Q4 2020 Endeavour Mining Corp Earnings Call
Okay.
[music].
Ladies and gentlemen, thank you for standing by and welcome to Anne Day with my name as of Q4 and for E O Isa <unk> conference call.
At this time all participants are in eastern argument.
After the managements presentation that would be a question and answer session.
Can I ask a question during the session you will need to press star one on your telephone.
Todays conference call is being recorded and John scraped off the call will be available on a Davis website Tomorrow I would now like turn the conference over to your management. Please go ahead.
Hi, everyone I am Martineau, Vice President strategy on Investor Relations and I'd like to welcome you to our 2020 full year results webcast, which today, we are hosting out of West Africa.
On the call I am joined by Sebastian Mark and Patrick We're also delighted to have our new CFO Joanna Pearson underlying for her first results call.
Today's call will follow our usual format the low also.
Also include the additional reflections of how we became a senior gold producer well trying to preempt your neighborhood questions.
What comes next.
Well I tried to be as quick as possible to leave time for questions I'd yet.
Before we start please note our usual disclaimer and now I'll hand, it over to Sebastian <unk> to walk you through our journey so far.
Thank you Martino and Hello, everyone. It is great to be speaking with you. All again, we are very excited to start 2021, because it marks a new phase in our journey.
And most of my team joined in early 2016, and we view the first phase spanning 2016 2019.
During this period, we were highly focused on organic growth with the build in particular of EG and Hyundai and the real push on our exploration efforts. In addition, we were focused on divesting lower quality assets.
Last year, we were in cash harvest mode, and third to leverage the strong West African operating platform were built by consolidating <unk> most of which offered strong industry logic.
We now have the portfolio, we need to enter a new phase, which again will be focused on organic growth.
The main difference between this phase in the first one is that previously we funded our sales through debt.
We are now at this stage, where we can self fund our growth through cash flows while also rewarding shareholders in the form of dividends and buybacks.
Another way to express this new phase M&A is clearly off the table as we have now the geographical diversification and the right portfolio of assets required to continue to unlock value for the foreseeable future.
I'm proud of how far we have come in a very short period of time and I'd like to thank the world team for their hard work and for severance in getting us here.
Turning to slide seven.
We are now one of the world's largest gold producers and in fact, we are the largest gold producer in West Africa, which is the world's second largest gold producing region.
Confident that this will be a significant competitive advantage going forward.
As you know my motto has been since day, one highly focused geographically in this highly prospective region and at the same time diversified over multiple assets and countries.
As you can see from the graph on the right here. We are one of the top gold producers globally with one four to $1 5 million ounces of production and targeted this year. We are also positioned very well in terms of audience sustaining cost with guidance below $900 per loans and also in terms of free cash flow yield.
As you can see here on the bottom left graph.
And finally, we recently paid our first dividend, which corresponds to a yield of approximately one 8% at current share prices, which we aim to increase going forward.
We are also seeking to supplement our dividend with the implementation of our buyback program as part of our continued focus on returns to shareholders.
Turning now to slide eight I am sure that you all recognize this chart, which capitally illustrates our portfolio priorities.
As I mentioned earlier, we are very happy with the portfolio. We have assembled and we have been focused on getting assets into the bottom right box, which is characterized by long mine lives and low cost.
Assets that don't fit the criteria have been divested shown with the wide circles.
We now seek to continue to aggressively explore with a strong focus on the newly acquired assets to extend the mine lives to be on 10 years.
Moving to slide nine you can see on how this repositioning of our portfolio translate.
We now have strength.
Gross asset life cycles, we have a strong portfolio of producing assets.
With and country diversification, which generate sufficient cash flows to reward shareholders and fund our development and exploration activities.
We have a number of exciting near term growth projects and one of the highest quality greenfield exploration portfolio, which ensures both near term and long term growth.
This is why I mentioned earlier that I'm very happy with the portfolio, we have assembled an abnormal the need for M&A.
Turning to slide 10.
We enter a new phase for our business and growing <unk>, we will be even more guided by our responsibilities. We are busy working on a number of ESG initiatives, which we hope to announce during the next couple of quarters, including renewable energy opportunities carbon emission reduction targets and biodiversity plans.
This forms part of our implementation of the World Gold Council responsible gold mining principles, which this year. We will also be growing alongside with the <unk> and SaaS be reporting frameworks.
We very much see our work as a partnership with our host country and local communities and we will continue to ensure our activities simple socio economic development through initiatives like Echo debt, we see a real opportunity to grow Ecu debt as an impactful investing muddle.
Let me just give you a quick example of one of our <unk> investments the Medici processing plant in Mali, which was commissioned last week many of the world's second largest producer of Sheila and accounts for approximately 20% of the global market and yet maybe you didn't have an industrial processing plant until.
<unk> and a consortium of other investors funded Medici.
These plants have now created 128 direct jobs supports over 21000 female Sheena growers and the aims to benefit more than 120000 women from around money.
More importantly, it enables mainly to progress along the value chain and become a manufacturer rather than just a supplier of raw nuts.
We chose this investment as a game changing investment on the value chain of the Chinas Cal.
<unk> is a big region of Chinas by funding. This industrial facility, we ensure that the women of the calendar region will have a proper buyer of what the growth at the right price.
This is a tangible example of how we are able to live our purpose.
To produce gold in a way that provides lasting value to society.
And turning now to slide 11, this translate into a new vision for the company, which is to be a best in class gold producer and our objective is to create a resilient business to reward our shareholders and to be a trusted partner in the communities where we operate.
To ensure our business is resilient, we are continuing to focus on driving strong cash flow generation, while advancing our attractive projects and exploration and continuing to divest lower quality assets.
For shareholders, we will sustain a healthy dividend yield implement a share buyback program and obtain a premium London listing, which we anticipate will lead to further demand for new investors.
And for this we will increase the proportion of nationals in leadership roles, and hence our climate and biodiversity strategies and accelerate social economic development program.
This element is core to our purpose and our license to operate.
Turning to slide 12, as I mentioned earlier, we're extremely excited about 2021, because it marks a new phase in our journey.
In which we will be focused on building and maintaining trusted partnerships with all our stakeholders enhancing a resilient and sustainable business and rewarding new and existing shareholders.
During 2021 now that we have integrated both on the semi for winter on assets, we intend to define our climate change strategy for the expanded group and incorporate climate targets into our business.
We remain focused on reducing our emissions across the group and are currently exploring several options to incorporate solid projects into our on demand and our critical development project among others.
Having successfully extended the mine life to plus 10 years at two of our flagship assets, who day in EG last year.
Rolling the semi pointer on gas assets and divesting the non core Agnella mine. We are now focused on organically advancing projects within our project pipeline.
With that in mind. This year, we're focused on completing the phase one expansions at some other on Massawa mind, while simultaneously completing the DFS on the phase two expansion.
We will also be advancing the federal on Kalana, a definitive feasibility study to completion in Q4 'twenty one in Q1 'twenty two respectively.
Exploration is an area, where we have been very successful over the last four years.
Thanks to Patrick on the call and his team.
And we remain on track to meet our five year exploration target this year.
Owing to our renewed focus on organic growth and our expanded portfolio. We've increased our exploration budget. This year to focus on exploration efforts on the newly acquired assets and on providing greenfield prospects.
In order to continue rewarding our existing shareholders and attracting new ones. We will follow up on our maiden dividend of 60 million debt was paid on February 5th.
With the implementation.
Our share buyback program to be executed over the next 12 months.
We believe this is an opportunity in time to initiate the program, having just completed the tear on GAAP transaction ahead of a proposal on the listing and we will look to build in dividends and buyback into a longer term capital allocation framework.
Turning to slide 13.
Before we move on to the second section and our results in more detail. We wanted to provide an update on our plans for our premium listing on the London stock exchange, which remains on track for June as we seek to broaden our appeal to a wider group of potential investors.
We believe we have a strong proposition for investors in London, and as you can see with the left hand chart here, we have the potential to be the largest pure gold producing company on that market.
Getting FTSE index inclusion and expect significant indexation demand on the back of this.
Moving now to section two to discuss our record fourth quarter and full year results.
Starting with safety on slide 15, which is of the outmost importance to us we continue to be well below the industry average. However, the three lost time injuries over the past 12 months as a reminder, that we can never become complacent.
I would like to take this opportunity to congratulate the <unk> team, which achieved 20 million hours lost time free and <unk>, which reached 10 million hours lost time free. This is a great effort by the teams on site one we hope to improve upon going forward.
On this next page you can see our annual production trend.
While this slide is a bit busy I'd like to focus our attention on two key messages.
The first point to note on this page the bars, and blue, which represent production from continuing operations compared to the shaded which represent a discontinued operations.
This clearly shows today, we have a completely different portfolio to the one we started with when I joined in 2016 as we have executed on organic growth disposals on the non core assets and strategic acquisitions.
Given these changes we now expect to produce up to one 5 million ounces in 2021.
Second as shown with the reference points in brackets, we have consistently met our guidance over the past day cheers.
And 2020 was no different we are extremely pleased to have met the top end of our production guidance. Despite the challenges COVID-19 as opposed to the industry our staff in our host countries.
I think we've been very fortunate to date as a business, we haven't had to suspend any of our operations and our supply chain hasn't been negatively impacted either sales largely due to our decision to refocus our procurement to the West African region back in 2019.
Most importantly, however, we have not lost on any employees to COVID-19 and to the strict measures. We put in place early on we've been able to contain it and keep our employees safe.
Having said that from a wellbeing perspective, I think all our staff had moments when the lockdown has been tough and it's important that we recognize this and we've put in place values programs to help them.
Increasingly as an industry, we are mindful that zero harm isn't enough and just focused on safety at the mine sites, but also means taking care of our employees mental health too.
Which is why I'm, particularly impressed with the team and the commitment they have shown to endeavour and we'd like to thank them sincerely for their tremendous work over this exceptional year by all means.
As you can see on slide 17, we are equally proud to have met our all in sustaining cost guidance for the last eight years in 2020, we reached the mid range of our guidance. Despite the cost inflation seen with higher royalties, which is of course linked to the gold price.
For 2021 cost are expected to come down to stand at below $900 per loans.
Moving to slide 18, you can see the trend of our all in margin since 2014 more recently our margin has increased by two five times in 2020 compared 2019.
In $2000 in the second half showed significantly stronger performance.
Then the first half due to increased production, which are further explained on the next slide we have also been able to take advantage of the higher gold price environment. Following the expiry of the Goldcorp program at the end of June which saw nearly half of our production capped at $500 per loans.
Moving to our quarterly results on Slide 19, you can see that we had a stronger increase in our operating performance in the latter half of 'twenty as we integrated manner, and Bongo and ramped up production at <unk> day with the addition of Kari pump.
Production in Q4 increased by more than 100000 ounces compared to Q3 to reach a record level, while all in sustaining costs saw a sharp decrease.
On Slide 20, you can see how on the operating performance translated into strong financial performance.
Q4 saw our sustaining margins increased by 28% compared with Q3. This represents nearly the same as what we achieved in Q2 and Q3 combined.
Moving a step further you can see how this improvement translated to strong operating cash flow, especially in the second half of the year.
Our Q4 operating cash flow before changes in working capital increased by $238 million, Australia, 26% compared to the same quarter in the prior year.
On Slide 22, you can see the evolution of our cash flow per share over the last four quarters five quarters, hitting a new record in the fourth quarter.
This is arguably one of the most important metrics given that the nominal cash flow is up in part due to the semi for acquisition.
As you can see we were keenly focused on transactions that were accretive and we believe that looking at growth per share is key to generating attractive returns for shareholders.
Remaining on the same subject of per share metrics you can see on this next page the day adjusted EPS followed a similar trend also hitting a record in Q4.
When looking back to 12 months ago, our EPS has more than tripled.
Another metric we track is our return on capital employed.
And you'll see on page 24 debt is quickly approaching our 20% target.
On page 25, we dive into a bit more details on the buildup to a return on capital employed it is important to note that our current 20% return on capital employed is being impacted by projects and exploration assets, which represent nearly a quarter of our capital employed.
Given that our projects have high IRR. This capital employed is expected to yield benefits in the medium to long term.
On the right of the page you can see the returns by assets both assets that we recently built each year on Hyundai are showing significant returns matter is also healthy at over 20% and we expect <unk> to increase next year given the recent restart of mining operations.
Canada has been waiting on the group metric and as such we have flagged that it has become non core.
I'll now hand, it over to Joanna to run you through our net free cash flow buildup and balance sheets.
Thanks, Ed on this page we start with the all in margin as I've noted earlier and work our way down to the free cash flow and cash inflow for the period looking at the full year numbers, we generated an all in margin of $642 million, which in turn resulted in a free cash flow of $476 million, which is a 12 fold increase over what we generated in 2019 highlighting.
Several of the more important line items, which account for this increase we note that we had significantly less growth capex, which is due to the ACI on bell being finalized in early 2019.
You'll also see that we had a working capital inflow. This is mainly due to increased trade and other payables due to the inclusion of <unk> for the second half of the year and a decrease in inventories due to the reduction of Goldman circuit and at Karma and the decrease in inventories at mine had been doing in the second half of the year.
The increase was partially offset by a decrease in non cash adjustments related to depreciation of the fair value adjustments on the PPA following the acquisition of the central assets.
Tax payments increased due to higher taxes on Angola, which also had a withholding tax on dividends on a year and at Eddie you do it's probably production startup while lower taxes were paid on Hyundai since last year was impacted by installment payments for forward looking periods.
The other operating cash flow and conclude the realized loss on the gold colored and in inflows related to short term forward sales.
During the year. We also had acquisition costs from the standard phone line trying to acquisitions and we received cash proceeds from our mining contractor for previously capitalized expenditures at Karma.
Cash flow generated from investing activities significantly increased for the year largely due to the significant cash that was acquired through the Samsung transaction as well as the proceeds from the sale of mining equipment.
Cash flow used in financing activities decreased significantly during the year due to repayments of debt that was acquired for understanding if a transaction as well as the repayment of the revolving credit facility, which was drawn in the year.
We also repaid the remaining outstanding finance financing obligations in Q4, where do you think that values and now at December 31.
Overall this has resulted in a cash inflow of $525 million for the year.
Thank you John on what I find interesting is that we get a free cash flow yield of circa 20%. If you divide the $476 million of free cash flow by the average weighted shares outstanding for the year and two day share price. This broadly matches the consensus free cash flow yield for <unk>.
<unk> thousand 21.
Yes, that's correct Sebastian now looking at Slide 27, we take a closer look at our cash position build up based on the free cash flow statement line items.
We achieved a net cash position of $75 million at the end of 2020, and net debt improvement of more than $600 million compared with our 2019 year end.
Cash from operating activities was nearly $750 million in 2020, an increase of $450 million from last year.
We invested a total of $160 million into the company's operations and had a cash flow outflow of 71 million for financing activities at year end, we had a large cash the cash position of $750 million. Some of which was then used to refinancing the more expensive triangle debt. Following the transaction close in the first quarter and to pay our first dividend.
Martina on Slide 28, you can see on how our balance sheet improve progressively since mid 2019, we hit peak net debt of 660 million. Following the completion of the build in Q2 2019 and in the short period of time. Since then we have achieved a net cash position of $75 million. This of course does not yet include the balance sheet of <unk>.
I'm pleased to see that we went from a leverage ratio of nearly three times net debt to EBITDA and are now in a very strong financial position I will now hand, it back to Sebastian.
Thank you draw on the continued improvement in our financial position has allowed us to take further steps to enhance returns for shareholders as shown on slide 29, we announced a sustainable dividend of approximately $3 seven per share. This was paid in February.
Following the payment of this first dividend, we expect to declare future dividends on a semiannual basis with the goal of maintaining similar payments until we reach our targeted net cash position of $250 million.
Believe that it is important to build a strong balance sheet buffer to be able to continue to pay a dividend during cycles.
Once we have reached this net cash position, which may be quickly based on current gold prices and the cash flow. We are generating we would be well positioned to increase the dividend.
In order to supplement our shareholder return program, we announced today that we also intend to implement a buyback program.
At current prices, we believe that such purchases will be value accretive to our shareholders on the EPS cash flow per share on net basis.
Moreover, buybacks can represent an effective use of our capital and can deliver enhanced returns compared to other uses of capital on a risk adjusted basis, especially at our current share price.
Through the buyback program, we can purchase up to 5% of issued and outstanding shares on market over the next 12 months.
To facilitate this we have entered into an automatic share purchase program with the Canadian broker.
What I like about the business on portfolio. We've built is that we can now generate enough cash to have shareholder returns, while also being able to reinvest into the business projects and exploration is not one on the other I believe that we have one of the most attractive pipelines of projects, which position us well to.
Keep growing.
The most attractive is the sub debt RMS our expansion, which was commenced and we are currently working on phase one.
Looking ahead, you might have seen the PFS results from both Federico in Kelowna, which were published two weeks ago.
Both are showing plus 10 years of mining potential attractive returns and lower in sustaining cost.
<unk> growth, particularly showing potential for over 200000 loans per year, while culinary showing 150000 ounces a year potentially.
Beyond return on capital employed we are focused on showing returns across the business and these are two good examples we invested roughly $20 million in exploration at federal and it is already showing NPV is over half a billion at a gold price of 50 <unk> hundred.
While the calendar was both for roughly $120 million and it is now showing an NPV of over $300 million.
We believe that this is just the beginning I would like to point out that the Citigroup PFS already looks a lot better than the ETE and on the DFS, where we then continue to add ounces.
I'd say that growth the studies based on only one deposit while we have identified over a dozen other nearby targets.
Given the potential of both assets, we are now progressing on the DFS.
The goal for this year is to focus on cash flow build up the balance sheet and returning capital to shareholders. In the meantime, we are building optionality on the portfolio with these project studies.
Lastly, I want to point out the low capex intensity of our projects compared to the free cash flow debt. The group is generating a new Greenfield project has a capex of roughly 300 to 150 million spread over 18 months.
This represents just a few quarters of net free cash flow that the group is generating based on gold price particular current gold price.
Looking now at the exploration on page 31, you can see how our program as progress since we laid out our five year exploration target in the second half of 16, we have consistently added to our resource inventory at the drill bit with another $2 2 million ounces added in 2020.
Excluding any acquired assets.
And the interesting as well to note that these answers were found at less than $15 per ounce.
Turning to slide 32, you can see our pro forma reserves and resources have evolved during 2020, largely due to the acquisition of semi force Ranga.
On the reserve side that we saw in organic additions at Hyundai plus the inaugural reserves at filler growth following completion of the PFS.
Doing the same analysis on our resources, we can again see an increase in resources at Hyundai and further grow while mine depletion explains the reduction net order mines.
With the acquired assets, we again approximately doubled our resource enrollment from the start of last year.
I'll now turn it to Patrick to walk you through the exploration program in more detail and then Mark to run you through the operations.
Thank you Sebastien.
Hello, everyone on the call.
As you can see on the slide that we are increasingly gain the overall exploration budget from 65 million in 2020 to $70 million to $90 million.
The low in 2021. This is a really on important challenge involving all all of my team and I think the opportunity to thank the shale production and support led by young readers root for their strong commitment to help us in addressing it.
What was the last four years, we have been spending an average of roughly between 12 to 15 million failure on each ETE and one day.
Now.
We have reached all main objective of low key gain at least 10 years of production at close to 250000 non says Oh yeah.
We cannot reduce our spend to roughly $8 million on each of them and to reallocate. Some of these budget to the newly acquired mines with a goal indeed true of replicating exactly all success.
You've seen the bottom line.
Trial that I'll, just focus outside of Greenfield, which remain in Boston, we'd be on tableau data Massawa in one year on when the vessel.
He is evenly spread across all the mines, we see overall significant exploration potential within <unk>.
All wall exploration portfolio, and we are really excited to publish an updated five year exploration strategy later on this year.
Now Mark will talk to you.
Thank you Patrick and Hello to everyone. Adjusted your casing siphoned will and clocking up plenty of virtual peloton models.
Starting on slide 35, and production bridge illustrates the performance for the full year for the pro forma 2020 business.
Daiichi income on all showed improvements in production year on year, while AG ban on which we recently sold declined.
In addition, we added the manor and <unk> assets in the second half of the year, which were strong contributors to our business.
We saw good all in sustaining cost performance, particularly from whom day, which was aided by higher hurdles and carry from and bogy, which reverted from processing of stockpiles to high grade open pit phase by the end of the year.
Moving to slide 36.
The review of our individual mining operations with one day.
As you can see on the chart production increased significantly in quarter four as we benefited from higher grades driven by the oxide ore coming from Kari pump with mining gain in the second half of last year.
Credit goes to the team on site for establishing this pit and ramping up production so rapidly.
All in sustaining costs decreased quarter on quarter, mainly due to the significant reduction in the strip ratio, which more than offset higher unit cost and sustaining capital.
Strong production and on sustaining cost for the quarter topped off a very strong year on day.
Looking ahead to 2021, we expect performance to be broadly similar to the.
The first half of the year, we will see all from the higher grade Kari pump.
Blended with all from Bora and Vindaloo Center.
During this period mining at Vindaloo mine will focus on waste stripping in the second half of the year, we expect to commence mining at Kari west, which will contribute to higher processed grades.
Turning now to EPS on slide 37.
You can see that production has increased between quarter three and protocol.
Driven by increased processing volumes and higher price contribution from stage two of the back to Pete.
Increased mining and processing volumes and a higher amount of fresh rock mined and processed.
Along with increased on a consumption due to the Becker tool resulted in higher mining and processing cost for the period.
All in sustaining costs for the quarter was adversely affected by one off accounting adjustments from prior periods.
<unk> and an increase of approximately $195 per ounce.
Other important activities on <unk>, which commenced in quarter. Four included the sales rise of the TSA compensation net flow lift for the le plaque deposit and construction of the or where the whole road and Cavalli River diversion to enable the next capex Silicon suite.
Sure.
Reviewing issues 2020 performance you can see that production benefited from a full year of operation from the <unk> CIL plant compared to only three quarters in 2019.
Looking ahead, we're expecting strong performance from <unk> in 2021 with higher production guidance.
Slightly higher all in sustaining costs than in 2020.
Moving to <unk> and Burkina Faso on solid CDI.
Open pit mining was successfully restarted in October resulting in a strong fourth quarter.
We saw a significant production increase thanks to the very heart rate all available on restock, which resulted in decreased OLED sustaining costs.
Looking ahead to 2021, we expect production at <unk> at slightly higher on sustaining cost due to the strip ratio increasing significantly in the west pit to around the loss of them on average from the deposit.
Production will continue to ramp up in early 2021, following the commissioning of two large excavators and additional production drills, which will result in a hot strip ratio in the first half of the year.
The GSA price is also planned and under construction.
Moving onto slide 30 non in manner.
Quarter, four production increased slightly due to the greater plant throughput, which was offset by small declines in recovery rates and price due to the completion of the higher price to open pit and greater reliance on feeds from the lower recovery one of it.
In terms of all in sustaining cost we saw a decrease as a result of lower open pit mining unit costs and low sustaining capital spend.
Looking at 2021, we expect a decrease in production for the full year. Following the completion of mining at <unk> last year and one on all stage early this year.
Which will be offset by lower price from line of SaaS stage two.
Underground total lower extraction is likely to remain fairly constant throughout the year with the proportion coming from higher grade stopes, increasing steadily and proportionate reduction in low grade development, all as the year progresses.
Sure.
Turning now to comment on slide 40.
Production in quarter four increase from the previous quarter. Following the end of the rainy season and increased staffing capability true.
Low grades and recovery rates remained flat.
In terms of all in sustaining cost increased due to higher royalties mining unit costs and inventory adjustments, partially offset by an increase in sales and lower processing and G&A unit costs.
Full year production from Palomar remained flat as higher stack tonnage was offset by lower grades and gold recovery right.
All in sustaining cost increased due to slightly higher mining unit cost following the changeover to contract mining and increased declaration cost on account of the recovery characteristics of the GG one.
Looking ahead to 2021, we expect to focus mining activity at the <unk> and <unk> pits with the overall strip ratio is anticipated to increase slightly compared to last year.
There'll be less ore available for the heat leach compared to the capacity of the <unk> system and a force excavator and additional trucks will be mobilized to Campbell in half one in order to increase overall production, which will improve slightly in the second half of the year.
Yes.
Turning to slide 41, and the $7 massawa them on.
And our visit salt on three occasions now over the past six months and have been very impressed with both the caliber of the team and quality of the operation.
Since the acquisition of Massawa activity has rapidly moving that direction with the construction of a 30 kilometer haul road and commencement of mining of the higher grade Sofia pit.
Oman is expected to be higher than in 2020 due to the transition of mining from the $7 lease to the Sofia mine in north pit on the Massawa mining permit.
Planned throughput and recovery rates are expected to decrease slightly due to an increased proportion of threshold from the surface pits.
<unk> will be comprised of approximately 30% oxide and 70% in fresh material.
<unk> is expected to increase in half two this year with high price mined at the Sofa E&ps.
At TSA price will be completed along with ongoing mining fleet replacement and rebuilds and continued establishment of infrastructure at Massawa.
The processing plant upgrades will be at loans in the following two slides.
Moving to slide 42, we announced embarking on our first phase of upgrades to the processing plant, which will be focused on de bottlenecking, the backend to increase the capacity to appropriate price at the higher grade free milling missile.
As part of this and gone through which is the number of points in order.
We are planning to add another electro winning sales to the Gulf.
I, just haven't regeneration kiln to increase regeneration capacity.
Additional acid-washed and loosen columns to increase the total average capacity to settle in tons per day.
And additional leach tanks to increased selection and CIO residents Tom to 32 hours on it.
Gravity circuit to reduce the load on the downstream CIL circuit.
We're also planning to convert one existing leach tank into a scenario changes to increase capacity.
Procurement is largely complete with some packages already delivered to site.
The civil Engineering contractor has also mobilized and already commenced pouring concrete.
Moving to slide 43, we provide some insights into phase two during which we plan to add an additional processing surface for the high grade refractory ore from the Massawa deposits.
The DFS for this second phase is already underway with a focus on a number of optimization opportunities and we expect this will be completed in quarter four this year.
Turning now to slide 44, and an update on London.
Similar to sub one dollar of had three visits to one which is ramped up production very quickly to well above nameplate.
A number of the team were transferred from $7, bringing the good systems and work practices with them.
Thereby enabling a very neat and organized operation to be established.
We believe that the region is still largely under explored with potential to further optimize the mining plan.
Our whole road was established to the from Cora satellite pits in quarter four of 2020, along with the commencement of the resettlement plan. This will enable contract mining some day in parallel with unwind from the noble in 2021.
For 2021, we expect commodity produce between 100 100, sorry, $140 on 155000 ounces for the periods of endeavour ownership as plant throughput and gold recovery rates are expected to decrease slightly due to the greater volumes of official.
Construction of the second sales of adhesives will also commence in 2021.
And I'll hand back to Sebastian now thank you.
Thank you Mark and.
In conclusion I'd like to acknowledge our strong performance of our recent years during which we have consistently met or exceeded both production and all in sustaining cost guidance.
We are very pleased with both the portfolio, we built and our financial strength, which now positions us to enter a new phase in the end of the story focused on shareholder return.
Moving to slide 47, we are very excited about 'twenty one as we have many upcoming catalysts. We are excited to show the Q1 metrics inclusive of the tail on GAAP assets for the first time and I'd like again to welcome all the Taronga team that has joined Endeavour. In addition, we expect to.
A steady stream of positive updates regarding our projects and exploration activities.
On the corporate side, we will be hosting a capital markets day in late Q2 ahead of our premium listing on the London stock exchange.
I believe that we have an appealing investment proposition with strong cash flow and both near term and long term growth. In addition to an attractive valuation healthy balance sheet and strong shareholder return focus.
Like to thank our shareholders, who have supported us during our evolution and we look forward to rewarding them.
With that I'd like to thank you all for dialing in and open the lineup to questions and congratulate Joanna our CFO and the finance team for clothing. Her first endeavour yearend results smoothly. Despite our two major acquisitions. Thank you very much.
Thank you.
And gentlemen, we will now.
Thank you.
Yes.
A reminder, if you wish to ask a question piece price.
In line on your Jonathan.
Thank you.
Please standby, while we compile the Q&A queue.
Thanks to an all day.
BMO.
Thank you Lee.
Joey Glenn Keith.
Yes.
Once again please press.
Please go.
Please go ahead.
Your line that you ask a question at this time.
Brad.
And your first question comes from the line of vs Habib.
Scott.
Please go ahead your line is open.
Yeah.
Thanks, operator.
Gratulation Sebastian in Endeavour team for a good quarter and year end.
And thanks for taking my questions.
That's my first question on is on.
On the dry gas assets.
Can you give us a little bit more color on how the integration is going with those assets, especially some of that on massawa.
And then I'll just ask more questions on maybe move on to booking out for that.
Sure.
Right.
I must say that the integration is going extremely well and has been smooth.
I'd like to say I mean to the.
Strong support from the <unk>.
Executive team of Durango, which is reported to us I mean throughout between announcement to closing.
I think the day said several times that we have a very similar culture in terms of operating model with stronger and with a decentralized model where the Gms at mine sites have the right competencies. The Reits report to operate and therefore, we have been extremely.
I'm extremely happy with the two operations that.
We acquired.
We currently have the two gms, which are in place and are happy with them and the team. So I must say that it's been a very smooth integration. So far our team has been progressively on the project side.
Taking over.
Some other on Massawa extension.
Particular on phase, one where we have a construction team, which is a project team which is on site to start the phase one expansion and our team will be also taking over progressively on the studies for the DFS for the phase III. So again extremely extremely pleased bye bye.
By the integration and also the quality of the of the people that on both <unk> and also in the car.
As the country manager and his team.
Okay.
Any comments on.
How the community as well as the government is kind of.
Accepted into.
Into the countries, especially Senegal.
No I think that.
We had.
Uh huh.
As you know I go very often to West Africa, So I did come true towards Senegal.
The week before the closing and.
I was able to meet index the minister of mine on the President.
Sydney Gala and also.
I did spend a total of time with the local governor around the subdued on Massawa, our mine and also the local chiefs they.
They were extremely supportive what was I think very important needs to reassure them that.
There is not going to suddenly change.
Full framework that has been put in place because <unk> have to say that the relationship on the ground has been extremely good between the subdued MSR team and the different stakeholders. So we are not.
I mean to continue to to.
To maintain this strong relationships.
Alright, Thanks for that and just my next question is on just moving to Burkina Faso in terms of Bongo any updates you can provide in terms of the government participation on the security side on the road to bundle.
Well as you know we.
We're trying not to.
Describe to openly I mean, the security protocols that we have in place.
If you recall really said that in order to be able to restart mining at <unk>.
We had several key criteria, which obviously on the in place otherwise I wouldn't have authorized the restart of the of the mining at <unk>. The first one was a framework agreement with with the government and ensuring that we would have the rights report from the Army police and Jean Marie in securing some logistic corridor.
And also security around the mine site.
One was to ensure that we would have a nurse trip up and running so that we were able to fly in and out 100% of our stuff from.
From the country to site, which is the case today, 100% of our staff on flying in and out.
And the third one was to be able to bring a credible mining contractor, which we did with SMTP, we took over and on beginning of Q4. So.
Again.
Happy the way and those things have been.
Progressing at Abu and you saw the strong results that we got from Google in Q4 <unk>.
Impacted very positively our year end results.
Perfect. Thanks for that and then just moving on to your organic pipeline.
Clearly feels like critical his endeavors next development project as it already kind of fits in your magic box.
<unk> studies are expected by the end of the year, but is there anything you guys are waiting to see over the next nine months.
That's going to be on in terms of exploration upside or or any kind of scope of the project any ultimately color that you can provide on permitting down as well.
No exactly I think that.
Clearly on the study side the objective is to come up with the DFS by year end.
<unk> team on the exploration side have been doing.
Drilling campaign since.
The end of Q4 into the beginning of the year. So we hope that we'll be able to integrate some of the results.
That we would be expecting in June into.
The DFS, which would allow us to continue to improve.
The quality of the projects from PFS, two DFS, so that would be the expectations and on the permitting side.
I'm currently in aggregate growth in Cote d'ivoire, and the objective is to.
We are expecting to be.
Granted the mining permit for critical over the next the next few weeks. So this will be a big big milestone step.
As this should happen over the next day or the next few weeks so extremely happy how things are progressing there as.
You said I think that the fed.
<unk> is starting to be what I would call on endeavour type projects.
Which means over 200000 loans annual production for 10 years, plus and with low all in sustaining costs that should be getting us with stronger <unk> in terms of returns. So yes, very happy with the way. This has been developed I mentioned in my presentation.
We spent so far $20 million on this project and we have above $5 billion of NPV on the on this project at 500.
So this is demonstrating how robust our exploration team can be in discovering strong assets.
Perfect Sebastian Thats It from me and congrats again on a good quarter on a great deal.
Thank you very much.
Our next question comes from the line of Don T marker from National Bank Finance. Please go ahead. Your line is open.
Oh, hi, Thank you operator, and congratulations to the team.
I guess my first question is.
You have this a FEMA initial resource pending and I remember that the Taronga geologists are really excited about FEMA.
I'm also looking at your budget for exploration in 2020, we got 30% allocated for Greenfield projects.
Can you share what we can expect for the maiden resource.
And whether it's going to be a focus target.
Greenfield exploration program in 'twenty one.
Sure. Thank you Dun.
Maybe Patrick I mean is on the line. So can you give a bit of color on the on a female.
We pointed out I mean, the objective is to have some initial resources to come out in the in the coming few weeks based on the latest.
Drilling campaign.
As you said, it's something that the Taronga team has been very excited about.
We tend to be I would say cautious simply because we want to see more drilling results in order to be able to assess the size of this of this target, but but it is extremely encouraging and we will.
Obviously spend some money in 2021 on the on continuing to drill on a FEMA.
Particularly on a comment further on our FEMA.
Ah yes.
What actually are the exploration program on that he might have been going on quite those homely.
Since actually the December.
So right now we all expect we are receiving a lot of that's on and so on so we can take some.
Time to analyze or visa and so on.
I don't know exactly how much will be spending on that team on ECL, but probably we'd be spending.
But on the 8 million dollar on it.
Maybe a little bit more as well.
That's very true.
Growth will come whenever all day, we'd call because we need to do some probably some day.
You should note that leading what we coordinate signs and so on but for US you know us and therefore, if he MA as one attractive project.
Project like another one that we see that a lot of things to do and we are doing equal on the call. We have been stocking again walking on another on Greenfield.
Cluster of license debt consolidators in the past named on that you gave up and we are also going to stop the mining.
In D day, where are we on private exploration license, we liked a lot.
Just you know by young low what you Gary So you'll see yes, we have a significant say for all Greenfield. This year, a few months one of them and we target hopefully Felicia.
Well the total issue from a P muscle guidance.
The second part of the semester I cannot give you exactly.
The time right now, but for sure. It so one of the subjects that we'd be at issue.
Okay. Thanks appreciate that Patrick.
Looking at the.
The year end reserve statement that I see that's abdala.
On the reserves were basically kind of flat year over year, which implies that.
And despite depletion of over 250000 ounces, you manage to kind of maintain the level of reserves.
So what drove this was an exploration success or what's the cutoff grade changed and maybe if you could comment on on some of the your expectations for exploration that SAP dollar on the year ahead.
So maybe mark come in do you want to comment on the reserves and then that should give you ideas on the exploration side.
When it comes to the reserve to $7.
We are still doing a lot more drilling there.
Yes.
Just a slight reduction.
And we do expect that we'll be able to.
Sort of offset a lot of that through the drilling programs that we've got.
Coming this year.
Patrick on the on the exploration.
<unk>.
Yes, again on the exploration.
<unk>.
What I can say that between the sabadell on muscle Wall force.
We are not going to spend a lot of money in exploration on sabadell.
I would say to you because it has been a subject of quite a lot of exploration in the past on the contrary, we do believe that there is still a significant upside on massawa and that's where we are going probably to span the big majority of the $13 million.
We plan to spend on the Massawa Sabadell Avia.
With different type.
Type of targets. The main one for us and for me, which is very important is to try to address.
<unk>, many good quality oxide targets to try to fewer it'll be.
I would say.
The.
Facility expansion on that to ease and comparison on phase one and also to give some breadth to the time of decision, making on whether or not or how we want to policies in force.
It used to because this is going to be a first year.
You are very important and that's why we want to be very aggressive on musselwhite.
Okay, Great and maybe just maybe 1.1 point on to your.
To your specific questions on not seeing I would say the reserve going down despite the depletion.
Technically we.
We've redone the sub elements our reserve at searching 100 gold price, while taronga used to dominate at 1200.
This is to have all our operating assets done at the same level. So part of this flat flat slight increase is due to this 213 under change to be aligned with all the other operating assets we have.
Okay, great and thank you for that and maybe my final question on it while M&A has been.
A common theme throughout 2020.
Even prior to that with the bid for sentiment, but your messaging recently has been more about you're done with M&A is that a is that the case.
Are you done with M&A just through the LSE listing our inclusion into the index processor or what is your sort of.
Your thoughts on M&A over the year ahead or beyond.
Sure I think that.
As we said M&A for me is easy tool.
To get to the right portfolio and we felt that in 2020, we had these those opportunities with the semi flow acquisition in the tear on via acquisition.
To rebalance nicely on our portfolio for the future.
We have now the size $1 5 million loans yearly production more importantly for me. We have this strong focus geographical focus in West Africa, but at the same time, we are now well diversified over several countries and several assets. So I do feel that we have now in hand, all the Reits.
Assets in our in our portfolio and given the success that we've gone through in terms of exploration and the quality of the organic growth pipeline that we have I don't see the use in the future for M&A. So this is why I've been insisting on the awesome windows, where M&A can be.
Tractive tool to get to the right portfolio, reducing debt, we have now on the right portfolio and the future for endeavour will be on the organic growth.
In.
West Africa.
Okay, great. Thank you for that that's all from me gentlemen.
Thank you Doug.
Our next question comes from the line of Anita Soni from <unk>.
Please go ahead your line is.
Good morning.
I'm not sure if that Sebastian can answer or maybe Joanna or mark I'm not sure, but I just wanted to go through the purchase price allocation.
On calculation that's in the integrated MBNA.
Financial statements. So this is with respect to sign off on.
I see the mining interest went down by approximately a little over 10%.
You have outlined your key assumptions that you haven't shown what they were previously on the preliminary.
Number can you just tell me what you changed that.
10% reduction I guess on drilling in on the depletion expenses lower than I was looking for.
And there was some restatements for Q3 Q4, and then the second part of that question would be could we expect something similar once the trend on them.
On acquisition closes so not necessarily on the first set of financials, but when would we expect to see the final purchase price allocation for that.
Sure John on you want to take this one.
Yeah.
Happy to take this off line and we can provide more details, but just on on overall basis. The purchase price adjustment from Q4 relative to Q3, just reflect revisions to the mine plans that were undertaken in the fourth quarter based on our better understanding the operations subsequent to the acquisition on a mine by mine basis overall, the valuations are relatively consistent with the preliminary evaluation.
Valuation at Q3, and there's not really any substantial differences. However, we did just reclassify that amount the valuation difference to goodwill in Q4, rather than reflecting it in the mining interest, which we've done previously and on.
I'm happy to discuss that with you more offline to provide a little bit more detail.
Okay Alright.
Alright, So I guess I'm, just trying to figure out why.
You had to move something from the mining interest and debt.
Goodwill.
And which one I can see these assumptions on I see obviously, you've done the mine plan again, I'm, just trying to understand which went on.
That's different from your average.
And we can take it offline, but essentially it's just the the recognition of the difference from the deferred tax calculation, which is an accounting accounting rule, which we reflected it in good well rather than the mining interest, but there's no real impact on the overall valuation of the.
On assets themselves, so, but I'm happy to chat with you offline to provide some on detail.
There are different I can see that there is there was deferred tax of $24 million I'm trying to drive on this 150, so yes lets take it offline.
And part of the question second part of the question was similarly on the trend of transaction would that be with the audited financials or will the Q1.
Financial statements. When this is all like when you guys put out the Q1 financials. On this is closed we will not reflect the true purchase price allocation or should we have to wait on the next set of audited financials next year.
We'll be looking at the <unk> purchase price allocation again in Q1 to reflect any changes in the Q1 statements and then for the <unk> acquisition, we will have a preliminary purchase price allocation and the Q1 financial statements and we'll then we have 12 months on to finalize that after the acquisition. So well then.
On that after that but we will have a preliminary allocation in the Q1 statement to make.
Okay. Thank you.
Your next question comes from the line of Kiwi, Amit <unk> from Canaccord Genuity. Please go ahead. Your line is open.
Hi.
Hey, good morning, everyone. Just a question on on Massawa Phase III study are there any significant changes youre expecting there relative to try and get ahead laid out in terms of debt.
Configuration and secondly.
Do you see.
Where would you see potential upside opportunities at Massawa.
Sure Mark I mean, you want to come from.
This is <unk>.
And there was a number of tradeoffs studies trying ahead.
<unk> that we are just going through the process of concluding and there's certainly no surprises so far.
Net income of sea trials.
Trade off studies for more just to confirm.
In case, there was a thought that perhaps something wasn't being considered the first so far everything's tracking quite well in terms of what Turing had thought and certainly what we're seeing.
And the flow sheet I think we are still looking at adding a gravity circuit, which should help increasing a bit the recoveries.
But.
Beyond that.
So far I mean, no no big changes and the other piece.
There is more ex oxide and.
Obviously, the exploration efforts for this year.
Very important to us to give us that flexibility as well.
Yeah, just to appropriately size the.
The <unk> plant.
Okay, Great and then maybe back on the project pipeline again looks like it's set to close at the front of the line here, but looking at the other projects you picked up from some of the flow and you know obviously you have seen mining and Gordon.
From triangle.
Which one of these would you would you would you say on more advanced than you know are there any timelines on.
Some of these debt more on the front of the line and some of the other ones that potentially could come ahead of collateral.
But I think that we are blessed with the size of the pipeline. So we'll go through those studies in a step by step obviously, we're not going to build full projects in parallel.
And on 2022 will probably be focus on the phase II of substance on Massawa, and probably physical although with weighted for the final results of both DFS between colonial and further growth and in parallel we are preparing the next day.
Ex projects.
We will have ago on looking at the potential integration of.
The old inhale into into Hyundai, So there will be a bit of drilling in med test later to have said this and I think Ben two is progressing well on in terms of obviously size on we've got close to construe million ounces of inferred resources there.
So we'll continue.
To work on the on those on those subjects.
Seeing that as.
As we mentioned earlier in the quarter from a FEMA is also an important one.
Yeah. So we are progressing step by step in on each of the key key potential future projects that we have in the pipeline.
Great. Thank you very much.
Your next question comes from that low.
Listen windows from bankruptcy.
Please go ahead your line is open.
Hi, Thank you, operator, and Hello, Sebastian and team.
Can I I'd like to start with a question on your growth.
Look.
And.
Maybe on sort of jumping ahead of your capital markets day here, but.
If you look out five years and think about your production.
Do you.
So your objective.
Maintaining $1 5 million ounces, a year or do you see your objective.
As growing that production level.
But it's a fair question and I think that will respond to part of that during our capital day I'm not driven by production size.
And this is why we've been continuing to on a regular basis divest what I would call non core assets and if we wanted to be 2 million on sterno gold producer, we would be by keeping the assets that we had already in the pipeline in the in the existing portfolio, but for me it's about maintaining.
Consistency around the quality of those assets.
With mine lives and with low all in sustaining costs, we clearly have the potential in the portfolio to continue to grow production going forward.
So we're starting with a strong base with this one for $1 5 million loans and obviously given the.
The strength of the pipeline that we have the ability to continue to grow beyond.
Great.
And.
Just touching on something you mentioned there about adjusting the portfolio you.
You mentioned that Karma is now non core I'm. Just curious is the sales process started and can you provide any commentary on how that.
As perhaps gone.
Okay.
The good thing in most of the assets that we divested in the past is that we didn't necessarily have to go through a dedicated process. Because we were in fact approached by each time by several.
Candidates buyers, so I think that.
We've made enough clear to the market that Karma was was non core we've been approached already by several potential buyers.
We are reviewing the different options and we know that.
If we are able to meet the criteria that we won't we'll proceed if not you know we have to continue to.
Enjoy the cash flow from from Karma.
Yes that makes sense.
And then just also on Karma I mean, I imagine that the.
The stream on Karma is partly what plays into the the lower return has there been any discussions around.
How that stream looks going forward or.
Perhaps the need to adjust it for any buyer to get comfortable with a price day you guys are happy with.
So the come on stream is in fact.
Decreasing significantly in March this year so.
The end of the of the bigger.
B cost because there'll be low below 5%.
It's.
It's pretty.
Its becoming I would say attractive for a buyer to step in to step in now.
I think the the returns as you pointed out is partly.
The stream, but it also if you recall I mean significant capex that we had to put on the plant.
To.
Get the prolonged trades from from the initial true gold design.
So overall on this had an impact on the capital allocated to Tacoma.
Yes, good point and.
Well taken.
And then maybe just on the capital return I think the buyback makes a lot of sense and.
Certainly a great your comments on it on a risk adjusted basis.
It's a very competitive return and I guess my question would be.
Why not.
Maximize the buyback I think with the TSA actually can go up to 10% on an annualized basis.
[laughter].
It's interesting to see debt when you start to generate good cash flow and have a good balance sheet debt.
You said then you have.
The request for a <unk>.
Very high dividend yield.
And or in some time and very high buybacks. So I think we're just trying to be realistic on.
What we can do.
This is a 12 month program, which means that we can renew those programs going forward.
And we can always request an increase in the program next year, but.
But we need also to be realistic to ensure that we can properly allocate the cash flow that we would be generating those two exploration on our future projects and maintain this healthy dividend yield that we've set up and at the same time being opportunistic on the on the buyback depending on where our share prices and clearly.
There is defense debt.
Now is a good time for you know for a buyback given where our share price then.
And it would be would it be fair for from myself.
Other investors.
Alright investors, rather to assume that at a 5% level that buyback is likely to be.
Fully used.
Over the next 12 months.
I think it's it's difficult to comment because it will depend on how the share price gold price you know we've evolve over the next day.
Next nine months, but.
The reason why we set five percentage because we believe that it's realistic.
We've seen in Canada looking at all the precedent has been I think a lot of companies announcing buyback at 5% or 10% and in reality executing on 20% of their envelope. So I think that we wanted to be realistic and make sure that.
Market expectations are around <unk>.
Commitments that we do in debt.
And that we make rather than.
Putting high numbers and getting people disappointed because we know they are executing along along those lines. So say, 5% is a good start is realistic and clearly now is a good opportunity in terms of timing and we'll see how it works on.
After the lifting we would be expecting and a strong demand as part of the listing going forward.
So we'll.
We'll see how the second half of the year would work for forfeit are.
Further buybacks.
Yeah that makes a lot of sense.
And then just continuing on.
Capital returns with the dividend.
On the release mentioned that the low man Chad.
The transaction will close in Q1, so mathematically you will have obtained and exceeded your $250 million net cash position once that closes so.
With that just on the horizon.
I imagine you've talked quite a bit about future dividend levels can you provide us any guidance in terms of what gold price.
You may be using in terms of thinking about setting a dividend.
First of all and then as a follow up to that.
When you think about it.
On a future dividend.
And a potentially higher dividend.
Do you think about setting a dividend at a level that can be maintained over the long term or could we expect some variability in the dividend.
Sure. So I think the offshore elements in your comment first.
We're expecting to receive the $200 million.
Investment from from the mantra is part of the closing of the tenor on get transaction, but recall also that we're taking over.
With more than $370 million of debt free.
Taronga.
So this has an impact I mean compared to the year end results balance sheet, which as you know.
Impacting it but given the strong cash flow that we're expecting depending on gold price.
Aimed to get quickly to this $250 million.
Net cash net cash position as part of the listing what we said is that on and this will be highlighted in our capital day.
We are looking at our capital allocation strategy that we are discussing.
The board and I think that this capital allocation strategy will give better visibility on how we intend going forward two to allocate.
The companys cash flow between the organic growth in instruments for returning value to shareholders.
Including potential.
More director that would say policies around free cash flow, which is distributed centered on free cash flow distribute to shareholders and so on.
Gold price is obviously, a big driver into debt, but the good thing with the quality of the portfolio that we have is debt.
Whether it's a fortune 150 100 or above we.
We're still generating pretty strong cash flow debt gives us confidence on this is why we came out at the end of Q3 was the dividend policy gives us confidence that whatever the gold cycle, we should be able to maintain a healthy return policy to shareholders and at the same time be able to finance.
Our organic growth.
And you would expect that return policy policy to be like a stable dividend. So one set it would likely remain at that level or higher going forward.
Yes, exactly I mean, what we said is we want to keep a minimum of one 6% yield net debt.
It was based on the on the share price when we when we issued the first dividend payment I think it's equivalent to about one 8% dividend yield today at current share price. So the intention is to have a minimum going forward dividend yield which is minimum equivalent to this one and growth.
Growing progressively as we as we pile up cash on the on the balance sheet.
Great and maybe just one more from me on the pipeline.
And thank you for that chart on all the debt.
Projects, the greenfield through to the existing assets, it's very helpful to visualize what you have on the pipeline.
Which of course is very robust.
Nevada is one that jumps out for me just because it's.
And as it exist today it is rather small in its size hasn't grown much.
And several years now I'm just curious if you still look at that asset as as core and what do you see is.
Potential exploration upside there.
Sure I think the reality around the bango is that semi flow hasn't done any work around the bank for the last 18.
18 months.
From a security standpoint pneumonia is not in the easiest part of bulking up.
So this is why it hasnt been.
Our priority on priority with <unk>, but we hope to be able to.
<unk> the manga.
In our exploration program on probably second half of the year or in 2022.
And as you said I mean, it's starting with a pretty attractive numbers because you've got the 800000 onset seven grams per tonne plus so it's a.
It's an interesting.
Starting point I mean to look at the asset so Patrick and his team needs now to to be able to complete another set of drilling program to see the potential of this asset.
Yes, no I can't disagree, though theyre certainly very exciting grades okay. That's it from me. Thank you so much for taking the question Sebastian and I look forward to our next discussion.
Great. Thank you Lawson.
Your next question comes from the line of Ben.
<unk> from Jefferies.
Please go ahead.
Good afternoon.
And on the rest of the team first of all let me congratulate you on a fantastic year for your shareholders.
Delighted with what you've achieved.
I do have a number of questions. If I may So festival in 2016, you published five year exploration plan, which is coming to completion. This year will you be publishing another similar plan on if so roughly when.
That's a good a good question for Patrick there's been a bit on the grilled on the on this.
We said that obviously with all the changes in the portfolio and as we are getting into the two day last year of our first exploration strategic plan.
It would be nice to have this second exploration strategic plan that will include.
The new assets from similar flow and Taronga. So I would expect that to be probably as part of our Q3, So probably in September or October.
We will have a way to present, probably the conclusion of our first exploration strategy plan.
This will give us time between now and September October for about six team to assess all the different opportunities in both of the semi flow and the taronga portfolio.
Particularly as there is there more you want to say on this.
Oh no on all thank you all we'll say about you know basically we consider all mall. It now that we have competed a little bit ahead of schedule of what we wanted to do.
On what was a basically a back in 2016.
The exploration portfolio in the law.
On this portfolio, we have been delivering almost $8 5 million answer. So we are very close to the target until he made you should be okay.
Right now I'm working with my team here, though.
I think writing all the upside potential we were seeing on the same muscle.
Uh huh.
Syed on.
The main activity right now is a dedicated to a incorporating on desktop.
So when you look at that you know I'll see what I said that we plan to publish or to speak you know either.
The first semester or you'll increase fees on new countries U K. So I shouldnt plant that will be beamed with more lasers same approach on the one that I use.
Four years ago, when I beat.
I'll now of exploring how to flow.
Very good that's certainly a plethora of targets to prioritize now.
And next question relates to the recently published feasibility studies for <unk> on Kalana.
Looking at those fetter crone looks pretty much ready to go subject to the DFS.
On the other hand.
I noticed that production would drop off after the first few years would you anticipate needing to do more exploration prove up more resources Kalana before.
Potentially moving ahead with that project.
Exactly Mark debt, that's the objective I mean, we all.
Ways.
Interested by Corona in particular because of the prospective EBT.
Color on are there is a pretty large land package and particularly on all of the soft spots, which hasnt been drilled yet.
We've got 16, we've been quite busy in focusing over the last.
A few years I would say and extending mine lives at existing core assets now that <unk> seems to be on track to become I would say in endeavour type project.
This will probably give more focus.
On the road for a bit more color exploration drilling campaigns.
In particular.
Once we will have a sense that political will go first.
We're not going to launch or three construction in parallel debt means that we will have a bit more time on kalana to start increasing.
The resources, there and hopefully get it closer to what I would call an endeavour type project.
Above 200000 homes on newer production so clearly the intention is.
To be able to progressively increase some exploration there.
Good day, thank you.
Our next question relates to financing.
Now we're in a.
Net cash position the convertible bond was a very good instrument for the company when it was issued.
It seems to me that maybe it's now outlived its usefulness.
It be redeemed early.
And if so is that something that day.
The board is thinking about doing.
Yes completely market.
We said when we.
When we came up with this convertible bond debt.
This was a way to find.
Finance, a construction phase and debt on the back of the cash flow expected from <unk>.
On the assets once once built on commission.
We would be in a position to analyze a.
Trade off and in particular, having the flexibility to buyback the bonds. So we have the capacity in our converts to.
Debt to buyback the bone and true end to basically redeem in cash shares or cash and shares.
We objectively I must say that we.
As part of the buyback that we announced today, we looked also at our.
Alternative scenarios and buying back some of the convert actually in terms of returns buying back shares had.
Much much bigger returns. So this is why we came out this morning with the <unk>.
Share buyback approach.
But we still have the flexibility going forward too.
Called the bonds when we want so I think this is we this is something that we're monitoring and this is part of our capital allocation strategy.
As a shareholder myself.
If I can avoid.
On the dilution of the.
The convert great in particular as we continue to grow.
Strength of our of our balance sheet, so fully I fully agree with you and that's on the radar for us to monitor over the coming months.
Good thank you.
Couple of concerns I have about the boat at the moment.
Firstly.
The conversion option, that's embedded in it tends to distort things as the share price moves a little bit.
And also that some of the bondholders seem to be operating delta hedging strategies, which could affect the share price. So it would be nice mining.
As to get rid of it to remove those distorting factors.
As you say if you estimate.
But buying shares back is.
More shareholder value additive then so be it.
Thank you.
And then.
Pet Ultimate question.
With the phase one.
Expansion of Sabadell on Massawa.
On.
Adding 900000, sorry, 90000 ounces of production.
Would that mean that from 'twenty to 2022 onwards, we would expect production from from that assets in the region of 400000 ounces is that correct.
Those are the.
The expansion of the phase, one which is debottlenecking the backend of the CIL allow us to.
Basically increase on a quarterly basis from 75 to 90000 ounces in terms of production.
So we'll see obviously the full impact of this of this growth in 'twenty two given that we're expecting to have these phase one commission.
Across Q3.
The full impact in Q4, and therefore Q4 will be a good proxy for what to expect.
2022.
If we look at the nine.
90000, non sono per quarter.
We'd leave sub.
<unk>, probably around 360 to 372000 loans for 'twenty two.
Thank you.
And then my final question is on an ESG matter.
Which is most of the operations.
Open pit.
Which is rather ugly mining method.
What are your thoughts on rough plans on rehabilitation of the open pits when mined out.
To comment.
Generally I mean, one of the things that it can be an interesting question way by it does make sense. If you can backfill pit.
There is also a reluctant.
Sometimes from government to back on.
On the basis that you could be sterilizing future resource. So we make sure if we I kind of do a backfill strategy that we really have done the work for $2000 gold price. So we do have examples.
We've got sorts on PS.
Even at one on some of the tiny little backfill.
If it makes sense, we will always look at bats on pizza because that is the major weighted sort of put back what you've done but obviously.
Doing that you would never do it.
Strategy, because you really handling the entire the wife's twice.
On.
It is it is a tricky one we generally do rehabilitate whitestone, we generally put bonds around pits and.
Pits to fill up with water today do become good water sources for those areas.
On.
One thing that I've done in Western Australia, which we havent necessarily looked at yet.
Is being able to put tailings into pits.
That really depends on water tables, and many other things.
Anything that you can utilize to sort of fill pick up that volume and not disturb moorland messages, obviously something that we.
We do have and we can probably look at a few further options as time progresses.
Very good thanks, very much true ounces thats very useful.
That will conclude today's Q&A session I would now like to turn the call back to MS. Kennedy Chief from.
Any additional cash.
Remarks.
Yes.
As there are no more questions, we'll finish the call I will of course remain available to address any additional questions off line have a good day and stay safe.
That will conclude today's conference call. Thank you for your participation ladies and gentlemen.
You may now disconnect.
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Okay.
Okay.
Okay.
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Yes.
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