Q3 2021 OceanaGold Corp Earnings Call
Good morning, and afternoon, ladies and gentlemen, welcome to the Oceana goal 2021 third quarter results webcast and conference call. At this time all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session.
If at any time during this call he requirement needed assistance. Please press star zero for the operator also note that the call is being recorded on Thursday October 28th at 530 P. M. Eastern time, and I would like to turn the conference over to San Francisco. Please go ahead Sam.
Thanks, So much Sylvie good evening good morning, welcome to Oceana Gold's third quarter 2021 results webcast and conference call <unk> Senior Vice President corporate development for oceanic oil.
I am joined today by Scott Sullivan Chief.
<unk> officer, and interim CEO, Scott Mcqueen, Chief Financial Officer, Sharon Flynn EVP sustainability.
<unk> Dano EGF Haile operation.
David way Etfs in Philippines, and New Zealand, and Craig Febreze EVP exploration.
Moving on to slide number two.
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 unless 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 the forward looking statements in our presentation.
I will now turn it over to Scott Sullivan to walk you through the key highlights of the quarter over to you Scott.
Thanks Sam.
Good evening good morning, it's a pleasure to be with you here today.
Firstly I would like to add that it's wonderful to be with those Sean ago, a company with a long and rich history in the gold mining industry.
Although I've only had my feet on the ground here for the past five weeks or so I've been really impressed with the quality and the potential of the assets in the portfolio.
A highly talented workforce that we have throughout the organization and the strong shareholder base.
We do understand we have work to do to regain market credibility and our reputation in the gold mining industry as a business that generates healthy margins returns capital to shareholders and make prudent capital investments on high margin growth opportunities.
Although early days for me here I am very confident in the long term future of the business and what I can assure the investment community is that together with the board the executive management team and employees across the organization.
We are fully aligned and committed to improving our operational performance and delivering long term sustained value to shareholders.
So if you look at slide three.
Looking back at the third quarter I am pleased with the financial performance of the business and it doesn't reflect the importance of having a diversified portfolio.
<unk>.
We delivered our fourth consecutive quarter of improved profitability, primarily related to the renewal of the FTAA paving the way for gold copper concentrate sales from the <unk> and continued strong performance at Haile.
The <unk> restart activities continue to progress well despite the sometimes restrictive measures that we have enforced in the quarter to safeguard the health and well being of the workforce, allowing an increase in COVID-19 positive cases.
We are pleased to achieved some key milestones in the third quarter and in the beginning of the first quarter.
We began underground mining at <unk>, a month ahead of schedule with all development.
<unk> is being delivered to the ROM pad ahead of milling, which we expect to begin mid November.
Secondly, we successfully completed the transportation all of the gold copper concentrate inventory on hand on October 2nd we invoiced over $60 million in revenue and received approximately $38 million in cash as at the end of the third quarter.
Instead, we have achieved critical mass in our recruitment efforts that has allowed us to achieve these milestones and continued to progress restart activities.
At Haile, we delivered a stronger than expected third quarter, mainly a function of better than expected grades out of our ledbetter phase one pit with a stronger year to date performance. We are again, increasing our guidance range at <unk> and now expect the operation to deliver 175000 to 190000 ounces of gold.
We continue to advance the highest technical review that will culminate in a new mine plan expected to be completed in the first half of 2022.
We are pleased to maintain our consolidated full year guidance, which again reflects the importance of having a diversified portfolio of assets.
We are expecting higher production from Highlander GPO to offset the softer production forecast now for the New Zealand operations.
Moving on to the next slide.
Okay.
We're very pleased to say that <unk> contributing again to the business with third quarter sales of over 19000 ounces of gold and 3400 tons of copper.
Consolidated production year on year was driven higher by Highland, partially offset by Mccray's.
Third quarter production is expected to decrease quarter on quarter and was in line with our expectations as higher delivered a better than expected performance, while the New Zealand operations were impacted mainly by the nationwide lockdown.
All in sustaining cost for the quarter and year to date decreased over the previous reporting periods, which was mainly a function of higher sales volumes, partially offset by higher operating costs and increased capital investments mainly related to the Haile expansion Martha underground ramp up of why he and pre stripping at both <unk> and <unk>.
Financial results for the quarter was solid and driven mainly by the GPO Dalton <unk> sales and continued strong performance at Hyatt Our adjusted earnings per share came in at seven <unk>, which was ahead of estimates.
While cash flow per share came in at 12, <unk> before working capital movements and excluding the physical delivery of the remaining gold ounces as a part of the 2020 gold prepayment arrangements.
I will now turn the presentation over to David Londono AGM at Haile to walk you through the whole results. Thank you debate.
Thank you Scott and Hello, everyone.
Moving on to slide five.
Sure.
You had a very good quarter of gold production at <unk> with nearly 46000 ounces produced.
<unk> above our expectations with better than expected grade mine out of deliberate pit.
Although greater conciliation of about 20% higher than predicted we believe this to be near term benefit.
Fully expect to align more closely to the resource model going forward.
Mining operations were mainly as net better phase one.
In the third quarter, we were focused on waste stripping ahead of increase or mining going forward.
As we progress through this stage of better we will go through a period of materially lower grades, which we expect to continue to see how.
How quickly next year.
Mining rates are steady however, we continue to be limited by competitive area, allowing for a visual pathways.
Storage facility and water discharge with the continued delays in receiving the Ncis associated impediments.
Ma'am paperwork lower quarter on quarter on decreased throughput rates related to property and have been all from their bigger.
We continue to implement plans covering facing initiatives to push throughput rates higher not only will it all back through all pits.
All in sustaining Cogs increase quarter on quarter, mainly due to increased restricted capital, which is tracking higher than originally guided.
This reflects the higher allocation of mining cost to capital than previous.
Airport Paas by.
The amount of total spend isn't changed and changed.
With a year to date performance, we have increased our production guidance on <unk> for the second time this year.
Now expected to deliver full year production between 175 and 180000 ounces.
Despite the reclassification of mining experience to capping the all in sustaining Cogs guidance remains unchanged at 11 <unk> to 11 50 per ounce sold while cash costs have decreased to $6 50 to 700 per ounce sold.
Moving on to slide six.
We continue to progress the hail technical review.
This review is intended to maximize cash flows from the operation and maximize the value of the assets. We are already implementing changes to the operation, which which will begin to bear fruit over the near term.
I do expect I do expect some more quick Queens. However, some changes are more structural in nature and will take some time to implement.
The primary focus area for clinical review, our portfolio's operating cost capital allocation.
Management.
Pack and waste management and employee turnover.
More specifically on the mining front, we're starting to see the benefits of changes that we've made so far such as improving haul roads on a compete on ROE drainage.
Unlike the past where.
We're mining operations shut down during heavy rainfall, we don't stop now we continue mining littery increments, we're suggesting a return or lining.
The improvements to our roads have also double the life of the haul truck tires, which just six months ago, we're averaging 3000 hours.
And now averaging over 6000 hours.
Target is to achieve 7500 hours in the medium term.
My expectation is that these changes will drive maintenance costs, lower and improve mine utilization rates, while increasing productivity.
Lastly, our mine utilization was in the mid fifties.
We've now of the mid seventies and my objective is to achieve a mine utilization rates in the mid <unk>.
<unk>.
Mining operations were previously driven by volume. This is how core mines work Hale is a coal mine and the ore body is geometrically complex and does not lend itself well to bulk mining approach.
We will refocus our efforts on the quality of the remaining delivered to plan.
Going forward, we will be implementing <unk> and RC drilling program for all grade control and for improved pathway specification.
We will configure that lease one of the shows to a backward configuration as well to be able to mine more selectively.
These efforts will be designed to reduce our dilution and optimize tagged waste that we are required to deposit.
Language facilities.
Over the near term, particularly as we continue to wait for the <unk> permits we do need to continue managing two critical aspects of our mining operations. One is water management and the other one the <unk> waste management.
First on water management.
We are limited by the capacity of the water treatment plant and given that the rainfall history, Okay is well documented.
Note that we have a considerable amount of water that needs to be discharged.
The weather has been a couple of things this year, which has helped greatly.
We are also happy with operators and we will be purchasing more units later this year.
Respecting this unit will reduce our water levels by approximately 30%, which again is very significant.
With the <unk>.
We will be able to expand the water treatment plant and this jack higher rates of water.
And then we have to move water around and at least for next year. We may have to slow mining air force due to restricted access to lower benches.
On the waste management front.
Our mining approach to date has produced more pathways Zhang.
<unk>, mostly due to the way pathways in Ontario have been classified as Ais revenues as I mentioned with more selective mining we can reduce the pathways of the lack of the mine even below below the level of transforming last year's technical report.
Additionally.
We will work with the regulators to demonstrate with the use of scientific data.
Classification of some of the potential asset generated mafia. So that we can store these waste safely in traditional waste storage facilities.
While we wait for the <unk>, we have to start packing race in active pits and we handle more than necessary.
These factors have been consumers contributors to operating unit Cogs being higher than expected are reflected in the technical report.
We will always work to drive operational efficiencies and lower cost however.
We're focused on controlling cost while meeting this restrictions and ensuring we're being realistic in what we can drive our costs down too as part of the payment country view.
The unit cost assuming last year's technical report will be difficult to achieve however, there may also be too far from optimal.
Either way the mine plan, we will assume achievable cost assumptions, which will increase our cutoff grades and increased ticket upgrades resulted in the reclassification of somewhat.
Yes.
Again, I will raise rates right, though that we will not be mining margin allowances or answer that destroy value.
It will be more selective in what we mine and process or how we generate strong cash flows and sufficient risk adjusted returns for shareholders to maximize the value of the asset.
For me I will not be measured by how many offers go we produce a paid I will be measured by how much free cash flow. We generate this is the culture, but I'm still in a cave now.
On the processing side.
There is some work we need to do the glass segment patient improvements. We have mentioned are expected to drive higher throughput rates and increasing mill utilization. It will help with blending of ore that will improve processing kinetics with an aim to improve steady state gold recoveries.
We have made all the improvements already such as increasing the emergency stockpile from several hours to seven base.
This means we have downtime of the primary crusher demand will continue to run.
All in all we expect to deliver a new life of mine plan in the first half of 2022.
Again, the implementation of changes is ongoing and the value realization expected progressively over the next 18 months.
Some of these changes are expected to deliver the same value. While other changes are more structural in nature and will take additional time to implement and drive value over 19 months period.
The timing of the new mine plan.
Will also be dependent on <unk>.
<unk> eyes.
And associated permits.
Moving on to slide seven.
No.
Hey.
The process continues and the company now expects expect the China and.
The record of decision and related related permits in the first quarter of 2022.
As I have laid out just a few minutes ago. These patents relate to the expansion will be operated footprint to accommodate waste suppliers.
Dancing with the ultimate plan to allow for higher <unk>.
Water discharge rates.
Whaler development that behave underground.
Engagement with the U S Army Corp of Engineers, and South Carolina Department of Health and Environmental control is ongoing at the company response inquires received post release of the draft EIS.
We have also worked closely with local stakeholders swap supportive of what we are proposing.
Although we don't we don't see any sharp stoppers and the processing itself is complete as we await the decision we have had to implement workarounds to accommodate water and waste.
The <unk> process continues to be delayed then we will have more choice, but slowdown in mining and in the meantime, and coring mining costs related to west two ways.
And water management, we will continue to engage with the regalia regulatory.
Asia is on a weekly basis.
We have continue constructing surface infrastructure related to underground operations.
We can develop the portal however, we required the Cif permits to begin building the underground scenario in mind Watson.
<unk> on the ground, we expect to drill extensively or expand the current resources and horseshoe and palomino and drill testing of targets.
We continue to see great potential for reserve and resource growth through underground targets.
I will now turn the presentation over to David <unk>.
Thank you, David and Hello, everyone.
On slide number right.
<unk> Zealand, the government announced a two week nationwide walk down to address the spread of COVID-19 in mid August.
This order impacted both of their New Zealand operations, which were essentially shut down for the duration of the lockdown.
On September 1st we recommenced operations at both why he and the crisis in a staged approach, which along with the government COVID-19.
Yeah.
Cries, we produced 25720 ounces of gold in the third quarter.
Which decreased quarter on quarter due to the nationwide lockdown.
The restart and ramp up of operations with slower than expected.
Due to subsequent regional lockdowns impacting timing of supplies and movement of workers.
Yeah.
These included the gradual easing of restrictions from label for <unk>.
Locked down to a level, three which still restricts access to the operation and then to the current level to which has some limited restrictions.
The other complexity for us at <unk>. This year is that we have had to weigh the geotechnical constraints at coronation North.
And reduced throughput rates from planned and unplanned mill disruptions.
We've essentially been playing catch up all year.
The good news however is that full operations were restored at the end of the third quarter.
The process plant issues behind us.
Evidenced by currently achieving record throughput rates.
And we're making good progress on money across all fronts.
I'm also pleased to announce that we have achieved first oil from the Golden point underground is planned.
With these improvements higher throughput rates and better grades.
We expect to deliver a rebound quarter to achieve our narrowed guidance range of 138000 to 143000 ounces of gold for the year.
I'm also pleased to announce that late in the third quarter.
We welcomed Mike Fisher as the new general manager for the <unk> operation.
Mike has extensive mining experience, having recently worked in Mongolia, and before that as President and general manager of the <unk> mine.
His extensive experience and leadership will.
And the <unk> operation and see how that goes well going forward.
I'll now move on to slide nine.
<unk> produced approximately 7500 ounces of gold in the third quarter.
The third quarter production was also impacted by the two week shutdown of all operations as part of the New Zealand government mandated COVID-19 lockdown measures in August.
Ramp up of operations was further impacted by ensuing regional lockdowns affecting the workforce supplies and equipment availability.
Despite the lockdown development at Martha underground progressed with 2195 meters of advance achieved for the quarter, even though impacted by the COVID-19 Lockdown on August <unk>.
Development continues to focus on the risks royal waste and Ed with mining areas.
Reduction in rigs in the upper levels of Edward also began late in the quarter with 6600 tonnes of stope ore mined.
Through the course of mining the Ed Woodbine, we have experienced some negative reconciliation.
And then subsequently updated our resource model, which will affect our near term production, particularly in the fourth quarter.
The two week lockdown compounded the impact by deferring alternative high grade panels to next year.
As a result, the Wahid mine is now expected to produce between 30000.
And 35000 ounces of gold with a revised all in sustaining cost guidance range of 1525 to $1575 per ounce.
We do not expect this to have a long term impact on the operation with resource definition and grade control programs advancing well.
On the exploration front, the two week Lockdown no drilling during this period.
For the quarter and much of the year drilling continued to focus on the Martha underground mainly for resource conversion and definition.
At the one he north project, we had originally planned on drilling 10000 meters at 480 format. However, the lockdown along with an extended seasonal drought means we will fall short of their drilling targets.
The drilling we have completed this year, particularly <unk> has focused mainly on resource conversion of the east Scribing bank with a step out hole testing the extension of the Scribing structure along strike to the southwest.
We continue to be very pleased with the drill results.
Drilling this year has extended mineralization of the east Graben vein now with a one two kilometers strike.
Drilling is also supporting the technical studies underway for the pre feasibility study.
Preparation for the Lodgment of a can St application for the Wahid North project inclusive of the predicted upon our underground mine continued to progress with environmental assessments nearing completion.
Over the next two quarters, we will continue engagement with a broader group of stakeholders as part of the consenting process.
We expect to launch a formal contains unique location in.
Clusium of stakeholder feedback.
With the regulated within the first half of 2022 weeks.
We continue to advance to technical studies as part of the same thing in pre feasibility study work stream.
The work is ongoing and supported by resource conversion drilling at particular program.
Although the pre feasibility pre feasibility study is contemplated for completion in the first half of 2022, we have increased the scope and might increase described further.
Additionally, we are looking to permit a third drill rig to focus on extensional drilling at particular permanent to further enhance the project value proposition.
The point is.
The opportunity is predicated upon is too compelling for us to rush through some of the work necessary to properly advanced this project.
The impact on the timing of such work is being considered and could result in extending the date of completion of the study.
Turning to slide 10.
I have recently returned from spending six weeks in the Philippines and at the dip here.
The <unk> restart activities continue to progress well with key milestones achieved during the third quarter and into the fourth quarter.
These milestones include the following.
Successful transport of the gold copper concentrate.
Commissioning of the primary crusher and undertaking critical maintenance activities of the process plant.
Recommencement of underground mining.
Delivery of underground ore to the ROM pad, which will continue to progress.
In the third quarter <unk> recorded sales of 19151 ounces of gold and 3356 tonnes of copper.
Also in the third quarter 1096 ounces of gold in Dor I was sold with the remaining sales related to the gold copper concentrate.
And at the end of the quarter, we had received approximately $38 million from the sale of the concentrates representing approximately 60% of the total middle value of the full inventory.
The remaining funds will be received in the fourth quarter.
Recruitment and training activities remain the critical path to restart and ramp up activities.
These activities are tracking to plan with recent recruitment activity, having been slowed to address the increase in COVID-19 cases.
Despite this we do have a critical mass to safely ramp up of operations recruitment activities are ongoing and we continue to expect to achieve 90% recruitment of the complete workforce by the end of the year.
Processing plant restart and ramp up activities continue to progress our hit first mill feed expected in the middle of November 2021.
In the third quarter, we completed several key activities, including maintenance milestones of ball mill motor replacement, Sag and ball mill gearbox and lubrication system upgrades.
<unk> of both the Sag and ball mills and conveyor belt replacements.
In mid September.
The primary crushing circuit was successfully recommissioned, leading to the recommencement of crushing emergency stock feet.
Currently approximately 75% of the process plant restart activities have been completed.
We are tracking to plan for the restart of milling expected in mid November 2021.
Underground mining restart activities continued to advance well.
With continued and ongoing recruitment and training of underground operators completion of safety inspections upgrades to underground mine equipment, including pumping facilities and the delivery of supplies and equipment.
During the quarter as Sandvik ran at 100 mobile raised bore rig and sandvik <unk> III underground haul trucks were delivered successfully.
Brought to the end of the quarter, we began underground mining activities with the phase III development costs, resulting in a total of 625 for tons delivered to the ROM pad.
The commencement of all development is approximately one month ahead of schedule.
We expect start development to commence in November.
Again, COVID-19 remains a risk to a restart and ramp up plans.
But despite a jump of new cases in the third quarter, everyone affected recovered without any serious illness.
We continue to manage the risk and we are working with local authorities to facilitate vaccinations.
Our COVID-19 protocols with the GPO include testing and screening before mobilization and entry to the operation.
Henry isolation measures regular rapid testing and screening of the workforce and ensuring testing capability and capacity with efficient turnaround the results.
Currently approximately 70% of the interesting anecdote Philippines workforce has received at least one dose of a COVID-19 vaccine with 55% of the workforce being fully vaccinated.
For the fourth quarter <unk> is now expected to produce between 7012 thousand ounces of gold.
This was previously five to 10000 ounces.
And also to produce 1000 tonnes of copper.
With the range, reflecting the ongoing risks noted.
For the full year <unk> sales are expected to range between 25030 thousand which was previously 23 to 25000.
Whilst <unk> sales are now expected to range between four and 5005 thousand tons.
2021, all in sustaining cost is now expected to be between 101 hundred $50 per ounce sold.
Moving on to slide 11.
Here, we have a couple of photos.
One of the first cut on the ground and the other illustrating the resumption of crushing.
We are very pleased with the progress at the shipyard.
And look forward to providing additional progress updates to the market.
I'll now turn it over to Scott Mcqueen to walk you through the financial performance of the business.
Thank you, David and Hello, everyone over.
Over the next few slides will cover the key elements of our third quarter and year to date financial results.
Scott has already mentioned and the multi pleased to report the third quarter represents the fourth consecutive quarter of improved profitability for the company.
Also that the prior quarter was one of the most profitable in the past three years.
Adjusted net earnings for the quarter was 53 million or <unk> <unk> per share.
This takes the year to date adjusted net earnings to 16% 16 cents per share fully diluted.
The quarter on quarter improvement in profitability was driven by the value realization on the <unk> inventory the majority of which we managed to transport and invoice within the third quarter, which was ahead of plan.
Approximately $17 million or just over <unk> <unk> per share.
Related to onetime tax credits on the recognition of tax losses and other temporary differences as we again generated revenue in the Philippines.
While golf sales from higher with lower quarter on quarter, they did exceed expectations, which partially offset a weaker performance in the New Zealand operations, but both were impacted by the nationwide COVID-19 Lockdowns.
We are looking for a material rebound in both New Zealand operations in the fourth quarter.
That high on the fourth quarter sales are expected to reduce consistent with the grade profile.
<unk> ourselves with all fiber just given the bulk of the inventory was invoiced in Q3.
However, the production ramp up will continue at a more significant and sustained contribution into 2022.
The combination of these operational factors also noting the onetime Philippines tax credits, we did recognize in Q3.
So we do expect a softer final quarter in terms of underlying group profitability.
Operating cash flow increased $33 million this quarter.
EBITDA was in line with the prior quarter.
The third quarter included a low lever prepaid sales, which totaled $17 million as compared with approximately $60 million in the prior quarter.
We completed the final physical deliveries into the <unk> in July and as we stand today and at the end of the quarter, we have no hedging contracts in place.
Investing cash flow increased slightly to $83 million, representing the highest quarter of investment we expect for the year.
Year to date cash flow from investing activities totaled $236 million.
With higher capitalized mining costs and growth capital investments at Haile.
The continued ramp ups of the <unk>.
Arthur and Golden point underground and the ongoing exploration.
Financing cash flow in the third quarter included the drawdown of $50 million from the revolving credit facility as we move through the low point in the liquidity cycle.
The monetization of the <unk> inventory and shifted focus there to the ramp up of operations.
As advised you in the July webcast also at the beginning of the third quarter. We did close an additional $30 million of short term working capital facility, which remains undrawn.
Operating cash flow, excluding working capital movements in credit to 12 cents per share for the quarter, bringing the year to date cash flow per share to <unk> 34 fully diluted.
Moving on to slide 13, when we talk about our capital investment.
Sure.
Consolidated capital expenditure in the third quarter was 91 million a slight decrease quarter on quarter with lower growth capital invested partially offset by a higher capital mining pills.
Year to date capital expenditure of $2 $55 million increased approximately 30% over the prior year, reflecting increased capitalized mining cost at Haile <unk> and Martha underground along with the planned investments associated with the Haile expansion.
The development of the Martha underground in.
The Golden point underground Macrae, plus ongoing exploration activities, principally focused in New Zealand.
Third quarter capital expenditure of approximately $56 million of tile pri.
Primarily related to the ongoing expansion of mining operations, including the construction of the tailing storage facility will lift heavy earthworks.
Constructive potentially asset generating waste storage facilities.
Capitalized pre strip at Haile is expected to be higher than originally guided reflecting an allocation for mining cost to capital expenditure higher than previously forecast.
As this is a reclassification there is no change in total mining costs or impact onside ethic.
However, updated guidance does include a corresponding reduction in the forecast, but unit costs cash cost sorry, approximately $200 per ounce consistent with the increased allocation of operating cost to the balance sheet.
<unk> total capital expenditure of $18 million for the quarter, primarily related to capitalized mining associated with the development of the detail multi pit plus additional stope development opportunities identified and Fraser's underground.
Third quarter capital spend of <unk> of approximately $7 million related to the now completed Sag mill upgrades, along with ongoing development of Martha underground.
We're also if I can start and enhancing our capital allocation program to ensure we are generating increased cash flow. We expect 2021 will be peak gross capital. However.
However, we are budgeting and planning in full swing combined with the ongoing technical review at Haile, We won't have the full details for 2022 until early next year.
Moving on to slide 14, which included a bit more on the balance sheet.
As of September 30, you can see our cash balance stood at $113 million with total immediately available liquidity of $143 million total.
Total net debt was approximately $257 million.
The quarter on quarter increase in cash reflects the drawdown of $50 million from our revolving credit facility.
8 million collected on the sale of <unk> inventory.
We expect liquidity to remain relatively flat across the fourth quarter with improved free cash flow coming out of the New Zealand operations and further receipt from the sale of the <unk> inventory.
Offset by the DPA ramp up in production costs and the soft quarter production at Haile.
Great is expected to be lower.
Capital expenditure across the business is also expected to reduce in the fourth quarter.
It is thought about capital allocation process, we are committed to and focused on increasing cash flow from every operation to support our balanced business, one that returns capital to shareholders reduces debt and reinvest in high margin projects that will generate positive returns such as W. K P.
I'll now turn the presentation over to Sharon Flynn to discuss our ESG efforts.
Thank you Scott.
And responsible mining is fundamental to the way, we do business and the health and safety of our workforce is a top priority.
At the end of the third quarter 2021, as Shannon Golar reported a 12 months mean, moving average <unk> of $3 nine per million hours.
This is up from $3 seven per million hours at the end of the previous quarter.
In the past quarter as there has been a strategic refocus on safety leadership to engage with the workforce drive a sustained safety culture and built on workplace hazard identification and injury prevention.
In response to the ongoing COVID-19 pandemic our company continues to win for us workplace protocols to protect the health safety and wellbeing of employees and contractors.
The commencement of the pandemic in March 2020. The company has recorded 378 confirmed cases of COVID-19, among employees and contractors globally.
This includes 186, new cases in the third quarter of 2021 at the <unk> and Haile operations combined.
With continued risks related to COVID-19, the company has implemented additional controls for the <unk> operation, including rapid testing and precautionary quarantine requirements.
We continue to encourage and promote employee access to vaccines aligns of course with local government requirements.
The Philippines, we support local health agencies to secure additional vaccines and we also sponsor community distribution.
We continued to advance our key ESG initiatives that keep us at the forefront of best practice globally, we view ESG as an enabler of our business today and the opportunities for tomorrow.
In line with our commitment to achieve carbon neutrality by 2050, we continue to work on setting our 2030 interim targets. This includes better understanding of our direct and indirect energy consumption and our carbon footprint.
We are also undertaking physical and transitional risk assessments for each of our operating sites to understand how our business can be impacted by climate change as well as other potential threats related to the transition pathway.
Zero.
We published our first Standalone modern slavery statement in 2021, and then our 2020 sustainability report we shared how we are unwilling and showing our respect for human rights.
In Q3, we continued implementation of human rights impact assessment across the company launched an online.
And continued development of our responsible supply chain approach.
Work to align our tailings management system to the global industry standards for tailings management has been progressed throughout the year.
Including review of corporate governance, and accountability frameworks in Q3.
We continue to progress towards the goal of 100% compliance with the World Gold Council responsible gold mining principles by the end of 2022.
I will now turn it over to Scott Sullivan to wrap up.
Yeah.
Thanks, Sharon and thanks, everyone for your updates.
So I'm going to conclude the presentation by highlighting our top priorities that we currently have in the organization as I mentioned at the onset of this webcast. There are many aspects of our business that are working well, but we certainly got a lot of work ahead of us for now I can assure you that we are acutely focused on the task at hand, and we will prioritize accordingly.
With my feet on the ground now for about five weeks I can say comfortably that have yet to see a challenge within the organization, which we do not or will not have a solution and more importantly, as I've already stated.
We have a highly talented workforce across the organization and together, we will work hard and smart to rebuild credibility within the market.
To that end, we'll continue to reached item to aggressively ramp up our operations at <unk>, while managing the risks associated with COVID-19, we expect underground mining activities to aggressively increase to full mining rights within the next eight to nine months.
And then we'll be at full production rate of 10000 ounces of gold a month and.
In 1000 tonnes of copper a month at first quartile all in sustaining costs and I think we can all agree that it's a pretty good time to be a copper producer.
As David has mentioned we are <unk>.
Having a good year at <unk> and expect to deliver on our increased guidance and continue to advance the technical review forward to produce a new optimized mine plan.
There will be some quick wins, but will progressively implement more structural changes that will be designed to deliver long term sustained value for shareholders showed at the company's committed operational strategy will be in operation that maximizes cash flow, it's not one that bonds ounces the size over the cycle producing ounces.
And while he will continue to ramp up Martha underground, while advancing our understanding of a multi mine project.
And finally, <unk> is too high potential to rush and we will look to expand the drill program there while advancing the project through the consenting process.
We're on track to launch our formal concerning applications over the next six months.
Driving operational efficiencies will never be a one time effort.
Leslie pursue opportunities to drive down our costs.
And our position on the cost curve, we will continue to manage the risks associated with inflation, that's led to higher fuel costs cost creep in some of our suppliers such as reagents and materials.
And Additionally, we proactively manage the risks and demand for labor, particularly as the country borders open up and world economies expand to ensure that we've got the right people in the right roles and not only that we are able to attract talent.
Timing them as well.
And finally and most importantly, we are currently reviewing and will enhance our capital allocation process, recognizing the importance of generating sufficient risk adjusted returns and cash flows for shareholders we will.
<unk> prioritized, our capital spend internally balancing capital needs with returns to shareholders.
Servicing our debt obligations.
I'm very confident and fully invested in regaining our status as the top gold mining company in the industry and I know, our executive and at Workforces globally share my enthusiasm that journey ahead. So I will now turn the call back over to Sam.
Thanks, Ken.
Thanks, Scott I will turn the logistics of the Q&A session to the operator.
Thank you ladies and gentlemen, if you do have any questions. At this time. Please press star followed by one on your Touchtone phone you will then hear a three.
Prompt acknowledging your request and should we just should you wish to withdraw your question simply press Star followed by two and if you're using a speaker phone. We do ask that you. Please lift the handset before pressing any keys. Please go ahead and press Star one now if you had any questions.
And your first question will be from Matthew Murphy of Barclays. Please go ahead.
Hi.
I have a question on Haile Thanks for the update on the technical review in the operating philosophy.
Just wondering when you're talking about quality over volume.
Or we should think about that from a cut off grade perspective, I think your reserves were added four five gram per tonne cutoff, what are you mining to now.
Yes, Matt.
Sam here. Thanks for the question I'll pass it onto Devine and the second here to comment on that but.
Basically we are still in the process of going through the hail Technical review.
I'm still going through what the appropriate cutoff grades would be as Davita mentioned, if you look back the last couple of years or so we've been really focused on mining.
Material bulk tonnage mining approach.
And.
We need to be more selective basically is the bottom line. We are we are obviously getting a good handle on our costs our cost base for hail going forward, but we want to make sure that we're using an appropriate cutoff grade.
Again, we're maximizing cash flows from the asset as opposed to mining ounces that have the potential to destroy value and we don't we certainly don't want that so we are again, we are going through the throws of this hail technical review, we are well advanced in that study work and we will come out with additional information, particularly as we complete the.
The new mine plan.
Davita is there anything you'd like to add to that.
No I think you're just trying to clear out the only thing that I hope driving that is that the average pillows.
<unk> clarified that are great.
We're mining rates are as.
Well above that.
Number and whatever it is coming down at that lower grade stockpile.
And we only used when we need to use that to keep the mills running.
So as volume versus quality.
And all the coal mines.
They want to move tons and tons and tons I may right.
On a more quality ounces that sounds like that pay for themselves.
And that not.
Not only for mining adoption for processing.
Okay. Thank you.
Thank you next question will be from <unk> Habib at Scotia Bank. Please go ahead.
Thanks, Operator, hi, Scott and notion of golf team.
Congrats on a good quarter, especially at Haile.
Just a couple of questions from me starting off with the deal now that appeal.
Mining seems to be ahead of schedule.
Doesn't look like you moved your guidance.
For full underground ramp up that's taking place in Q3 of next year.
Are you just being cautious on COVID-19 impacts and continuing Colby backs and cleaning implementation or are there any other contingencies that youre building in.
The repeal underground ramp up.
Yes. Thanks for the question, it's good to actually talk about the <unk> and it being in operations and it's certainly great to have the <unk> back into the portfolio and contributing in the way that it has thus far.
Have made good progress with the restart activities and the ramp up and we are ahead of schedule. As you just pointed out with respect to the underground, but as we've also pointed out there are still some risks that we have to manage.
Particularly around Covid.
Making sure that again, we're protect.
Protecting and safeguarding the health and wellbeing of our workforce. It's also hurricane season. So we do have to factor that in.
But we can say that progress is going really really well.
We will continue to manage expectations going forward, but so far we've had a good start at the <unk>.
And David way is there anything you want to add to that.
Pretty much covers it.
Thanks, Sam, but just point out I mean, yes, we have increased the guidance.
And also in terms of stoping start production, that's still on track to commence mid mid November which of course any leaves.
Six weeks for the year and is also coincident with the startup of millions as well.
Which is certainly not at maximum throughput either so I think the guidance is fair. Thanks.
Yes, and just to add to that as well a base. So milling. We again, we expect to start that in the middle of November it will be predominantly on the lower grade stockpile feed that we have on surface, which is 23 million tonnes at <unk> three grams gold 3% copper.
So as the underground ramps up will progressively supplement mill feed with the higher grade ore that comes from the underground.
Okay sounds good guys. Thanks for that.
Just just on my next question is is at scale.
In terms of Hale F E. S. Now expected in Q1 of next year.
I think <unk> kind of talked about a little bit about a plan b.
If it gets delayed further can you can you just reiterate what he.
He pointed out and maybe give us a little bit more color there.
Yes, I'll pass it on to Davita in a second but as we've said thus far the I mean, the CIS process has taken a little bit longer than we expected. We do still have very good engagement with the regulator and Thats. The U S. Army Corps of engineers in South Carolina, and engagements basically on a weekly basis as we respond to any inquiries.
Since the release of the draft SaaS.
<unk>.
We've had workarounds, thus far with the operations and we will have to continue with the work around as we await the final decision and.
And the associated permits associated with it.
David over to you just provide a little bit more color.
Yes.
<unk>, let's say, we don't get the ICIS.
In Q1 is that.
We are going to be storing some of the bank materially in some of the pieces that are going to be in active.
Which means there'll be more of a handle that we will like to do and staying with the wider and wider.
We're trying to discharge on the move.
Most awarded through the process plant or through the operators back for the expansion we need to get the permits from the ICIS. So that would be the plan before us and keep mining in the upper benches.
Got it thanks, David and debate now you've been at scale and kind of part of why shouldn't I guess for the last.
Three months ago, a little bit more here.
Any kind of comments you can provide on <unk>.
You've kind of talked about some low hanging fruit in terms of operational improvements at Haile.
Can you talk a little bit more on the mining as well as processing side and I know you talked about a little bit about water management and waste management.
Are there any other areas you can talk about in terms of.
Improvements.
Yeah, we're getting.
Proving Mac fragmentation.
And with that we have actually increase our throughput at the mill.
Going into what we want to be producing about $10 5 million pounds, a year going to two eight and we are pretty much running at that rate right now and that's as a result of the fragmentation.
We are in the process of <unk>.
Going all the way back to.
Break the rock as much as we can.
And then once we are comfortable with that we had at the right place we are going to start optimizing the use of explosives, but that's a one big improvement that is alright.
As a quick way and that was already seen in there.
Haul roads.
We've seen an increase on the guidelines we've seen an increase in productivity of the trucks, we have seen a decrease from <unk>.
On damages and increase on equipment availability.
<unk>.
Great low hanging fruit, so we just kind of going for them.
And they are making sure that we.
We use them.
But that's that's great that we want.
That's it from me okay. Thanks.
Thank you.
As a reminder, ladies and gentlemen, if you do have a question. Please press star one on your telephone keypad.
And your next question will be from Farooq Ahmed at the Raymond James. Please go ahead.
Hi, Thank you operator.
I just wanted to follow up on that last question I was asked.
Youre talking about the mill going to $3 8 million tonnes per annum.
But in your prepared remarks, you also talked about mining more selectively and slowing down can.
You kind of square those two comments for us in terms of how you look at the mill and your ability to feed the mill or sell the mill.
Given this new kind of strategy or approach on the mining side.
Okay. So in the past.
Let's say.
<unk>.
The targets for the mine, where youre going to move to 45 million tons or X number of millions of tonnes and the main difference.
Alrighty. So they were competing targets. So the mine was dedicated to move tons and EMEA.
<unk> whatever they could get from benign.
We are changing the mentality and the mentality is we don't mind even.
Areas, where we have the oil will remain selectively when we lose a little bit of productivity, but we can make sure that we reduce.
Reduced dilution that we mined better or that the great gifts and we've seen a big improvement on the great and.
And at the same time, keeping the main floor.
Which is our target the target is to be able to keep the mill full and the mine delivering what we can deliver.
Okay. Okay.
Maybe another question for you I think you said in this quarter your.
Great at Haile was about 20% above what you were expecting.
Can you.
Kind of give us some color on how that happened what what was different from what you were expecting.
And going forward, how do you feel confident about kind of your.
Our mine to mill reconciliation in terms of what you should be expecting in terms of grade.
So I mean, the year, we converted one of our marine shovels into an excavator and we move also prominent global bankers instead.
Instead of mining a 10 minute bench, where you'll get a lot of dilution we're mining fleet.
<unk> so.
So we might instead of mining 10 meters.
One bank to remain we mined three benches at three three meters each.
And that will help also reducing the amount of waste.
Including dealer. So we don't have to process that much waste that won't give any any any money, let's say in the Gulf.
So we that will be the biggest advantage of having that selectivity and.
And improving the metropolis.
So that was what drove kind of that better grade this quarter than you were expecting that that is correct. Because we are going full time.
<unk>.
At Premier benches at the bottom of the pit and obviously, what we have calculated as forecast great.
Came better than that.
And I would say mainly because of the selectivity once were getting to an X.
Yet on the next quarters.
Going to be able to predict better and make sure that we mined what we say it's great that we set for economy.
Alright good.
We're going to be closer to what we are predicting.
Okay I understand and then maybe this is a question that's probably more for when the technical review comes out, but how do you see any impact on your mining costs by going to this more selective measure.
Now, obviously, because we are going to be reducing the productivity sell rebates, we're going to increase.
The loading.
Loading costs.
Also because of the amount of material that we've seen that is more than than was in them. Although that will increase the mining cost too because we have to construct aligned facilities to put that back in that area.
The <unk> of the pack materials, the recombinant the water that's increasing.
And the mining cost.
Eventually we are able to reclassify that bag material.
Are we going to see a reduction names and in time, we have to be realistic on that.
Mining costs are going to increase compared to what we said in the technical review of last year.
My name.
Increase our CRO, great, which at the same time, we will probably reduce.
Our compare some ovarian reserves into resources.
Okay. Thanks.
Thanks for thanks for all of these answers that's great. It sounds like there's a lot of opportunity in and good luck in <unk>.
In executing over the next 18 months.
Okay. Thank you.
Thank you once again, ladies and gentlemen, if you would like to ask a question at this time. Please press star followed by one on your Touchtone phone.
Yeah.
And at this time, we have no other questions I would like to turn the call back over to Sam.
Thank you operator, just a couple of points of clarification as well I mean part of the mining unit costs at Haile is related to moving water around and also re handling the peg waste.
So as we get the CIO permit.
As we look at opportunities to reduce the amount of pay material that we generate either through the RC drill program or as Davita just mentioned the reclassification of some of the yellow peg material.
That should drive some of those unit costs down from from re handling perspective.
So this is some of the work that is ongoing as part of the technical review and to evaluate or our full cost and and again, we'll come out with a new mine plan within the first first half of next year.
So there are no other questions that concludes the webcast and the conference call a replay will be available on our website and later today. So on behalf of Scott and the rest of the management team.
Thank you for joining us today and wishing you a pleasant rest of the day bye for now.
Thank you ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time, we do ask that you. Please disconnect your lines.
Okay.
Okay.
[music].