Q2 2021 OceanaGold Corp Earnings Call
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Good afternoon, ladies and gentlemen, and welcome to the Oceana Gold 2021 second quarter results webcast and conference call. At this time all lines are in listen only mode. Following the presentation. We will conduct the question and answer session. If at any time. During this call you require immediate assistance. Please press star zero for the operator.
This call is being recorded on Thursday July 29th at 530 PM Eastern time.
Now I'd like to turn the conference over to Elisa. Please go ahead.
Good evening and good morning, welcome to Oceana Gold's second quarter 2021.
The webcast and conference call.
I am Elisa Howell Investor Relations manager for Oceana gold.
I am joined today by Michael Holmes, President and Chief Executive Officer of Oceanic Gold, along with Scott Mcqueen, Chief Financial Officer, and other members of the executive team, including the committed to David Londono AGM of Hail Craig.
Greg Thievery.
Our executive Vice President of exploration and development and Sharon Flynn, our executive Vice President of sustainability.
Before we proceed note that the references in this presentation adhere to international financial reporting standards and all financial figures are denominated in U S dollars.
Otherwise stated.
Also note that the presentation contains forward looking statements, which by their very nature are subject to some degree of uncertainty.
There can be no assurances that our forward looking statements will prove to be accurate as future results and events could differ materially.
I refer you to the disclaimers on forward looking.
<unk> on the final slide of our presentation Michael.
Michael over to you.
Thank you Melissa and good evening and good morning to all this the.
A pleasure to be here with you today, especially post the most recent news the renewal of the <unk>.
Which is the FIS.
This.
Renewed in the country of which we are very grateful to the government of the Philippines for the support through the process.
This is an exciting development for us and we're looking forward to recommence in the operations, which I will discuss during the presentation.
We delivered our third.
Incentive quarter of improved profitability on the back of record gold sales from Heil robust average gold prices and notably improved margins, we are delivering on our commitments.
It was a particularly strong second quarter and how the operations sold 59000 ounces of gold and over 104000.
Because of the goal through the first half at all in sustaining cost of $953 per ounce, putting us well within the range of its full year guidance.
<unk> record performance was partially offset by lower sales from the crisis, which delivered of lower than expected first half performance due to.
And the standard mill shutdown in mining limitations.
With these disruptions largely resolved we expect the strongest second half from the crisis.
At <unk>, we recommenced sustained milling and board Martha underground production online.
We continue to advance our exciting.
2 in an organic growth projects.
Capital investments during the quarter of approximately $95 million, we're focused on growth, including the Martha underground and Golden point underground development and the Heil peg why stroke storage expansion and CSF lit.
We ended the first half with 140.
<unk> in the immediate available liquidity.
And have ensured our ability to continue to progress on our organic growth projects on optimal time lines.
Delivering on our commitments is the core value fresh on the gold and the renewal of the DPA is if Ti has been a key strategic objective for us.
To me since the operations were suspended in mid 2019.
Subsequent to the second quarter and I am proud to share that we delivered on this commitment the country's first FTAA has been renewed by the Philippine National government.
And as a testament to our team's tremendous effort.
And the strong endorsement from both the community and the government.
The mine is expected to be a significant source of free cash flow.
Moving forward.
Once the DPI reaches full operations is expected to produce approximately 10000 gold ounces and 1000 tonnes of copper monthly at first.
On the board haul all in sustaining costs.
Under the revised terms the net revenue share remained 60% Philippine National government and 40% of Osha on a go the.
The amendments to the terms primarily focus on returning additional benefits to local stakeholders, which is consistent with the <unk> legacy as the significant.
<unk> socioeconomic contributor.
With the renewal in hand, our attention has immediately turn into the rehab and training of our world class for the pain workforce, which is the key catalysts to the operation achieving full production within the next 12 months.
We expect to add out of 700 employees.
As to the existing operational standby team by year end.
Processing is expected to commence recommence in the fourth quarter, we shouldnt with initial fade from the 19 million tonnes of stockpile, providing at 0.5 grams per tonne gold and <unk>, 5% copper.
Within the.
The next 12 months, we will re establish our underground mining right to 1.6 million tonnes per annum, which will supplement the ore stockpile feed into the processing plant.
The transport and the style of existing copper concentrate is expected to begin light in the third quarter.
The.
The 15000 tonnes of copper gold concentrate includes approximately 18500 ounces of gold and 3500 tonnes of copper.
We look forward to the <unk> contribution to our portfolio over the long term.
Moving on to slide.
5 and responsible mining is fundamental to the way, we do business and the health and safety of workforce is the top priority.
We are pleased to see improved safety performance in the second quarter with the total recordable injury frequency rate trending lower to 3.7 versus 3.9 in quarter, 1 as we continue to drive proactive.
The active health and safety initiatives across the organization.
The COVID-19 pandemic remains a pressing issue globally, especially as variants of the bars continued to emerge.
The strict health and safety protocols kept our workforce site, while on site and we will continue to use.
Slides these stringent safeguards.
For the remainder of the year.
Turning to ESG last month, we launched our independently verified 2020 sustainability report the.
The report highlights the significant progress made in a number of areas, including climate change human resource.
Resources by the diversity and steps towards compliance with the World Gold Council responsible gold mining principles.
Notably we joined App is by taking immediate climate actions with the release of the new statement of position on climate change that sets of net zero operational greenhouse emissions goal.
So by 2050.
Also as part of our journey to understand climate change risks, we commenced and reported on our first assessment of scope 3 emissions.
This year, we are building on 2020 achievements in advancing key initiatives that keeps us at the forefront of best practice globally.
We are developing work plans and targets related to the very prescient pressing global issue of climate change and.
And this includes our commitment to provide 2030 climate change reduction targets in line with the task force on climate related financial disclosures by the end of 2021.
We are assessing how we respect and protect human rights across our operations in the Philippines, New Zealand and the United States the.
These assessments will be finalized and reported.
On at year end at the end of this year.
We are implementing a by diversity standard across the portfolio and in 2000.
And in 'twenty, 1 operations will established by the vicinity baselines and management approaches that commit to no net loss in areas of natural habitat and net gain in areas with critical habitat.
We will also.
The continued to progress towards the goal of 100% compliance of the World Gold Council.
So on so we'll go mining principles by the end of 2022.
Our overall ESG performance has been recognized by the major ESG rating agencies and we most recently maintained a writing with the MSCI and outperform on ranking with sustainability, putting us among the elite ESG performance.
For sources in the mining industry.
I will now turn it on for Scott Mclean of that financial Officer, who will review, our second quarter financial results.
Thank you Michael on Hello, everyone.
The next few slides summarize the key elements of our second quarter and year to date.
Performance financial results.
I am pleased to report the second quarter includes the third consecutive quarter of improved profitability for the company.
The quarter on quarter as well as of year on year improvement in profitability reflects higher gold sales volumes led by a record second quarter sales of 59000 ounces.
The title the higher period on period realized gold prices.
While not material in absolute terms. It was also notable of the current quarter benefited from incremental sales from Hawaii as the Martha underground commenced continuous production in June as planned.
We now look forward to many more years of operations and opportunities.
<unk> in Hawaii.
At the upper gold sales was slightly down quarter on quarter, which was lower than expected.
And the reflected the impact of additional unplanned milling downtime in monarch constraints, but we do look forward to a stronger second half of <unk>.
And for you from the title of the first half EBITDA was 150.
Is it.
As nearly tripled over the same period last year and is up 45% quarter on quarter.
As noted this is the third consecutive quarter improved profitability and margins.
With adjusted net earnings for the second quarter coming in at $36.9 million on <unk> per share fully diluted.
For the year to date, the adjusted net earnings per share equates to <unk> <unk>.
Moving to operating cash flow, we did say the case to $35.8 million despite the improved profitability the.
The decrease being timing related reflecting the physical deliveries into the gold presell arrangement for which we received price as in <unk>.
Q3, 2020 at non to $820 per ounce.
During the quarter, we delivered just over 31000 ounces or around $60 million of the revenue under the presale contracts.
The final non thousand ounces to fully quite of that based agreements will be delivered today.
On an.
Basis, excluding working capital movements, which is consistent with how it's been reported in prior periods.
Adjusted operating cash flow with quite a <unk> 13 per share fully diluted for the quarter, bringing year to date cash flow per share to 22.
Investing cash flow increased to $80.9 million.
In the second quarter, bringing our year to date total investments to $152.8 million.
This related to planned developments and the rate of investment is expected to reduce somewhat into the second half.
The bulk of the year to date investments relate to the major key projects.
Well underway.
On the way or nearing completion, including higher waste storage expansions of the Haile underground early surface works.
Continued math of underground development with the mine now producing.
Golden point underground development, where production is expected to commence in the fourth quarter and ongoing exploration, especially at high.
<unk> of your targets in the water district.
Financing cash flow consisted primarily of finance leases with no drawdowns on debt facilities during the quarter.
Moving to slide 7.
Okay.
As at June 30 of cash balance stood at $92.3 million with total avaya.
The pool of liquidity of $142 million.
Total net debt stood at $224.8 million.
The reduction in our cash balance quarter on quarter represents expenditure on planned investments into the organic growth projects.
As we had planned for this and we continue to actively monitor and manage liquidity as we move through.
<unk> growth investment period of this year and we now also plan to ramp the DPI back into full operation.
While the liquidity outlook of standard based on oil prices.
And we had prepared to continue on growth projects irrespective of the timing of the <unk>.
With ramp up now commencing we took.
The proactive prudent and low cost debt to further enhance short term liquidity headroom and increase flexibility by establishing of $30 million working capital facility with Scotiabank.
This short term facility from spud of the total permitted indebtedness under the company's existing credit facilities and the existing security package.
Through the Covid and anticipate drawing the facility and we expect the sale of concentrate stock on the reached out of the DPA to contribute significantly to our free cash flow this year and beyond.
We remain focused on ensuring all risks of manage proactively and cost effectively and the key high value growth projects can be delivered on the optimal for online.
And to the later phases.
Turning to slide 8 which includes a bit more detail on capital investments.
As mentioned, our 2021 capital investment program is focused on advancing our organic growth projects into production.
Second quarter capital investments were.
Ultimately $95 million.
Of this just out of half with growth, including $28 million of tile and the initial Haile underground works 17 million at Wahid on the development of Martha and the process plant upgrades to facilitate the recommencement of production.
For millions of <unk> for the development of Golden.
On the point underground.
Exploration spend totaled $6.4 million with the majority of related to the ongoing definition and expansion drilling at and around Hawaii.
The total also includes resource conversion of the proposed underground stopes and extensional drilling of Golden point underground.
For our products' dining capital expenditure double quarter on quarter, and largely related to capitalized mining costs with $16 million and pre stripping of tile and $14 million at mccray's related to pre stripping of detail both open pit and underground development to access of new panel of identified of Fraser's underground.
Due to due to higher mining costs early in the year at Haile and changes in mining sequence and activities of <unk>. We now expect a higher proportion of our mining cost to be capitalized across the full year.
And have updated our pre stripping capitalized mining guidance accordingly.
The projects are moving ahead strongly.
As noted Martha underground commenced production.
In the quarter as planned and on budget and Golden point underground is expected to commence by year end.
Pile on the granting of moving forward with surface infrastructure progressing with the commencement of underground development ready to progress post the finalization of the SEC.
Based on the first half progress outside of the timings of tile and.
In light of capital reviews, we have reduced our full year investment expectations somewhat.
<unk> hundred $75 million to $295 million, despite the increased allocation to capitalized mining costs.
Now I'll turn the presentation of that kind of an <unk>, who will provide details on the operational performance during the quarter.
<unk> Scott.
And moving on to slide 9.
How delivered a record second quarter and best of a first half producing over 100000 gold ounces 3 of the midyear.
Of doubling over the prior year period.
Total gold production of 57 ounces.
The ounces in the second quarter increased approximately.
Obviously, 30% of of quarter, 1 as we moved into the higher grade all signs in meals and snacks Fi snake eyes too.
Middle sales increased 24% quarter on quarter with resolution of the quarter, 1 outages and along with improved recoveries benefited the type of oil production.
Mining unit costs of $2.60 per ton decreased quarter on quarter on increased nearly 10% over the prior year due to higher fleet maintenance costs.
Millions of unit cost Osha size improvement quarter on quarter by the increased over the prior year.
To date due to first.
First quarter outages.
All in sustaining costs fell well below the sales dollars per ounce.
<unk> in the second quarter and year to date, reflecting high gold sales from improved grades and lower overall cash costs.
These benefits were partly offset by the higher than planned pre stripping capital expenditures in the second quarter.
Given the outstanding.
Standing results sheet of di we refined our expectations for the full year full.
Full year and now expect 160000 to 170000 gold ounces of production, which is in the upper range of the original guidance.
All in sustaining costs and cash costs of also being revised to just about the original.
Credit ranges now expected to be 1 third from 100 to 1150 and $850 to $900 per ounce sold respectively.
Total cash expanded total capital expenditures at <unk> for the year are estimated at $135 million to $145 million.
Good morning for the lower than original expectations lower growth capital spend has been partly offset by increased pre stripping related to new design phase III development and little bit of phase 1 development.
Total of element for the Ohio underground is expected to commence with the receipt of the supplementary environmental impact statement originally expected.
Which is on media.
The ICIS will allow continued development of the existing how footprint expansion of the TSS in pesos and full development of the Haile underground.
Engagement with the U S Army Corps of engineers in the sales line of Department of Health and environmental control remains positive and.
The timing is the company responds to increased inquiries received price release of the draft EIS.
We anticipate the record of decision and final payment in the fourth quarter of this year.
Turning to slide 10.
While we are pleased with the record performance in the first half of the year from Heil.
And on the <unk> also recognize we have significant opportunities for improvement that can make this a world class asset.
Recently, we advised of the commencement of the sidewalk technical review of pile with oversight from our technical Committee.
We are currently assessing the physical performance in reviewing constraints in terms of both mining and milling.
Through the diagnosed size, we are building off of our current improvements in identifying further bottlenecks in practices that can be improved.
This process is intended to identify and prioritize opportunities to derisk the asset.
Potentially deliver additional value.
We will identify and implement these initiatives.
That of going to deliver productivity in the unit cost improvements and thus more value long term.
In the short term program, we are reviewing plant availabilities reliability utilization and ultimately throughput.
We're reviewing mining productivity is in areas of drilling blast, whilst in water management and mining selectivity.
<unk>, which is looking at benchmark and dilution as well as equipment availability and utilization.
For example, based on industry standard.
<unk>.
All considered within the context of site specific constraints. We are of the view that the mining costs of $2.20 per ton or less are achievable lives of the lots of them on an.
We are taking action to arrest of escalation and deliver reduced unit costs.
Over the long term timeframe of the operation.
Water and waste management are also of primary area of focus.
Construction of why storage facilities and in some cases rehab on the wife's rock to accommodate potentially asset.
Generating material is.
Either of the lots of them on an as capital intensive.
We are currently working with regulators in the side to mitigate the need for additional Pike why storage capacity.
Water management is also an area of focus including excess water pumping storage water pumping for storage purposes.
Management of <unk> and on site water, including road preparation for wet weather and driving strategies.
We will also assess capital allocation methodologies the thought.
<unk>, we are advancing the highest value projects for the solid and within the contest context of the company's total portfolio.
This includes mining tradeoffs.
And the where we are reviewing the potential to convert future items pushback with higher strip ratios to underground mining at high cutoff grades.
As you can see there are opportunities for significant improvements of house and we are determined to real assets we.
We are pleased to welcome our new executive General manager David load on.
The site.
All of this months, David joins us from catch on like where he was vice president of the projects and prior as GM of detour lifestyle months. He brings decades of technical and operational experience and the can pages enthusiasm for changes to come.
We expect to share more details of the sidewalk taken.
Technical review as we move into the solution of identification of implementation sizes of the coming months and provide a comprehensive update of findings post year end.
Moving on to on to New Zealand.
From a <unk> second quarter gold production of approximately 32000 ounces of gold was limited by GE technical construct.
Constraints and extended mill downtime as a result, Bonnie activities remained focused on weiss of movements, including pre stripping activities of the new sales more open pit.
In production year to date of 67000 ounces of gold was lower than expected.
During the second quarter of the operation.
Completed the planned re bricking of the order of cloud installed the refurbished Sag mill motor and completed the additional out of Skype maintenance activities that resulted in the 5 day delay to restock.
In addition pit wall movement in the.
Coronation North resulted in the line mining of the high grade all of.
These factors resulted in the lower than expected production during the quarter.
With the mill.
Issues resolved and to full capacity and the geotechnical risks being managed by the team the crises confident that of stronger second half is on track to deliver into the lower end of full year guidance. However.
The result of these factors the company used forecast of consequently, higher all in sustaining costs and cash costs due to the changes in the mine sequence.
As you can see the picture in the lower corner of the slide Golden point Underground development continues to progress with deliveries of new equipment arrived on site during the second quarter.
Production is on track for quota for this year from Golden point.
Moving on to slide 11.
<unk> produced just over 3000 ounces light in the second quarter, taking year to day production to just over 8000 gold ounces.
The Stein milling recommenced in late quarter, 2 after 7 week shutdown.
Then on the plan to upgrade the Sag mill and complete the general maintenance.
We continue to expect Wahid to deliver 35 sales into 45000 ounces of gold production. This year at an improved all in sustaining costs and cash costs.
Ramp up of gold production will continue.
And we are targeting of.
Right of 90 sales into 100000 gold ounces per year from the project over the next few years.
We continue to believe that while he north project, which includes <unk> represents the greatest value opportunity within our portfolio.
Drilling continues at the <unk> Apollo including.
Clothing resource conversion drilling on the eastern Graben design and the significant step out on the south Western strike extent of the main structure.
Where the conditions improved in June and provided the necessary reward levels to support continuous diamond drilling.
We currently expect to deliver an updated pro.
1 of the study in early 2022 and further define the potential of this high quality asset.
Moving to slide 12.
We considered the DPI and integral part of their portfolio and its restart as is the key focus for us for the remainder of the year.
The fees of activities for the restart of progressing to plan. Our initial focus is on securing all of the standard operating pit permits to ensure uninterrupted supply chains and sustainable operations.
This includes the discussions with the local government groups evidence of the documents detailing the startup plans we have developed.
This is of critical process and we want to ensure that we get it right.
Concurrently the recruitment rehab and training of our workforce is underway.
<unk> approximately 230 or 1 third of Joel bankruptcies have been posted and following a 2 week notice period.
We will be in the position to start.
Filling these roles.
The interest in these positions has been overwhelming so far.
We're also progressing the rehiring of critical roles, including the operational management positions and this is tracking as planned.
I'll refer you to the time line in our presentation.
Which provides the detail.
Detailed overview of our restart plan over the next 12 months.
We expect to restart the price is planned in the fourth quarter and this time line is driven by the required maintenance and re commissioning activities to reinstate reinstall and retest all the equipment.
Critical personnel on spare part components are expected to be onsite volume.
August month end to commence the restart process.
And functions that can be restarted now are well underway.
Price testing of the existing stockpiles is expected to be supplemented by ore from underground with the commencement of the underground development and production currently expected.
In early October.
The underground will commence once we complete the on boarding and re training of our personnel as well as implement reentry protocols for.
Required to ensure a safe restart the.
For the ramp up will be out of several months as we recommenced the development and stope extraction sequence.
COVID-19 remains of significant risk in the Philippines, and especially at the DPI given the camp accommodations.
The early in the second quarter. The total number of positive Covid cases increased to 63 in line with local trends and has since decreased in June and July.
The new day.
I'm on has existing COVID-19 management protocols.
Which were developed with reference and in alignment to the National and International guidelines.
These protocols include testing and screening before mobilization.
Interest and entry into the operation for cautionary isolation measures regular testing.
Training of the work force and testing capability and capacity with efficient turnaround of results.
The renewal of the FTAA and the restart of the GPO has been the key initiatives initiative for us and we look forward to bringing the operation on lawn and a valued Philippine workforce back to site.
Now looking to the future.
Key initiatives for 2021 are unchanged however, with notable progress in most areas.
Excellent and ESG and the commitment to responsible Romani Mani <unk>.
The remains fundamental to the way we do business.
We delivered a 2020 sustainability report.
And reporting on key initiatives like carbon emission is carbon emissions that put us at the forefront of the best practice amongst their peers.
Delivering on our commitments is the core value for our share on a go.
And for us that means of achieving our 2000 of 'twenty 1 guidance.
Successfully delivering on organic growth.
Yeah.
And at the end of the force of first half we remain on track to achieve both of these measures.
Achieving a robust organic growth projects is key to delivering shareholder value and we're doing so in 2 geopolitically stable jurisdictions, New Zealand and the United States.
And the safe restart of the DPI remains of significant near term catalyst.
And for the company.
With the renewal in hand, and the restart underway, we look forward to achieving full operations over the next 12 months and contributing to the Philippines' COVID-19 economic recovery.
In summary, we're focused on bringing our organic growth on lawn and restarting the DPA, which we build.
<unk> is critical to creating shareholder value.
Okay on the gold as the resilient and dynamic gold miner, with a strong and sustainable future and with the restart of the <unk> operations. We believe that that future is even brighter as we realized growth potential that is all I arrived.
Thank you for joining us today and I will.
I'll now turn the call well now turn the call back out of it to the operator for questions and answers. Thank you.
Thank you ladies and gentlemen, we will now begin the question and answer session.
Should you have a question. Please press star followed by the 1 on your Touchtone phone Youll hear of 3 <unk>.
Acknowledging the request and your questions will be pulled on the order. They are received should you wish to decline from the polling process. Please press star followed by 2 if you're using a speaker phone. Please lift the handset before pressing any keys 1 moment for your first question.
Your first question comes from.
Paul Thanks Habib from Scotiabank. Please go ahead.
Thanks, Operator, hi, Michael and the kind of goes game.
Congrats on a good quarter just the.
Couple of questions from me.
Starting with the.
Maybe David Londono Ken.
Give us some.
Other on is for us for PV 15.
15 days with <unk>.
<unk> on any comments you can provide on any kind of operational improvements like the.
Hanging fruit and Goldman Pcs on deal.
Great. Thanks, very much of items.
Really good.
All the good quarter as you said and really happy to get the detail on loan and net.
EBITDA for a baptism of fire on thank you.
Alright. Thank you can you hear me.
Yes, I can.
Oh, okay.
So yes, I've been there for a couple of weeks on air So on.
1 of the things that we.
Looking at sort of weighing on the on.
First of all 3 months of early in the game is gonna be of segmentation I think can we increase the fragmentation at the mine.
We are going to be able to increase throughput through the mill, so I see that 1 assay.
Are we.
We do have a.
A little bit of of difficult because of the drilling that so because of obviously, we have to inclusive of the Julien. So we're looking at how we.
We are going to let's say optimize operating capacity at site.
<unk>.
We see also a wood.
Waste management, so I'm doing on optimization of the.
The ways to see how can we better use the closest bumped to the mining areas and by the way redo of the mining cost and increase the productivity on the truck fleet.
All of it all of US here I'm very happy with water management. There you can see that the and why.
It is a big.
The issue here in South Carolina store, we're looking into how.
How we can chat more water on and discharged from a water into a man.
In the area.
And so to get rid of of what we you know we get a little of rain, particularly for some of the 2.
To improve on the.
Bates.
So that the those type of things that I'm looking at the first 2 months.
Perfect day by day I really appreciate your comments.
And looking forward to hearing additional the color from you over the next couple of months.
My second question is just the based on.
The off for the first half production of around 177000 ounces and your revised guidance of affecting our guidance of the implied production for the second half is approximately about 180 to 185000 ounces.
It looks like Q4 is shaping up to be our strongest quarter within the second half can you provide some color as to the percentage.
The of production in Q3 versus Q4.
Yes.
Thanks, Hi of ICT.
It's a bit of of shuffling of the chairs.
And so you know as we mentioned high on sort of production as we previous.
Previously discussed for the west in the first half weighted.
And then we will see the ramping up of <unk>.
Of.
Why he and.
And and a stronger quarter.
And the price side of the quarter 3 quarter foolish is fairly flat.
I I've rule, when you sort of put them all on the mix.
The center of the Mt.
Okay, perfect and just the.
Did you already mentioned that maybe I missed it but.
When did we get to the revised guidance on when Youre looking to release, the revised guidance, including the the appeal.
Yes.
We're working through.
For the plans with regards to the detail on and.
We're ensuring there's a few of few activities that we need to do on the ground in the first.
Post the <unk>.
A bit of documentation that we have to sort of following the.
All of the documentation straining through registration.
Getting the business as usual.
Permits.
Through the Mg of any region to presenting of the documentation to the local government units.
As I mentioned, the sort of posting posting the.
On the notice of.
Employment notices on the boards and then sort of 1 for 2 weeks until we can start re hiring side.
We're counting in this and.
Couple of weeks really just sort of finalize on to ensure that when we do items.
And stop the operations, it's going to be sustainable and uninterrupted.
And so once we sort of get a little bit further I've of this this understanding period, and then have the confidence with regards to bringing people back on and training.
With the backdrop of Covid.
We will sort of will be presenting and updated guidance.
For for the.
For this year and for up for the next for use of the PPA.
As I mentioned.
We haven't changed on the view with regards to what we sort of presented the plan presented previously.
Previously with regards for the 12 month ramp up in the the stages of <unk>.
On the sniff cups for the operation, but net.
The vessel will be working on harvest to try on that based on this and should those out of the water so for us.
The idea is to to get the required permits and get all the material that has been on standby, which means that by the <unk> have to read raise rate oil rig Commission.
Ramping up at the thing as we go through.
All of the equipment.
Get that going sorry focuses for us is to ensure that we have the right type of whats the right support.
So once we start we don't get without getting the drop it as well as loans focusing on.
On getting the.
The employees back.
The equipment up and running and certainly parts.
Missing on getting the.
On the concentrate thats on the slide out.
On solve as well.
Okay. Thanks.
And Thats what for me so thanks to debit as well as yourself Michael.
Thank you very much for us.
Your next question comes from Mike Parkin from National Bank, Mike. Please go ahead.
Thanks, guys for taking my questions.
Just kind of going back to the previous.
Update on the hail can you give us a bit more color as to why you think there is.
Greater per.
<unk> equal for the potential oxygen or duration of peg material out of the.
Pits and what your thought processes, there too to mitigate that in terms of the mine plan or it seems like you're maybe considering attacking some of the <unk> zones, a little more from an underground basis versus an open pit.
Potential yes, thanks, Thanks Mark.
That was the sort of being dealing with with regards to.
Just the.
The understanding of the.
On the boundaries within between the grain the 3 the 3.
Categories of on.
Weis material, we have the grain wise.
The yellow peg in the right path.
The pipe has to go on to construct itself.
On the Green wise it can go.
Yes, just the normal prices.
As we've sort of been mining it.
Some of the the age of fix.
We identify the additional pie that we have been modeling.
And so.
We're now going through the processes of.
Working with the government to identify a couple of things 1 as is.
The amount of the additional pay the categories of the pipe as well as some.
Material that is that has been categorized pegged as an asset generating and so we believe that the.
That can be coming.
2 into a different kind of into the grain wife's category and thats something that we.
We're kind of working with the regulators.
And then just understanding the.
The full amount of peg material within the forgot the model.
It's appreciated the storage of prices.
<unk> is at a higher cost.
And thats been.
Having a look at the lifestyle that we've got with our strip ratios.
The <unk> brings into that sort of trade off studies that we're looking at for underground versus open pit.
We're seeing the underground potential.
The real opportunity for Ohio.
For not only of the hub, but the is the.
The.
The fifth.
So the shift of.
The higher underground the orebody disorder of the hix, the how extinction.
As well as the sort of the palomino the resource that we.
We delivered on the 600000, the answers of resource we belief.
The 40% of the goal of is in the in the top 3 levels, there and there's a real opportunity to move forward with that and then sorry for you.
You're sort of looking at those of the underground areas then if youre on the Wyeth 2 from higher underground..2 <unk>. Then you can certainly duck into might be the bottom of page banner or snake, which has got the higher cost strip ratios. So day of the things that day to trade offs that we're looking at at this point of time, and so that trade off sort of.
<unk> into a high right on it looks the reduction of total amount of material to be on from the open pit.
Point of view and certainly the reduction net of pipe pipe material of as well so the.
The the that's the sort of longer term programs that we're looking at the <unk>.
Why aren't going to impact the short term plan that we've got the more sort of follow up plushies down the track.
But that's certainly something we're looking at volume.
Okay, and then just in terms of employee availability I know back when you guys went into construction of the hail.
Unemployment rates are pretty high in the region. Since then you've seen quite of bit of competition for labor coming into.
For the area can you give us an update in terms of how that shaping up with the turnover rate is like if there's significant cost pressure on.
The workforce for Hale I remember you were looking to.
For people in from the Nevada region, which was showing some success in terms.
<unk> of interest.
An update on kind of the labor pool and cost of it would be great.
Yes.
It is something that has that has been.
Our focus area and it's certainly 1 of the other things that.
Duffy. This is looking at is the talent management.
And how we sort of progress that going forward, we have taken the 10 out of it writes down significantly since the.
I think if you remember a couple of years kind of from around the 40% debt to sort of twenties.
Trying to drive it down to the double low double digits the.
The 20%.
The.
The line <unk>.
A portion of of company 10 out of her as well as it's 1 of those just.
The point Timna.
For us it's still remains the focus and it is something that we need to continue driving on and continue on improving.
We are seeing some opportunities within the market.
But it is getting tighter and tighter.
Through the Covid period issue.
My remember that we did guide to unemployment agency to supplement the workforce during the period of of.
When people were.
At the B, so far for lighted.
Sorry.
We're utilizing some of those opportunities, but it's still an ongoing an ongoing focus for us volume.
Okay. Thanks, very much that's it for me.
Ladies and gentlemen, as a reminder, should you have a question. Please press star followed by 1 you're.
Your next question comes.
Comes from John Tumazos.
At the Investor. Please go ahead.
Thank you.
Concerning the <unk>.
Restart.
The concentrate inventory looks like $50 million to $60 million source of cash.
And then when you start milling youre going to be milling down on the stockpiles.
Word probably already been expensed for mining.
So how much more with the cash.
Cash from inventory liquidation of the larger.
Then the development capital for underground work.
Training and other cost of restart.
Yeah.
Thanks, Ed.
Alright, Thanks Scott.
Okay.
Anyway.
Thanks.
Yes.
The concentrate on on hand, as a significant value of kind of in process, probably north of 60 million in fact.
The race that on the lower grade materials as Michael mentioned in the presentation shades of around Q4.
We will we will.
Certainly the cash flow positive.
Yeah, we would expect a very strong net cash flow generation and well in excess of what's required as part of the ramp up process over the next 6 to 12 months.
So it was the $30 million.
Extra credit line you negotiated earlier in the quarter before you had.
The good news about the restart.
Yeah, I mean, it started debt debt negotiation process, Jim with the while the uncertainty still remained around the time line is the dip here.
Given given the rates that did take a little bit longer than we'd like but we're happy that it's underway.
There is there is still unknown risks in the Philippines around.
Covid, and that's probably particularly of risk around the transport.
And the concentrate given it's a 12 out of round trip to pull it through for lots of communities of given we'd gone down that path of we thought it was prudent and cost effective just to continue and put it in place temporarily until we get the ramp up of underway, but we don't expect.
The.
As I said, we expect the cash flow took the positive coming out of the DBA.
I saw Paul was named Chairman.
We know him.
Sorry on mining.
I had 3 things that came to mind forgive me, if I'm a little bit mischievous.
Back to you.
I was wondering if you are looking to merge with an asset in Turkey.
Or alternatively do a merger of equals.
As for our 2 companies, where the little hair on them get together.
Each 1 second of the other will solve their problems.
The Ceos.
And my age of control bonus and the bankers get fees, but the stocks don't always go up.
Or would you only sell out for at least the 50% premium given how much of productions kind of rise over the next for years.
Forgive me for being teasing you a little bit.
Thanks, Sean.
Got it thanks.
The change the chairman.
Current chairman Ian right.
He's he's view and and pool prices as that is the chairman's role is never a lifelong role.
And he believes the company should be structured.
And at the.
The primary of time by the appropriate knowledge.
Ian has led us through the whole of the GPO SDI renewal side of he basically you've got into the channel positions when the.
The same guy came down and basically saw the successful renegotiation of the DPA.
Ian has stood aside.
<unk> not seen that now we're not we're in on a.
The ramp up growth price.
Any way of operations.
We're not.
Sending permitting sizeable operations in.
And he he thought it was appropriate that some.
With the good long term mining knowledge stepped up into the gym and strong and Paul Benson has accepted the position, which is which is great.
And again, we've reinforced I think the skill set in the company as well.
With me.
Coming and joining the board.
Therefore, because it's fully booked for for exciting projects basically the ramp up of the DPA, which as I said, we're going to draw on.
The launch of <unk>.
A lot of activities.
For the kind of in the demand at the surface would look at that persistence is quite smooth, but we will once we open that we will be we'll be throwing interesting asset added.
We've got the exciting sort of Martha underground and.
In ramping that up the Jeep on ramping that up in the Ohio work that we're doing in <unk>.
Good time for us the Sims.
It's happening and reflect certainly with the 2 new board members to see it back from reflect on the performance.
It hasnt been we have improved but it hasnt debate when we 1 of them today and so this is a good opportunity but missed the 2 the 2 new <unk>.
<unk> members as well as David coming on board to actually really have a good look at what.
Look at what the.
That's why he's moving forward. So really excited we have some enormous potential coming through with the volume project, which we're doing a lot of consultation with the with the communities around the around <unk> and the government.
Well.
All of the regulatory body say so.
Very excited.
The Pos going forward, so I think.
The channel.
On the boat in the management of Great will be very very busy.
Kicking the lot tab, and really sort of pushing the yes the.
On the business back into that into the.
Sort of World class profit want to with the assets that we have.
And yes.
Student debt.
If we get reflected in the share price as we move for US what we've had 3 consecutive quarters and we just want to build on that now with the DPA coming back on line.
Thank you so to summarize you've got 2 or 3 years of work to get the output up to 650000 ounces.
And it's not the right.
The time go out even though you have these M&A guys on your board that of sold the other companies.
That's a very good summary, thank you. Thank.
Thank you. Thank you thanks for putting up with my questions.
Yeah.
Your next question comes from Peru commit.
Raymond James Please go ahead.
Hi.
Good evening, everyone. Thanks for taking my question.
I guess my question is somewhat related to the previous series of questions. There, it's more related to the new FTAA agreement at the dip.
From.
I know that as part of the new agreement there was some requirement that the shares of the subsidiary I believe up to 10% of shares of the subsidiary he made available on the local exchange on.
Just wondering if there are any other restrictions or constraints that are included in the new.
The AAV agreement.
Related to oceana of the ability to potentially sell of the operation down the road to a for an entity.
Yes, thanks for Rick.
Look the.
It's.
The.
The FCA I renewal I think.
Excitingly is a is a win win to buy stuff.
Sales in the <unk>.
And the.
The government.
The 10% in 3 years is really just sort of the demonstrate the lifeboat will.
The ability for local ownership.
The other the other conditions.
The year round sort of additional community support.
From the broader <unk>.
In light of community support, which is the SD and pay which really looks at the the.
The local bond on the <unk> surrounding barren guys. So the additional support that.
That's been put in the areas more of a regional support.
The the potential.
Actual style of the door to the Philippine National Bank is all site.
<unk> sort of the product and we have the dore that can be sold so that most of the other thing and then just sort of.
Moving the sort of the corporate address to the to the.
The provincial area so they.
The really the only sort of.
Tens with regards to the renewal.
As well as a bit.
The government sharing the percentage with regards to the net smelter returns.
But there is there is neither of impediments and it's more just sort of the moment structure with some additional additional benefits for the.
The government.
And the locals.
But predominantly the 60.40 split in the same terms and conditions side I don't see any sort of impediments.
That was the case I mean, we've got the.
The 25 year agreement now time for us.
It's getting up there in delivering it is.
<unk> cash generator for the business so.
Got it.
We haven't really proud of.
For the category for say that was what was the world class operation and that's what we were bringing back to 1 of that world class operation within the hour within Ash silo.
Okay. Thanks for that and then maybe just a follow up question.
On the.
Really the the concentrate inventory that you have on site now.
I will start to be sold in Q3 and Q4.
Could you give us a rough breakdown of.
Kind of how much you see being sold in Q3 versus how much in Q4.
Tom It's hard.
And on that at this point of time.
Sort of.
We will get the the.
The the components put together so it just depends on the ability to trucks. So we will probably we can sell of impossible to trafigura, but the trucking will start towards the end of quarter 3 so the majority of the the <unk>.
Sales.
We'll probably come through will be.
The recognized from portable.
Okay. That's very helpful. Thanks, that's it for me.
Yes.
There are no further questions at this time I'll now turn it back to Elisa.
Thank you operator, we do have 1 question.
As of the submitted through the webcast as for our management team.
The question is.
The current shares owned by the Board and management level can we expect now the earnings is over for the board and management to show their commitment through buying shares.
Thanks.
Thanks for the centered on.
Heavily committed to the shot on.
The old share of portfolio myself and our delay you've seen on this is a perfect opportunity.
Once for out of blackout for the rest of the team and the board too.
To consider that option.
<unk>.
It's up to each individual.
Remember that only of the lasers, it's obviously some of some great opportunities yes.
Thank you Michael we have no further questions.
So with that I will conclude our webcast and conference call a replay.
<unk> will be available on our website later today and on behalf of Michael Scott and the rest of the team. Thank you for joining us.
Thank you very much ladies.
Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.