Q1 2021 Pretium Resources Inc Earnings Call
All participants please standby your conference is ready to begin.
Thank you for joining us this morning, welcome 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, our 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.
I will 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 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 are in 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 company wide health and safety plan to transform our safety culture.
Iran. The fourth slide you can see our rolling 12 month 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 operations and produce almost 86000 ounces of gold.
It was yet another profitable quarter, and we generated generated nearly $51 million in free cash flow.
We ended the quarter with a cash balance of nearly $209 million and 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 Yeah.
We're also making significant investments in future growth, which includes construction of upgraded camp facilities, an assay lab and integrated core shack, along with resource expansion and near mine exploration drill programs.
As most of you are aware a COVID-19 outbreak was declare at Bruce Jack during the first quarter.
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. Unfortunately finally got the site.
On February 10th BC, Northern health declare a COVID-19 outbreak at the Bruce Jack mine too.
To protect the health and safety of our work force in local communities. We quickly implemented our management plan, which included enhanced protocols such as restricting travel while sitewide testing could be completed.
In collaboration with our local indigenous partners and BC 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 are reported.
Following the outbreak a 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 a risk and could have a significant impact over a short period of time.
I will now turn the call over to Patrick to provide an overview of our operations for the first quarter of 2021.
Thanks Jacques.
Turning to abrasion on slide eight.
The first quarter, we processed approximately 341000 tons of fall through the mill equivalent to 3790 tons per day.
This is slightly below our objective of 38 <unk> tons per day as a result of the COVID-19 outbreak.
This provision costs for the first quarters average one of them 88 per per ton milled, an increase from the first quarter last year.
Costs increased due to the strengthening Canadian dollar and the extra costs associated with the COVID-19 safety protocols.
The change in the exchange rates increased pollution caused by about $16 per ton in the COVID-19 safety protocols resorts in the niche or $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 lower blasting and grown support costs.
Turning to slide nine as you can see Oh, where quarterly rate of underground development has historically been trending up quarter over quarter in the first quarter of last year. The onset of the COVID-19 pandemic stalled or momentum and then in the first quarter of this year were rid of development was impacted by the COVID-19 outbreak.
Although we achieved the targeted rate of 1000 meters per month, this was lower 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 filled presumes nearly 86000 ounces of gold, which is less than 1% below the guidance Richmond point for this year.
The mill feed grade average 8.2 runs per ton and the recovery rate was 96.8 per cent.
As a result of the impacts of the COVID-19 outbreak on peripheral activities combined with performance issues with several strokes stopes Zurich and following the outbreak recruiting expect we currently expect gold pollution and grade in the second quarter to be below what we're gonna Ridge.
On an annual basis, but this is although we are bullish on forecasts, we remain on track to be within our full year production guidance range.
Yes.
To enhance our understanding of the high grade variable deposit and improve the predictability of Photoshop, we have increase the density of drilled that we collect.
Diamond drilling progress through the quarter with six diamond drills on site conducting in the field and resource expansion drilling day rates of drilling was reduced during the COVID-19.
But we're still complete more than 29000 meters of diamond drilling.
We are adding a seventh drill underground to catch up on our plan for the year.
Through optimized production and improved blending two buttons quarter to quarter fluctuation, we have maintained an accelerated rate of underground development to improve underdrawn access.
The increase of Loveland read expand our access to new areas of the deposit and provides us the space to build an inventory of drilled off though.
Our target is to have about 400000 tons of drill drill stopped ready to be blessed by the end of the third quarter of 'twenty 'twenty. One this is roughly equivalent to a full quarter of production.
At the end of the first quarter, we had 276000 tons of drill of stope inventory says, 23% increase from the previous quarter.
Turning now to turning now to slide 13, we have a section view of the underground development looking north until this year mining have been limited to only two money a resilient lose deck.
Good morning, arisen consist of a four mining level each about 30 meters.
Earlier this year, we began production from the lower arisen from the 10 80 level. We now are actively 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 older than 30 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.
Yes.
Now I will turn the call over to Matt for an overview of our financial performance.
Thanks, Patrick our 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 of 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 costs.
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 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 noncash items and the new definition, including deferred taxes and amortization of prior financing cost financing costs.
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.
Adjusted earnings per share would have been 22 per share in the quarter as this page shows.
Lastly, I note on the MD&A, we've completely reformatting and rewritten this document in the first quarter 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 costs for the reasons noted by Pat included the COVID-19 costs.
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 in cash and available liquidity of approximately $369 million.
Debt as of March 31 comprised 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 of bank debt on our revolver, leaving the $200 million revolving portion of our facility Undrawn.
Turning to slide 18, all in sustaining cash costs 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 $1009 per ounce as.
As Pat noted production cost increased relative to Q1 2020 as a result of the strengthening Canadian dollar COVID-19 costs, partly offset by lower development costs.
More favorable terms under our off take 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, the OLED 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 for 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, forecasted 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 per expansion capital and at the low end of our $50 million to $55 million range with a core sustaining capital.
Net levels of capital expenditures noted here in the first quarter reflect 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.
Yes, 2020, a regional exploration program on the company's claims included a promising discovery of epic or mall style gold mineralization at the hanging Blazer zone.
The 2021 near mine exploration program will focus on the hanging laser zone, which is easily accessible from Bruce Jack.
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 the threat of Eylea altered outcrop that extends four kilometers from the hacking laser zone to the northwest of Bruce Jack to their bridge zone to the South East.
In addition to the exploration 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 2021, Bruce Jack definition and expansion 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 zones with the potential to extend mineralization underground.
Initially six drills or deployed underground and as Patrick mentioned at $7 has been added to catch up.
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. Okay deposit and our underground infrastructure looking west the results from the North block 2020 of resource expansion drill program intersected high grade gold as far as 300 meters from the current resource shell and as high as 2590 grams per.
Tango over one meter.
As we reported earlier this week in 2020, we also completed about 14000 meters of resource expansion drilling outside of their resource shell from the 10 day level to the east west and at depth below the <unk> deposit.
Looking at Slide 24 is another cross section of the V. Okay.
This time looking north the results from the 10 day 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 high as 1635 grams per ton goal over one meter.
The results from the <unk> zone, and the 10 80 level continue to highlight the potential to expand beyond the value of the kings deposit.
We intend to continue a resource expansion drilling through 2021 with 82000 meters of drilling plan.
Follow up drilling within the Nord Zone, and 10 80 level is currently underway with 24000 meters already completed.
As a as a result, our 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 at 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 drill 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 a tone acknowledging your request.
Using a speakerphone please pick up your handset before pressing any keys to withdraw your question. Please press Star then two we will pause for a moment as callers join the queue.
Yeah.
The first question comes from Obs Habib from Scotiabank. Please go ahead.
Okay.
Thanks, operator, hijacking that Argentina, and thanks for taking my questions.
Hey, good morning.
Yeah, Hi.
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 than Q1 due to COVID-19 now would we see a little bit of a catch up over here on these costs 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.
Best way to look at it versus we're reaffirming our guidance for the year. So we were below that range.
So I think you should use just the guidance from 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 the sustaining capital levels in the quarter net debt.
Net resulted for us being below guidance in the first quarter.
Sounds good to simple wanted to double check on that.
And then just moving onto obviously there was a lot of drilling done in Q1 40000 meters.
A lot of that was infill as well any kind of.
Color you can provide in terms of those infill results.
We paid out compared to your expectations.
Well, we are actually the drilling is going well from that as well because we expect to to us because of that mainly because we are impacted by COVID-19, but actually we are in order are resolved or wherever we have a lag between the laboratory of resolve the power as a result.
The drilling so it will be the result will show up more in Q2 than Q1 actually.
Got it okay.
And just just moving on.
Of.
You did mentioned that there was some Q2 is going to be impacted by some performance issues on some stopes.
Any color you can provide maybe I've missed it then you've kind of touched upon it and any color you can provide us what those issues that youre, having and what are you guys doing in terms of mitigating any future advances.
Moving on this one and what is happening is.
First is that we are we have the two or three stores. The grade that we are we have actually after all the mining and the definition drilling.
The grid control that is the word that we expect and basically it's due to be installed and it's impacting more it will impact more of a Q2, because it's true that we did look in Q1.
Oh 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 variability of the reserves the accuracy in the orebody with your body that we have.
Okay sounds good.
And just a 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.
Versus like one or two weeks of stope inventory at same time last year.
You were talking about getting closer to that four months of build stope inventory.
In terms of this whole situation with COVID-19 do you guys think that you guys arent track on that line, 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 goose full steam ahead to achieve this objective because it's important for us.
With you that were impacted by COVID-19 big time at some stage.
Sometimes we had more than 30 people in resolution that site in 14 were impacted by COVID-19 infected. So it's a net impact of it impact us but the guide.
The.
Worked really well we broke arose our activities and we focus on the Kpis and actually I'm pleased because the result or not and so we are showing all the airport that we're investing 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.
Our next question comes from Heiko Ihle.
<unk> from H C. Wainwright. Please go ahead.
Hey, there thanks for taking my questions.
Hey, good morning, all good morning.
I'm going to maybe build on a question that was just asked it looks like your all in sustaining cost was 1000 pilots per Alan's and this is a quote from your release you incur at reduced levels of sustaining capital expenditures relative to 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 costs to be below the guidance range from a 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 into nothing here, but is there some delayed spend or should we in theory could we take the midpoint of guidance for Q2 to Q4 and then the actuals for Q1 is there anything we're missing or has anything changed on your end that.
<unk> It took the guidance up slightly for Q2, three and four.
Okay.
I think I think I go a day.
The reason why our sustaining capex is lower in in Q in the first quarter as we didn't do all the drilling.
That we wanted to do and the development that we wanted to do.
So that that will reduce but now as Pat mentioned, we at we introduced seven drill underground.
We are pushing hard on development to to catch up.
We had good performance on development in Q1, but honestly, we were expecting to do a lot better than that.
Similar for production.
We almost at 3800 tons per day, but we were hoping to be a little bit 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 us now to get to the end of the year, where we were supposed to be.
And our original plan so.
In the coming quarters will span at more money.
Our hope is that at the end of the year, we're back on track with our plan. So it wasn't all our Asa cost in production then it will be within our guidance range. So.
Really the message and I think the message that.
We want to convey here is that this is my first quarterly conference call with the company and I've said this many many times. It is a variable ore body, we're gonna have ups and downs, we have risk of COVID-19. So things are going on there, they're not going to be flat 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 was a comment we are in the past, though we 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 costs will be in line with what we were expecting so.
We're not panicking area things are this and there are a good.
It's.
We said many times that we could get a quarter that theres not as good as the other ones and that's going to be Q2 this year.
Yep.
You mentioned how does this your fifth call is a decent lead over into my next question.
Given 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 has now been on the job since September so over half of the year on that note 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.
At what point of time, you'd consider returning some incremental capital to shareholders, whether through a buyback or a dividend. Please.
That we're in the same situation nickel as we said before.
Priorities for us as 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. So we we.
We think three months of <unk>.
Spendings and expenditures for the operation 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, and 2022, sorry, when you get into Q1, 2022 that we have $200 million of cash on the balance sheet, because we will have to pay a $100 million for the convert that matures at the end of March 2022, and yes, we want to keep a $100 million of cash really we need to have two 200 at that point.
Between now and then it is reducing our debt.
We've met we are paying $17 million a quarter, we made a discretionary payment of $38 million this quarter.
And we still have another 100 plus million dollars of <unk>.
Term loan debt.
We need to continue to deal with so that's that's our priority. One is do we get there and then I'll hopefully COVID-19 is.
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 are reinvesting in the business returning money to shareholders in different forms but until then our priority is free.
Reducing our debt and maintaining a sound cash balance at all times.
Great and once again, a decent layover into just a quick clarification you had the outbreak and the COVID-19 outbreak in February and March obviously and that was the last time there was even just a single positive case at site correct, Jonathan Zero Cross your Workforces since then right.
We add zero app at starting.
Starting 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.
Non employee that came to site. So we test all of the employees as they arrive at site.
And they tested positive. So there is one person currently in isolation that is positive and I believe that person is going to come out of isolation in the next couple of days fixed on.
Basics basics, so mesa ex the person is coming out of isolation. So at that point, we'll have.
We'll have no cases at site. So it's it's really well.
Before they take the plane in Vancouver, and we test other people that don't fly from Vancouver day that they get tested as soon as they arrive at site with a rapid antigen test. So we get the results within a few minutes.
Starting this week, we're going to start to test people that Theyre at Paris Airport and also at our Smith <unk> office people that bus decides 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.
Someone that's positive there'll be before the.
They travel by plane or by bus. So we will be able to return home in golar with quarantine at their at their personal residence.
In addition to the support them with those.
Support of Norton Health, we also restored the vaccination at site.
So and we are naturally we have chosen to go that is available for our employees.
From.
Starting today, we will provide to give the vaccine for people who want to have it for the <unk>.
People were higher than 30 years old so it's gonna it's.
We're improving this through from that site actually.
Very good well I hope that the warfare that comes out of quarantine tomorrow feels good and fine and I wish him the best and getting better.
Thank you all so much.
Okay. Thank you Rocco.
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 a little bit of trouble understanding what you mean by that.
What that means.
Yeah with respect to the grade variability being you know that it's going to be variable in Q2, given that there was some performance related issues and stopes in Q1.
Yeah look through really.
Relative to bring some colors, we are mining and we mined last year remains 69, so for the year and during the year.
So we have multiple stopes or it means that we're mining more or less 15% to 16 stope per quarter.
In the store that we develop in Q1, we are a true stopes war volume in tonnes and ore and grade.
When we did the definition that the grid is the head grade that is after grade control is lower than what we expected the reserves from.
Revenues by two runs sometimes by four grams. So we're not we're not losing everything but obviously are representing a good volume in terms of tonnage for the quarter. So it will.
Slightly less bothersome that we expect during the quarter.
Part of the variability of the ore body.
And you know with this ore body.
We have a nugget effect, so sometimes we have positives from things we have negatives.
And we are still in the range of the reconciliation of the reserve that we presented to you at the end of the.
So.
Basically its it will be a few thousand ounces, but we're not in we're not panicking. It means you just mean and it's it's not coming from one area. So the stopes are spread more or less true stopes were in a different area of the mine. So we are not seeing a trend years. So it's more more local and more info.
Some of the negative effect of the ore body.
Okay that was going to be my follow up question. If it was one specific area 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.
You paid down your debt and getting your cash balance to where you want it to be you wanted to reinvest in.
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 book to drill more look to diversify your cash flow through M&A. Thank you.
Yes Anita.
Maybe all of the above but.
We're drilling a lot this year and we're excited by what we're seeing right now with our results.
This year, we issued two great press releases.
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 site.
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.
To have a satellite.
Our 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 goal. So the results are so encouraging that we kind of ex back to that when when we got the all the results together.
We're going to be.
Compel 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 good good results from the North block the North block is very close to our infrastructure. It is currently not in the reserve. So it's not in their resource. So it is not in our.
Overall, the plan or <unk>.
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. So we may decide to push on that one sooner than later.
Those are the type of reinvestment, that's we're going to be thinking for Bruce Jack.
And you know.
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 that we have for sure.
There might be a higher percentage of our cash flow that goes back to shareholder.
We do have good projects, probably going to be a lower percentage or maybe not even anything and that's the discussion that 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 that on the drilling that you guys are day.
Can you just give me some color on.
On the things that you are doing differently with the drilling versus the I guess the.
What led to the issues that Bruce Jack and with the reconciliation having to use the mine haul factor. So just trying to get an understanding as you look at this thing are you taking into account the.
<unk> the original ore body had been developing this geological model.
Yes, I think I think of what we're doing differently in EDA is basically at the density of data the density of drilling.
It's a negative deposit and when it's drilled widely.
You have some local issues and estimating degree.
The global resource.
You can probably get a decent number but in a locally it's very challenging when you don't have that.
The level of drilling that is required. So this basically what we're doing is we're drilling a lot more with diamond drills at end of the of the areas that we want to develop but also we're adding to this the RC drilling.
When we get closer to the zones and zones that are a little more complex.
We continue to do with the RC drilling initially.
That was it started as a test in 2020 and <unk> 19 in 2020.
Now we have two RC drill dedicated the definition drilling that are providing us very good value in them.
The mix of Diamond drilling with RC drilling and production whole sampling is really helping us understand a lot better.
The low coal.
<unk> here of the various zones.
And the last follow up on that I mean.
Opinions on multiple indicators kriegie could we expect to see that going forward.
Yes.
At this time, that's what we're we have to to work the resource.
We're going to continue to work with that we were doing some.
The analysis and tasks.
<unk> of all we're going to approach this but definitely in the <unk> zone, we're going to.
Moving to use the <unk> to understand the resource.
In 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.
On the guide.
That you gave for Q2.
What kind of magnitude below.
The annual guidance.
Are you guys expecting you know annual guide divide it by four and the low end would be about you know 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.
<unk>, it's a few thousand ounces.
Okay.
And then now that <unk>.
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 a stope that comes out much higher grade than predicted are lower.
These things can always happen, so but right now based on where we are whether understand that's a few thousand.
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.
It just a focus of paying it paying it all off to get debt free.
Joe It's Matthew here speaking thanks for the question, Yes, we are we do have a supportive.
Syndicate.
That revolver matures in December of 2022, and we're going to be looking to refinance that and extend that.
All of our term loan with our supportive group of banks in the coming months.
So stay tuned.
Okay.
Thanks.
Our next question comes from Andrew <unk> from BMO capital markets. Please go ahead.
Thank you congratulations on a good quarter lots of great questions already been asked Ken can we just get a little bit of.
Color on throughput so 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 was true puts 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 full.
You've already commented youre, hoping to be slightly further on a tonnes per day than what you did but can you give us a sense of what.
The impact was in Q1 please.
Yeah, So in Q1.
We're close to the Vod objective, we plan three onwards, a workload by going forward, we have the capacity to catch up what we missed in Q1, so it's not a flip.
But from some of your problems. So we are actually our plan is to forego the up to the maximum to decentralize Bye Bye bye. The permit is one of your 387000 ounces per ton.
So the answer is going to be totally different but.
In terms of tons in the.
We have no restriction in the mill day, mainly as a result.
And that is well designed and minions robust the mousavi overcapacity. So then the recovery is are we improving them from our recoveries. So we are watching what he told me that sales rate and those things as one something that is robust at the circus.
Also of new new issue of no concern with the new performance moving forward, we had 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 at 3800.
And for about three weeks, we were more like a 3000 ton per day.
And then when the workforce was back and we were able to really the mill. The mill was could have done more but it's just because of all the people we have in quarantine in isolation.
We just couldn't bring the tons to surface that keep the mill going at full throughput, but when.
When when people who are back in the scoop and the trucks. We we had as we were running easy at 42 43 100 density.
Okay and.
One thing sometimes we see here is a kind of delayed maintenance when you're trying to catch up is true.
Should that.
Did that occur could there or you guys didn't come back in the balance of the year, telling you. So we took a weeks maintenance because it didn't happen in Q1.
No we are right on with respect to Europe.
Respecting our preventive maintenance schedules and Dorado, we'd never skipped.
<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 your commentary is essentially grade related.
Like you guys demonstrated in Q1, youre not expecting throughput Miss in Q2, it's just the sequencing and in great.
Variability that that's giving you the slight miss in Q2.
Okay.
Yes.
Youre correct Andrew.
Our mill can put can processed tonnes and the mine can feed tons because as we said we had at the end of the quarter. Three 200 then.
70000 tons of inventory. So we can we have the tonnes.
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 and right then.
Doing all kinds of Crazy things just.
<unk> great.
We have a sequence we wanted mined properly we want to mind the right way.
We want to make sure we don't generate rock mechanics issues long term. So we're not jumping around and this was a problem that then all 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 as Pat mentioned, we have stopped that.
Greg There is a little lower than what was expected and thats going to impact our grade but.
We are following the sequence and as we said we continue to be confident in our guidance for the year.
Okay that 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.
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 or the north block I see the both encore.
In close proximity to the mine.
Okay.
For this we need to go through the definition, but nor blockers drove volume so it's.
It's a free.
It's really from mining.
No.
It's a nice volume that we will we are actually doing the second phase of drilling in the field in the north block. So that's.
It was interesting.
As we go down with around the tendency that we need to reduce the non lung.
On the <unk>. So in terms of priority is difficult for me to scheduled up with new book.
It will be close in the pipeline and both were in.
And that's where we are also.
Uh huh.
Working under with the.
<unk> zones. So we're doing the drilling and the results so to anticipate the work as much as we can so it's a it's a.
Uh huh.
This will be probably we will see what we will have access in this type of zone this year and the mining plans per 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 mine plan next year at some point.
Yes, it's what we use what we are where we're sticking to the plan.
We are we want to release.
The new 40 to 101 reported for the first sales of what we do.
Okay and 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 King 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 value kings.
It is possible.
Don that 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 will get from the West zone, and what we get from.
From Nord block in <unk> will we 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 than others interesting.
Things in the West Zone, if you go back to the old.
43, 101, there is the <unk> structure that develops us very high gold grades at depth.
I know the K, so again that as Patrick text ads.
More to come with drilling results, we have a very exciting year of drilling a very very exciting year of drilling <unk>.
Very good targets.
No.
I said 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 and and we also look forward to the updated technical report next year. Thanks again.
Thanks, Don have a good day.
Yes.
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.
Okay. Thank you everyone for dialing into our earnings call. This morning.
We appreciate all the comments and all 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 a lot of work ahead of us to achieve all our objectives for this year.
But as a as we sat in on where we are on track to do what we want to do.
Theres 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 <unk> 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.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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