne. So when you blend everything you can you can develop the significant size the stopes, but that the first thing we have to do is do all of the drilling understand what we have.
Do the interpretation and then we can start to build the corridor that we want the mining within the was 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 back and do a little bit more drilling there.
And what we have.
And that if there's a long there's a section that we.
We show in the presentation and you can you can see that the we're going to have that's all the areas that we'll be active in 2021 for the 195000 meters of drilling we're going to do of Nord block as part of that and so.
So we drill the phase one and phase two in 2020, and we Havent started the phase III now in Nord block, which is.
Higher fans and longer haul, so thats going to be done this year.
As part of the full of the program with all of the other zones that we're going to be drilling in 'twenty one.
Okay great.
Maybe just shifting gears then too.
Obviously your strategy this year is to increase the the.
The drilled off inventory.
How do we know if you're making progress on your objective here I mean the.
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 youre progressing.
The model I think there what should we look for.
Yes, there is two aspects to this.
I think the first the first one has to look at our drilling inventory at the end at the end of Q2 of Q3, I think we were 150 or 153000 tons of inventory at the end of the.
<unk> 256, so we went from one of 50 to 256 at the end of the year.
And 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 than for you guys. In particular is we're going to be able to and we're not quite there yet, but we're going to be able 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 the where youre going to see debt. We can we can we can shoot we can predict we can forecast what's coming for the following quarter of lot more accurately.
Okay.
Okay, Great and then just maybe my final question, perhaps related to this so like as you drill off the gross inventory and you've got this mail 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 debt.
Of.
That we need to to the think about the number one it's our permit.
We're we're capped at 1.387 million tons per year. So if you divide by 365 is 3800 tonnes per day, but the capex not the daily cabinets of yearly cap.
In order to increase throughput, we would have to go for a permit amendment and in order to do that we want to make sure that.
Of the lake will be able to handle additional volume.
So we so we're doing we're going to do the technical studies this year and the on the flip side of that it's to make sure of the mine can supply we have.
We have one the ramp we have limited the number of vehicles, we can put in the ramp so we need to think about the logistics and the productivity and whatnot to see how far we can we can push the mine to be able to increase throughput.
So those are the two major of Criterias permitting and the mine capability of supplying additional tonnes as Patrick mentioned the mill. The mill is not an issue for us at this time.
Okay. Okay. Thanks, so much for the 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, Good morning, John I have a hard time to hear you John.
Yes.
Okay.
The shut off the other caller, please I'm sorry Jacques.
I am doing my best.
Jack.
Yes.
Stock Youre doing great and your stock is 10 times earnings of <unk> Centre in Kurdistan almost.
[laughter].
Yeah, John that's a good that's always a good question the higher our priority right now with our cash is due to focus on our depth and focus on all of the the nice thing is we want to do to improve the the.
The value of the project and the drilling and whatnot then.
We're not just there yet that the 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 the it's not it's a board decision.
As for the board to make that call but.
I would say that it's definitely that's something for this year, it's going to be something.
Maybe where maybe we're going to start to think in 2022.
Hi can I ask another question, Chuck and I might be overreacting to the phrase in the press release improve the understanding of the ore body.
Bitch of mined about 1 million ounces of gold and four of 5 million ounces of ore and some development mark very close to the or.
So you have a pretty good bulk sample by now to 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, 101 rules for sort of of fantasy.
<unk> single point of numbers are often not realistic and give your annual guidance is of grade range and gave your cash flow guidance is of great range.
And just admit that it's.
Hard ore body of the estimate.
Well it is.
Of everything you said John.
Between God and then in the and the regulation.
It is the hard body.
The difficult our body to estimate.
The.
Yes, we of buying quite a bit in that ore body. We have a few of 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 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 of the data and everything we've learned over the years.
We feel strongly that when we do our 2022 update we're going to 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 in the past.
I have great confidence that you'll do as much as God could do.
Thank you Jeremy.
Good day.
Thanks, Ron.
Our next question is a follow up from Anita Soni of CIBC World markets. Please go ahead.
Okay.
Hello Anita.
Sorry, I was on mute there.
Just to follow up in terms of the dilution targets that you have can I get some color on I know you are still targeting 12, but can you talk about how youre going to get it from the current level of backup to the 12% or what was like what will change over the course of this year.
Hello Noah.
We have a lot of things that we're working on other it's really we're working on the on the quality of the phase two so we can improve the pace.
So the fact that you can mine over your pace of instead of the mine under your base through.
We have the drilling that we are working hard actually.
We have the undercuts.
We also what we what we will implement this year is we will monitor the.
Precision of our blessing holes.
That's something that we initiated in the last days.
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 redo the timing so.
We are working with the where we stand the actually and it's all sort of in Zurich relationship.
The nutrition it will depend of the majority of our stopes or are the.
But the our heating degrees, we have some more maybe more of the 70. So we are of will investigate more of the cable bolting of being able to reduce the dilution we have in the economy.
Russia of all to do this is what we will we will assess.
And the basically it's what it is in terms of recovery.
That is another aspect too we are working hard on this with the recent D approaches the block with the remote jumbo to drill and blast the the.
The big piece of fraud that are remaining in the stopes that we cannot extract because we remotely.
The rewards gurus who've drums to finalize the cleanup of the stopes. So the value that we have this new equipment improve also the recovery in our sites.
It's the other is the one action is another.
If all of the problem. It's a programmatic is coming with a lot of combined solution.
And we are actively working on that actually.
Because for US it's operating.
Prove the recovery for us and redo the the reason is essential because we have other there's.
There's other screening we have of I agree the ore body. So we are we want to prune the quality before the quantity.
And that's what is important the workers.
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. <unk> for any closing remarks.
Hey, Thank you everyone for dialing into our earnings call. This morning.
We appreciate all of the comments and questions in the more interesting ones.
We look forward to updating you in the coming months and.
I would like to remind everyone that.
We're living under unprecedented times and.
It's important for everyone to follow the guidelines and the restrictions and to avoid the.
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 the Bruce shack without everyone's effort nothing would be possible. So the last.
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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