Q1 2021 Pretium Resources Inc Earnings Call
All participants please standby your conference is ready to begin.
Thank you for joining us this morning.
I'll come to the Protium resources first quarter 2021 conference call.
As a reminder, all participants are in listen only mode and the conference is being recorded.
After the presentation, there will be an opportunity to ask questions. The conference call today is being webcast live and available along with the presentation slides on <unk> website at P. R. E T I B M Dot com.
I would now like to turn the call over to Mr. Jacques Perron, Protium, <unk>, President and C E O.
Please go ahead.
Thank you good morning, everyone welcome to our first quarter 2021, operating and financial results Conference call.
The first quarter of 2021 has proven to be very challenging.
Thanks to the dedication of our team the support of our contractors. The contributions of our first nation community partners, Our health care provider every day of medical NBC Norton Health operations continued throughout the COVID-19 outbreak and we delivered a solid performance under the circumstances.
On today's call I will briefly touch on some of the key events of the first quarter.
We'll then turn the call over to Patrick Good day, our chief.
Operating officer to provide an overview of our production results and the progress of operations.
Following of that Matthew Quinlan, our Chief Financial Officer will go over some of the financial highlights of the quarter.
Following the quarterly review I will provide a summary of the recently announced underground expansion drilling results before closing off with a look ahead to the remainder of the year.
At the end of the presentation, we will open the call to your questions.
Before we begin note that our statements contain forward looking information and future oriented financial information based on certain assumptions and subject to risk factors.
I refer you to the cautionary language included in our news release of yesterday as well as the management's discussion and analysis for the same periods.
These are available on our website and have been filed on SEDAR. Please note. All dollar amounts mentioned on this call or in the U S dollars unless otherwise noted.
The health and safety of our work force remains our number one priority last year, we launched an extensive companywide the health and safety plan to transform our safety culture.
Iran. The fourth slide you can see our rolling 12 months lost time injury frequency rate and our total recordable injury injury rate, which is starting to trend in the right direction.
There is still room for improvement and it will be an ongoing process as we continue to focus our efforts to emphasize the importance of safety and ensure it is at the forefront of everything we do.
Despite the obstacles faced in the first quarter, we were able to maintain the operations and produce almost 86000 ounces of gold. It was yet another profitable quarter and we generate eight generated nearly $51 million in free cash flow.
We ended the quarter, where the cash balance of nearly 200 of $9 million and the subsequent to the end of the quarter. We repaid the remaining 38 million on the revolving portion of the loan facility.
We had several major initiatives underway, such as accelerating underground development infill drilling and increasing drilled up stope inventory with the antenna to improve operations at Bruce yet.
We're also making significant investments in future growth, which includes construction of the upgraded camp facilities.
The assay lab and integrate the of course shack, along with resource expansion of near mine exploration drill programs.
As most of you are aware of COVID-19 outbreak was the clear at Bruce Jack during the first quarter we.
We have been lucky enough to make it through 'twenty 'twenty with zero cases of COVID-19 that Bruce Jack.
But with the rising number of cases in BC and Canada. It's unfortunate the finally got the site.
On February 10th BC North of in House declare a COVID-19 outbreak at the Bruce Jack mind.
To protect the health and safety of our work force and local communities. We quickly implemented our management plan, which included enhanced protocols such as the restricting travel while site wide testing could be completed.
In collaboration with our local indigenous partners NBC Norton health additional procedures were established including ongoing testing of all employees and contractors.
As a result of this cooperation and the quick response of our team. The COVID-19 outbreak was declared over on March 21st with no new cases of reported.
Following the outbreak of vaccination program was launched at Bruce Jack under the guidance of BC Norton Health.
Although mine and mill production continued throughout the quarter the outbreak during the outbreak it was at a reduced rate.
We will continue to closely monitor the situation and provide updates as appropriate. This is a reminder, that COVID-19 remains of risks and could have a significant impact over a short period of time.
I will now turn the call over at the Patrick to provide an overview of our operations for the first quarter of 2021.
Thanks, Doug.
Turning to abrasion and slight Inc.
The first quarter, we processed approximately 341000 tons of foreign through the mill equivalent to 3790 tons per day.
The system slightly below our objective of 38 on the tons per day as a result of the COVID-19 outbreak.
This bullish on growth for the first quarters average of one of them 88 per ton milled and increased from the first quarter last year the.
The cost increase due to the strengthening Canadian dollar and the extra cost associated with the COVID-19 safety protocols.
The change in the exchange rate increased pollution caused by about $16 per ton in the COVID-19 safety protocols resolved in the niche of $8 per ton milled.
Partially offsetting this was approximately $4 per ton of lower cost due to the lower levels of pollution drilling as well as low a blessing and grown the support cost.
Turning to slide nine as you can see our quarterly rate of underground development has historically been trending up quarter over quarter in the first quarter of last year of the onset of the COVID-19 pandemic told all of our momentum.
And then in the first quarter of this year or rate of development was impacted by the COVID-19 outbreak.
Although we achieved the targeted rate of 1000 meters per month. This was the word than our anticipated performance.
We will be increasing our affords to push on development to get back on track with our plan with our 2021 plan.
Despite the challenges we faced this quarter was silk presumes, nearly 86000 ounces of gold, which is less than 1% below the guidance range midpoint for this year.
The mill feed grade average 8.2 grams per tonne and the recovery rate was 96, 8%.
As a result of the impacts of the COVID-19 outbreak on operational activities combined with performance issues with several of stroke Stopes Zurich from the following the outbreak we greatly expect we currently expect go pollution and grade in the second quarter to be below of where garden ridge.
On an annual basis, but days, although we're bullish on the forecasts we remain on track to be within our full year production guidance range.
To enhance our understanding of the high grade variable deposit the and improve the predictability of Photoshop, we of increase the density of drilled that we collect.
Diamond drilling progressed through the quarter with 67 drills on site conducting in the field and resource expansion drilling the rate of drilling was reduced during the COVID-19.
Great, but we still complete more than 29000 meters of diamond drilling.
We are adding the seven drill underground ketchup, our on our plans for the year.
To optimize production and improved blending to balance quarter to quarter fluctuation. We have maintained an accelerated rate of underground development to improve underdrawn access the.
The increase of Loveland read expand our access to new areas of the deposit and provides the space to build an inventory of drilled of stope.
Our target is to have about 400000 tons of drill drill stopped ready to be blessed by the end of the third quarter of 2021. This.
This is roughly equivalent to a full quarter of production.
At the end of the first quarter, we of 276000 tons of drill of stope inventory says, 23% increase from the previous quarter.
Turning now to turning now to slide 13, we have of section view of the underground development looking north until this year mining of the limited to only two months of resilient buzek.
And wanting a risen consist of fifth of four mining level each of about 30 meters.
Earlier this year, we began production from the lower arisen from the 10 80 level, we know of activity operating from three mining horizon.
We are continuing to develop access into the fault zone, which is just west of the rules I fault on the 12 under the trailing 20 levels, we expect to be mining from these two areas later this year.
This would increase access from mining from two five from three distinct area and will provide significantly more flexibility in terms of production compared to previous year.
Yeah.
Now I will turn the call over to Matt for an overview of our potential performance.
Thanks, Patrick.
Financial results were strong in the quarter.
For the quarter, we realized an average gold price of $1804 per ounce, an increase of 12% over the first quarter of 2020.
Revenue increased to $142 million.
A similar 12, 5% increase compared to the first quarter of 2020 due to relatively consistent gold sales across both periods in the first quarter 2021, we sold approximately 82000 ounces of gold.
EBITDA in the quarter was $68 1 million as compared to $56 $3 million in the first quarter of 2020.
Net earnings and adjusted earnings were both 14 cents per share for the quarter, a significant increase over the five and eight cents per share respectively. In the first quarter of 2020.
Net earnings increased primarily due to higher revenues decreases in interest expense and deferred taxes, partially offset by increased production cost.
We changed our definition of adjusted earnings and.
Adjusted earnings per share effective this quarter and all prior periods have been restated to reflect this new definition of on slide 16.
We have simplified our definition to make it more comparable to our peers and as a result, we're not adjusting for certain non cash items, and the new definition, including deferred taxes and amortization of prior financing financing cost.
Now the end result of this is that our revised definition lowered adjusted earnings per share by eight cents in the first quarter when compared to the prior definition I E under the prior definition at all.
Our adjusted earnings per share would have been 22 cents per share in the quarter as this page shows.
Lastly of note on the MD&A, the we've completely reformatted and rewritten the document in the first quarter of with the aim of giving you our shareholders an improved understanding of our business results and outlook.
Turning to slide 17, the year over year increase in EBITDA helped drive cash flow from operations to $61 million per the quarter, an increase of profit of approximately 20% over the first quarter of last year.
Operating cash flows reflect the increase in production cost for the reasons noted by Pat included the COVID-19 cost.
Related to the ongoing prevention measures and the outbreak.
Total capital expenditures in the quarter on a cash basis were $10 6 million.
Free cash flow was $51 million as noted by Jack for the quarter nearly a 22% increase over the first quarter last year liquidity continued to grow in the quarter. We ended the quarter with approximately $209 million of cash and available liquidity of approximately $369 million.
Debt as of March 31.
Price primarily of bank debt of approximately $155 million and convertible notes of $100 million.
Subsequent to the end of the quarter, we voluntarily repaid the entire remaining amount of $38 million.
<unk> debt on our revolver, leaving the $200 million revolving portion of our facility Undrawn.
Turning to slide 18, all in sustaining cash cost in the quarter of $1005 were consistent with the comparative period in 2020.
<unk> for the fourth quarter of 2020, where it was also consistent of 1000 of $9 per ounce.
As Pat noted production cost increased relative to Q1 2020 as a result of the strengthening Canadian dollar COVID-19 cost, partly offset by lower development cost.
More favorable terms under our offtake agreements continued contributed to a saving compared to the prior year and as a result of the COVID-19 outbreak in the quarter levels of sustaining capitals were slightly lower than the prior year and most notably below our expectations. So as a result of the Orleans sustaining cash cost per ounce sold in the quarter was below our guidance range for the year.
That's something we don't expect to be the case from the balance of the year.
So turning to slide 19, we're reaffirming our guidance ranges for 2021, both operationally and financially.
As previously mentioned, we expect gold production in the second quarter to be below our guidance range on an annualized basis, However, forecasting gold production and grade for the full year remains within guidance.
We expect to be at the top end of our guidance range of $55 million to $65 million for expansion capital and at the low end of our 50 of $55 million range with of course sustaining capital.
The levels of capital expenditures noted here in the first quarter, reflecting the effects of COVID-19, but also please remember that the second and third quarters typically see higher levels of capital expenditures due to the summer construction season that Bruce Jack.
With that back to you Jack.
Thanks Mac.
2020 of regional exploration program on the company's claims included of promising discovery of epic or mall style gold mineralization at the hanging laser zone.
The 2021 near mine exploration program will focus on the hanging laser zone, which is easily accessible from Bruce Jackson.
10000 meter surface drill program is planned for this summer to test the high grade corridors.
Additional near mine exploration. This year will focus on this round of Eylea altered outcrop that extends four kilometers from the hacking laser zone to the northwest of Bruce Jack to the bridge zone to the South East.
In addition to the exploration of work 8000 meters of surface drilling is planned to test the zone surrounding Bruce Jack. This program is expected to start at the end of the second quarter.
The 2020, one Bruce Jack definition and expansion of drill program is anticipated to total approximately 195000 meters of drilling comprised of reserve definition 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 of our deep Lori the underground and as Patrick mentioned of seven as been added the catcher.
During the summer two surface drills will be added.
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 was conducted at Bruce Jack since production started.
Ear looking at Slide 23 is a cross section of the V O K deposit and our underground infrastructure looking west the results from the North block Twenty-twenty resource expansion drill program intersected high grade gold as far as the 300 meters from the current resource out and as high as 2590 grams per.
Kind of go over one meter.
As we reported earlier this week in 2020, we also completed about 14000 meters of resource expansion drilling outside of the resource shell from the 10, a day level to the east west and at debt below the V O K deposit.
Looking at Slide 24 is another cross section of the V. Okay.
This time looking north of the results from the <unk> level drill.
The program included high grade gold interest as far as 200 meters below and 200 meters east of the current resource shell and as I as the 1635 grams per ton goal of over one meter.
The results from the North of <unk> zone, and the 10 80 level continue to highlight the potential to expand beyond the valley of the Kings deposit.
We intend to continue of resource expansion drilling through 2021 with 82000 meters of drilling planned.
The follow up drilling within the Nord Zone, and 10 80 level is currently underway with 24000 meters already completed.
As a as the results are pending stay tuned.
Looking ahead to the rest of 2021, we will continue to emphasize safety. We will also maintain our strict COVID-19 safety protocols to minimize the potential for another outbreak of site.
Based on our production and gold price estimates, we expect to generate a significant amount of cash this year, which will be used in part to reduce debt.
We look forward to continuing to announce derail. The results. We will continue to provide results from the 2021 resource expansion drilling throughout the year as they become available.
Looking further ahead, we will continue to advance our exploration efforts near mine with the intention of growing our existing resources.
Thank you that concludes the formal presentation I will now turn the call over to the operator, who will open the line for your questions operator.
Thank you.
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 will hear of tone acknowledging your request.
Think of Speakerphone, please pick up your handset before pressing any keys to withdraw your question. Please press Star then two day one.
For a moment as callers join the queue.
The first question comes from Obs Habib from Scotiabank. Please go ahead.
Okay.
Operator, hijacking that Jim and thanks for taking my questions.
Hey, good morning, all of it.
Yeah, Hi, and just a quick couple of quick questions from me.
I believe you kind of touched on the all in sustaining cost.
Obviously, they were lower in Q1 due to COVID-19 now will we see a little bit of of catch up over here on the cost remaining quarters for the year or is it going to get kind of pushed out.
As we go quarter to quarter into 2022.
I think the best way to look at it of ashes were reaffirming our guidance for the year. So we were below that range.
So I think you should use just the guidance for the for the year going out we think we're going to be within the guidance for the year I think thats. The easiest way to answer that question and it was really sort of the sustaining capital level of in the quarter of that debt.
That resulted for us being below guidance in the first quarter.
Sounds good just wanted to double check on that.
And then just moving on to all of you see there was a lot of drilling done in Q1 at the 40000 meters.
A lot of that was infill as well any kind of.
Color you can provide in terms of those infill results, how the paid out compared to your expectations.
Well, we are actually the the drilling is the he was going well not as fast as we expect to true up because of the mainly because we were impacted by COVID-19, but actually we are in all of the result, or wherever we have a lag between the laboratory of resolve the progress of result.
The drilling so it will be the result will show up more in Q2, the in Q1 actually.
Got it okay.
And just the just moving on.
In terms of.
You did mentioned, but there were some cash.
Q2 is going to be impacted by some performance issues on some of the stopes any color you can provide maybe I've missed it then you kind of touched upon it and any color you can provide us what those issues of youre having.
What are you guys doing in terms of mitigating any future advances.
Many of them. This one and what is happening is the.
First is that we have the rehab the two or three stopes of the.
Of the grade that we are we have actually after all of the mining of the definition drilling and the the grid control that is the word that we expect and basically its two trees don't and it's impacting more the would impact more of of the Q2 because of the total debt we did love in Q1.
It will be.
Below the low end by a few thousand ounces, but we have nothing to panic here of chewy. We are in the range of the revenue duty of the reserves the currency in the orebody, where the ore body that we have.
Okay. It sounds good.
And just the final one from me and then maybe I'll jump back into the queue.
In terms of your underground development that seems to be advancing pretty well.
At the end of Q1, you guys had approximately about 225 months of drilled stope inventory.
He is one of two weeks of stope inventory at same time last year.
You were talking about getting close from that four months of guilt stope inventory.
In terms of this whole situation with COVID-19.
Do you guys think that you guys arent track on that plan from obviously things seem to be moving pretty well.
Because it's important for all of us to have enough inventory to succeed and to mitigate the variability of this ore body and its something that we want to keep the pressure in gross full steam ahead to achieve this objective because it's important for us.
I can say to you that were impacted by COVID-19, the big time at some stage at some sort of.
Things, we had more than 30 people in resolution of that site in the 14 were impacted by COVID-19 infected. So it's the impact of the impact us, but the guide the.
The they work really well we proved the arose out of activities and we focus on the Kpis of natural Liam I'm pleased because of the result or nothing in the league.
Knowing all of the year forward debt were invested by our guys in the field. So they did an amazing job and actually was something that we can catch it up and actually we are on the way to do this.
Okay, perfect again thats it from me and thanks for taking my questions.
Thank you Luis.
Yes.
Our next question comes from Heiko Ihle from H C. Wainwright. Please go ahead.
Hey, there thanks for taking my questions.
Hey, good morning, with the all good.
Good morning.
And then maybe build on a question that was just asked it looks like your all in sustaining cost was one thousands of flights per Alan's and this is a quote from your release you incur at reduced levels of sustaining capital expenditures relative to the expectations, which lowered the all in sustaining cost below guidance range.
But then you go on to say that you don't expect all in sustaining cost to be below the guidance range for the balance of the year. Nonetheless, you left the overall guidance for the year unchanged.
We're halfway through Q2, and maybe I'm reading a whole bunch of to nothing here, but is there some delayed spend or should we in theory could we take the the midpoint of guidance for Q2 to Q4 and then the actuals for Q1 is there anything we're missing or is has anything changed on your end the implicit.
Lee It took the guidance up slightly for Q2, three and four.
Okay.
Well I think I think I call the day.
The reason why our sustaining capex is lower in in Q in the first quarter is we didn't do all the drilling that.
That we wanted to do and the development that we wanted to do.
So that that will reduce but now as as Pat mentioned, we at we introduced the seven drill underground.
We are pushing hard on development to to catch up and we had good performance on development in Q1, but honestly, we were expecting to do a lot better than that.
In all of <unk>.
Similar for for production a week.
We all most of that 3800 tons per day, but we were hoping to be a little bit of above 3800 tonnes per day. So our activities were impacted so iris level of spending was impacted so in the next quarter, we're going to we're going to play catch up to the known to get to the end of the year, where we were supposed to be.
We are in our original plan so in the coming quarters will span at more money.
Of the our hope is that at the end of the year, we're back on track with our of our plan. So all in all our eighth of cost in production then it will be within our guidance range. So it's a.
The really debt.
Message and I think the message of debt.
We want to convey here is the <unk>.
This is my first quarterly conference call with the company and I've said this many many times. It is a variable of our body, we're going to have ups and downs, we have risk of COVID-19. So things are going on and theyre not going to be flat to all the time, there's going to be ups and downs, but.
I think what we are trying to do is make sure that we don't surprise anyone that.
That was the comment we are in the past all the way we are always get surprised we always get surprised and we're trying not to surprise anybody.
We're laying it out there Q2 is going to be not as good as Q1 in terms of production, but we're still confident in our guidance, we still confidence our cost will be in line with what we were expecting so.
We're not panicking area of things are they send the R are good and.
It's we said many times that we could get the quarter that is not as good as the other ones and that's going to be Q2 this year.
Yes.
Yeah Yeah.
You mentioned hold this is your fifth call is a decent bleed over into my next question.
That I have asked the same question on the past one of these calls before but that was under the old management team.
Your new CFO was no been on the job since September so over half of the year on the that note. The congratulations to Matthew but if you maybe want to just give us some color on your minimum level of cash that you'd like to keep on your balance sheet again with the new management team, obviously and at what point of time, you would consider returning some.
Incremental capital to shareholders, whether through a buyback or dividend. Please.
That we're in the same the situation I go as we said before price.
Priorities for US this one keep.
About $100 million of cash on the balance sheet at all times.
So we want to do that especially during COVID-19, we want to have the cash if we need to adjust our if we have disruptions at site because of COVID-19 as of we we think three months of.
Spendings as of the expenditures for the operations in the company. That's what we want to have on the balance sheet at all times. We also want to make sure that when we get to Q1 'twenty 'twenty.
2021 of 2022, sorry, when you get into Q1 2022 debt, we have $200 million of cash on the balance sheet, because we will have to pay of $100 million for the convert debt matures at the end of March 2022.
And we want to keep of $100 million of cash really we need to have to may of 200 at that point.
Between now and then.
It's of reducing our debt.
We've met we are paying $17 million of quarter, we made the discretionary payment of 38 million this quarter.
And Oh, we still have another 100 plus million dollars of <unk>.
Term loan debt that we need to continue to deal with so that's that's our priority once we get there and it all hopefully COVID-19 is the.
Is kind of behind us I'm not too sure about that but anyway, we will see when we get there. That's when we're going to start to think about what do we do in terms of capital allocation of reinvesting in the business returning money to shareholders in different forms, but until then our priority is reducing our debt.
And maintaining a solid cash balance at all times.
Great and once again of decent layover into just a quick.
You had the outbreak and the COVID-19 outbreak in February and March obviously and that was the last time. There was even just the single positive case of site correct, Jonathan Z will cross your Workforces since then right.
We add zero app at starting.
The start.
In mid March we went down to zero, we were at zero for the last the following I think it's four or five weeks.
About 10 days ago.
One employee that came to site. So we test all of the employees as they arrive at site.
And the E tested positive so there's one person currency in isolation debt is positive and I believe that person is going to come out of isolation.
And the next couple of days fixed of me may.
Basics basics. So may six the person is coming out of isolation. So at that point, we'll add.
We will have no cases of tight so it's it's really well managed <unk> we test people.
Wendy before they take the plane in Vancouver, and the we test other people that don't fly from Vancouver day debt. They get tested as soon as they arrive at site with the rapid antigen test. So we get the results within a few minutes.
Starting this week of we're going to start the test people at the at Paris Airport and also at our Smith of his office people that bus. The site. So everybody will be tested prior to coming to site with only a few exceptions. So we will completely insulate the site from from COVID-19 cases, if someone's desk.
There will be before the day travel by plane or by bus. So will the will the returned home and Golar with quarantine at their at their personal residence.
In addition to of the support with the.
The support of Norton Health, we also restored the vaccination at site.
So and we are naturally we are of the throes of Mako that is available for our employees.
The from.
Starting today, we will provide the give the vaccine for the people who want to of it or the people or higher than 30 years old. So it's gonna. It's we're improving the through some of that sort of thanks Ronny.
Very good well I hope that the the worker that comes out of quarantine tomorrow feels good and fine and I wish him the best and getting better.
You all so much.
Okay. Thank you Heiko.
Our next question comes from Anita Soni from CIBC World markets. Please go ahead.
Good morning, guys. So my first question is with regards to the commentary in the in the release and the MD&A about.
Performance of certain stopes in Q1 could you just elaborate on that I'm kind of having the little bit of trouble understanding what you mean by that.
But the the.
Yeah with respect to the grade variability being you know.
It's going to be variable in Q2, given that there was some.
Performance related issues and so in Q1.
The drug to be really the throughout.
To bring some colors, we are of money, we more of last year, we mined 69 scope for the year and during the year. So we have multiple stopes. So it means that we're mining more or less 15% to 16 scopes per quarter.
In the storm that we develop in Q1, we of interest dose war volume in tonnes and the ore and grade.
When we did the definition of the grid is the head grade that is off the grid control as Lord of what we expect of the reserves.
Sometimes it's by two runs sometimes by the four grams of we're not we're not losing everything but of the are representing a good volume in terms of tonnage for the quarter. So it will we will.
With slightly less production that we expect during the quarter.
As part of the variability of the ore body.
Nowhere with this ore body, we have a nugget effect. So sometimes we have positives of those we of negatives.
And we are still in the range of the reconciliation of the reserve that we presented to you at the end of the.
The year so the.
Basically it's a it will be a few thousand ounces, but we're not in we're not kind of getting it means you just mean and it's the it's not coming from one area. So it's the stopes are spread more or less III TOB swarm defer the rear of the mine.
So we're not seeing a trend of the years. So it's more more local and more function of the nugget effect of the ore body.
Okay that was getting the my follow up question. If it was one specific area of that it sounds like it's not and then secondly, I just wanted to ask on your on your comments on capital allocation. So you talked about.
The pay down your debt and getting your cash balance to where you want it to be.
You want to reinvest.
In the business and then also return capital to shareholders in various forms. So could you just elaborate to me by what you mean by reinvesting in the business does this mean that youre going to look to developing satellite deposit.
To drill more look to diversify your cash flow through M&A. Thank you.
Yes Anita.
Maybe all of the above but the.
We're drilling a lot this year and we're excited by what we're seeing right now with our results and are you already this year, we issued two great press releases of.
The last year at the end of that have we issued another great press release on hanging Glacier.
Depending on what we're going to GAAP from the drilling we're going to do this year. We made the side you know and this is just I'm just giving an example here if we're very successful at adding laser we may decide to start to put money there too.
No.
To have a satellite.
Ore body that would would feed the mill in two or three years down the road.
But I'm not saying, that's what we're going to do but I am just giving you. Examples so it's difficult for us to say exactly what what we intend to do but.
The results are so good everywhere, we drill right now we hit gold. So the result of our so encouraging debt, we kind of ex back to debt when when we got the all of the results together.
We're going to be.
Pal to invest money in some parts of the orebody to advance the development.
So that's the one area that we're looking at for sure.
We're getting a good good.
Results from the North block the North block is very close to our infrastructure. It's currently not in the reserve so.
Not in the resource so it's not an hour.
Overall, the plan or in terms of Capex, but we may decide when we put the budget together for next year. We may decide that we're going to accelerate the north block because the results are good and the grades are really good.
We may decide to push on that one sooner than later so the.
Those are the type of reinvestment that's the we're gonna be thinking for Bruce Jack.
And you know what.
We'll see we'll see what what what else shows up and where we have to put money. So.
It's it's we know if we don't have any good projects are good investments for the cash debt we have for sure.
There might be a higher percentage of our cash flow of that goes back to shareholder.
If we do have good projects, probably going to be a lower percentage of or maybe not even anything and that's the discussion debt. It's not management that will make that final decision. It's a board decision dividends or share buybacks or that type of instruments will be will be considered when we get there.
Okay and then.
I wanted to follow up with one second question on the on the drilling that you guys are day.
Can you just give me some color on.
The things that you are doing differently with the drilling vs. Yeah, I guess the.
You know what what led to the issued debt Bruce Jack with the reconciliation how long to you. The main call factors. So I'm just trying to get an understanding as you look at this thing are you taking into accounts.
The challenge is that the original ore body had when developing the geological model.
Yeah, I think I think of what we're doing differently. Anita is basically at the density of data the density of drilling the.
It's a nugget the deposit and when it's drilled widely.
You have some local issues and estimating degree.
The global the resource.
You can probably get the decent number but in the locally it's very challenging when you don't have the the level of drilling debt as required. So this basically what we're doing is we're drilling a lot more with diamond drills at end of the of of the areas. We want to develop but also we're adding to this.
The RC drilling.
When we got closer to the zones in the zones that are a little more complex and we continue to do the RC drilling initially.
That was it started as a test in 2020 and of <unk> 19 in 2020.
Now we have two RC drill dedicated the definition drilling that are providing us very good value and the.
The mix of Diamond drilling with RC drilling and production the whole sampling is really helping us understand a lot better the.
The low coal.
<unk> here of the various zones.
And the last follow up on that I mean opinions on multiple indicators Craig Inc. Could we expect to see that going forward.
Yes.
At this time, that's what we're where we have to to work the resource.
We're going to continue to work with that.
We're doing some.
The analysis and tasked of.
Of all we're going to approach the us but definitely in the <unk> zone, we're going to continue to use the <unk> to understand the resource.
And the other zones, where it's simpler like the West Zone. For example, it's more conventional resource estimation.
Okay. Thank you very much.
Our next question comes from Joseph Reagor from Roth Capital Partners. Please go ahead.
Good morning, guys and congrats on a good start to the year.
Thank you Joe.
So most of my questions have already been answered, but maybe just a.
On the guide.
The you gave for Q2.
What kind of magnitude below the annual guidance or are you guys expecting you know annual guide divided by four in the low end would be about 81000 ounces and change.
Or are we talking a few thousand ounces lower than that or are we talking 10, 15% below that.
Like just so we have a rough idea.
And as Pat said the.
Joe It's a few thousand ounces.
Okay.
And then now that the.
That being said Joe as you know mining is always a very interesting business.
It's always possible that.
We tried to give the best information that it's possible that we have installed debt comes out of much higher grade than predicted are lower.
These things can always happen, so but right now based on where we are whether I understand that's a few thousand ounces.
Okay. Okay, all right that's fair enough all right and then.
Yeah.
On the debt front.
You know are you guys actively looking at potentially like refinancing out the remainder of your debt.
Or is it just a focus of paying the debt paying it all off to get debt free.
Yeah.
Joe It's Matthew here speaking thanks for the question. Yeah. We are we do have a supportive.
Thanks Syndicate.
Some of that revolver matures in December of 2022, and we're going to be looking to refinance debt and extend that revolver and term loans with our supportive group of banks in the coming months.
So stay tuned.
Okay.
Thanks.
Our next question comes from Andrew the kitchen from BMO capital markets. Please go ahead.
Thank you congratulations on a good quarter lots of great questions really been asked Ken can we just get a little bit of color.
Color on throughput CE, even with the COVID-19.
Impacting what looks like almost half of your quarter, you had very strong throughput in Q1.
Is that.
Did you have any period in that time, where <unk> came down and then you were able to catch up or.
Where are you where are your teams essentially able to keep the mill essentially fall I know you've already commented youre, hoping to be slightly further on the tons per day than what you did but can you give us a sense of what.
The impact was in Q1 please.
Yes.
In Q1 the.
We're close to the two of the objective we plan three eight hundreds of work towards volume going forward, we of the capacity to catch up what we missed in Q1. So it's not the slips in some of the problems. So we are actually our plan is to forecast the up to the maximum that is otherwise by doing by the way. The permit is one of the 387000 ounces.
<unk> sorry.
Is it going to be totally different.
But you know as the in.
In terms of tons in the.
We have no restriction in the mill. The mill is something that is well designed to the millions of robust. The news are the overcapacities, though and the recovery is are we improving in term of recoveries. So we are watching what he told me. The Pillsbury then all of those things is when something becomes robust of the cycles is the mill so of new <unk>.
The issue of no concern with the new performance moving forward.
We had the Andrew we had to reduce throughput for about three weeks.
There was a period of three weeks, where we took the throughput which is so we operate at about 4000 tonnes a day when you apply the mechanical availability.
It gives you a 3800.
And for about three weeks, we were more of like at the 3000 ton per day.
And then when the workforce was back and we were able to really of the mill. The mill was could have done more but there just because of all of the people we added in quarantine in isolation.
We just couldn't bring debt tightens the surface that keep the mill going at full throughput, but when the.
When when people who are back in the scoop and the trucks. We we had days we were running easy at 42, 43 100 tonnes a day.
Okay and.
One thing sometimes we see here is the kind of delayed maintenance when youre trying to catch up as it should.
Should that.
Did that occur could there are you guys can come back in the balance of the year, telling us all we took of weeks maintenance because of that didn't happen in Q1.
No we are right on the with respect of.
Speaking of will prevent the minimum schedules in your radar, we'd never as kipp.
<unk>.
In the mail or elsewhere.
Okay.
Just very quick last question I think it's been asked over and over again, you guys have answered quite a bit of detail, but Q2.
The Miss is.
From all of your commentary is essentially grade related.
Like you guys demonstrated Q1, youre not expecting throughput Miss in Q2, it's just the sequencing and great.
Variability, that's giving you the the slight miss in Q2.
Okay.
Yes.
Youre correct Andrew.
Our mail can put can processed tonnes and the mine can feed time. This because you know as we said we had at the end of the quarter three out of 200 then.
70000 tons of inventory. So we can we have the times.
What we're not doing.
Anymore, it's something that we've changed is we're not Jed the price.
Jeopardizing the sequence, we're not jumping around left in the right then that doing all kinds of crazy things just.
<unk> great.
We have of sequence, we wanted mined properly we want a mind of the right way.
We want to make sure we don't generate the rock mechanics issues. The long term. So we're not jumping around and this was a problem that then all of that was happening in the past and we said we're not doing this so we're following the sequence we have the tonnes, but sometimes that can as Pat mentioned, we have stopped that.
Great there is a little lower than what debt.
What was expected and that's going to impact our grade debt.
We are following the sequence and as we said we continue to be confident in our guidance for the year.
Okay. That's the standard my questions. Thank you very much for all your comments.
Thank you Andrew.
Our next question comes from Don Demarco from National Bank Financial. Please go ahead.
Thank you for taking my call.
Hi, gentlemen, maybe just one more run at the exploration success that you've been having could you.
The comment or compare.
Where you see the most upside with the highest priority might be or potential timing to production between the 10 80 level of the north block I see the bolt on.
In close proximity to the mine.
Okay.
But for the portfolios and we needed to conclude the definition, but the Nord blockers growth low so it's.
It's a free.
It's sort of reminds them.
With the.
It's the law is one that we will we are actually doing the second phase of drilling in the pit and the roadblocks.
Some of it is interesting.
As we go down with the round the tenancy that neither of these are the.
The on Monday is <unk>. So in terms of priority is difficult for me to scheduled up with Uber.
It's in the it will be low than the pipeline and both were in the.
And that's really we are also.
The working on the with the.
<unk> zone of where during the drilling of the results of to anticipate the work of what does the Kim so low.
It's.
This will be probably we will see what we would have access in the in this type of zone this year and the and the mining plans the bogey.
Okay and I guess, that's my next question with all of these these developments can you confirm that's what you are planning indeed too to issue a technical report with the new part of my plan next year at some point.
Yes, it's what we use what we are we are always taking into the plan.
We are we went through really the.
The new 40 to one of one reported for the first of all of what we do.
Okay, and the based on what Youre seeing right now in the North block in the <unk> and we recognize the west zone grades might ease slightly compared to the value of kings is there any chance that you might defer production from the West zone and prioritize more on on some of these newer developments that you see in expanding the valley Kings.
It is possible.
Don debt, we decided to prioritize Nord block or a 10 <unk> compared to West zone, but again. This year. We also have a drilling program in the West Zone, then we'll see what we get there.
Depending on the results, we'll get from the West Zone, and what we get from.
From Nord block and <unk> will will have to make decisions, we won't be able to go everywhere at the same time, but but I wouldn't discount the west zone, just yet and all of their is interesting.
Things in the West Zone, if you go back to the old.
The 43 101, there is the Ari structure that the develops us very high gold grades at depth.
And then all of the K. So again as Patrick said the more to come with drilling results. We have a very exciting year of drilling of very very exciting year of drilling very good targets.
No I as I said the earlier stay tuned because there might be some very very interesting.
News coming out in the future.
Okay, great well, we'll keep an eye on those thanks for that Jacques in the and we also look forward to the updated technical report next year. Thanks again.
Thanks Dawn of a good day.
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.
We appreciate all the comments and all of the questions.
We tried hard to make sure that you understand that we want to deliver on what we promise and we want to meet our guidance for this year and we're on track to do that we want to make sure that we avoid surprising the market. So we're doing that so things are moving in the right direction we have.
Lot of work ahead of us to achieve all of our objectives for this year, but as a as we sat and nowhere. We're on track to do what we want to do there is a number of initiatives underway and we look forward to updating you on the results of everything we're going to do in Q2 and Q3.
And once again I want to.
Conclude the call by thanking the entire of preterm team for their dedication and hard work as we continue to operate through these very challenging times. So thank you very much everybody stay safe and we'll talk to you soon bye now.
Okay.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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