Q3 2021 Centerra Gold Inc Earnings Call
Yeah.
Yeah.
Greetings and welcome to the Sentara Gold's 2021 third quarter results conference call and webcast. During the presentation. All participants will be in a listen only mode. Afterwards, we will conduct a question and answer session at that time. If you have a question. Please press the one followed by the four on your telephone if any.
Time during the conference you need to reach an operator, Please press star Zero as a reminder, this conference is being recorded on Friday November 5th 2021, I would now like to turn the conference over to Mr. John Pearson Vice President Investor Relations. Please go ahead.
Thank you operator, welcome to <unk> third quarter 2021 results conference call.
Slides are available on <unk> website to accompany each.
Speakers remarks.
Today's call is open to all members of the investment community and media in listen only mode.
Followed following the formal remarks, the operator will give the instructions for asking a question and then we will open the phone lines to questions.
Please note that all figures are in U S dollars unless otherwise noted.
Joining me on the call today is Scott Perry, President and Chief Executive Officer, Dan days are Dan Chief operating Officer, and Darren Millman, Our Chief Financial Officer.
I would also like to caution everyone that certain statements made today may be forward looking statements and as such are subject to known and unknown risks, which may cause our actual results to differ from those expressed or implied.
Also certain of the measures we will discuss today are non-GAAP measures.
Please refer to the description of non-GAAP measures in our news release and MD&A issued this morning.
And for a more detailed discussion of the material assumptions risks and uncertainties. Please refer to the news release MD&A, along with our unaudited financial statements and notes and all of our other filings, which can be filed on SEDAR Edgar and on the company's website and now I'll turn the call over to Scott.
Thanks, a lot John and a very good day to everyone and thank you very much for joining us for our Q3 earnings conference call.
I'm just referencing the accompanying slide presentation, that's available on our website and I'm just going to start off on slide number five.
On slide, but a number of key bullet points here just in terms of some of the key corporate highlights. The first bullet point, just starting with safety as always you can see during the Q3 period, we had a number of safety highlights one of the key ones I want to reference is that upset producing operating gold mine in Turkey, We recently celebrated 2 million hours consecutive hours.
Lost time incident free operations.
Moving onto the second bullet point, just with regards to the global COVID-19 pandemic during the quarter. We are seeing very very good uptake in terms of the vaccination rollout whereby the majority of that workforce is now double vaccinated.
Third bullet point, just with regards to the control matter as you would've noted announced disclosure we continue pursuing legal actions to preserve the value of their assets and protect the interests of our shareholders. It's obviously includes the binding international arbitration as well as the court action in Toronto and New York.
Moving into the operational results the fourth bullet point here.
We had another good quarter.
In Q3, we're seeing good continuity there just in terms of our operating momentum and our productivity and that resulted in gold output of just under 77000 ounces that was a relatively strong level of production. So when you look at the six bullet point you can see in terms of the corresponding all in sustaining cost it was a low competitive 700.
$81 per ounce.
Wide basis in for emphasis.
Terms of the individual contributions at the operations.
Mount Milligan was operating at $727 per ounce during the quarter and offset there is operating at $603 per ounce during the quarter. So again, both operations demonstrating relatively low unitary costs.
As I mentioned earlier.
Good level of production in the third quarter I'm, just referencing the second last bullet point here and we think that puts us in very good stead with regards to our outlook or our full year guidance, we think we're well positioned.
Terms of achieving gold production targets, both at Mount Milligan and offset.
Last bullet point, just given the strong production that we're seeing particularly at the offset as you would've noted in Q3 was a strong quarter. We're also seeing very strong.
Corresponding all in sustaining cost performance and as a result of that we've actually lowered our.
Full year guidance to offset whereby the decrease the estimated range to 682.
$730 per ounce.
Likewise that has a favorable impact on the company wide all in sustaining cost range, whereby we've now lowered that to a new range of 700 to $750 per ounce.
Just moving on to slide six.
Fifth bullet point here just in terms of the headline earnings result.
Adjusted net earnings of <unk> <unk> per share Darin, <unk>, CFO, who will expand on this further during his remarks, but in terms of free cash flow the third bullet point.
The strong production given the relatively strong all in sustaining cost performance and just in light of the relatively strong gold price and copper price environment. We are seeing pretty good margins, both from a profitability perspective as well as the free cash flow perspective during the quarter Q3 company wide, we generated free cash flow of 41.
<unk>.
And again and for emphasis you can see the individual contributions from the operating mines.
Milligan generated $25 $9 million of positive free cash flow and offset had a significant increase in free cash flow generation coming in at $48 $9 million for the quarter.
Strong profitability the strong free cash flow just referencing the fourth bullet point here.
Finished the quarter with a.
A debt free balance sheet and total cash reserves of just under $912 million U S. The second last bullet point, taking into account our revolving line of credit facility, which is.
Entirely undrawn, we have a total treasury liquidity profile in excess of $1 $3 billion U S.
Just lastly here in terms of the last bullet point again, just recognizing the solid operating performance and the strong financial position. The board has again declared a quarterly dividend of Canadian <unk>.
Sure.
You can see the chart that we bought it and I just wanted to highlight.
The chart in the Middle which is the offset obviously this is our newest operating gold mines.
Operating in Turkey, you can see the quarter over quarter free cash flow and as you can see in Q3. It was a significant increase in free cash flow performance and that's consistent with what we've been guiding to we've always expected the back half of this year to be.
Back end weighted production year, and what's really driving that is the great dissemination protocol and just where we are in terms of our mine plants and the sequencing of operation. So we are now into that high grade sequence, we expect that to continue.
Here in Q4, and likewise that will continue into next year, as well and beyond but particularly next year, whereby we are expecting a very meaningful significant increase in gold production levels relative to what we are guiding to this year. So.
Suffice to say offset is in a very good position and we are seeing that in terms of its profitability and its free cash flow generation.
Just moving onto the next slide on slide seven.
Just in terms of <unk>.
Tara is environmental social governance profile and just in terms of some of the key quarterly updates here I wouldn't reference all of these bullet points.
In terms of the first bullet point, obviously from a safety perspective.
Paramount.
Continue to be relentlessly focused on.
Achieving a zero harm environment as I mentioned earlier, we had a number of safety highlights during the quarter, which is fantastic and I'm sure Dan will expand on some of this during his remarks.
I do want to mention the six bullet point here and terrorism remember the logo council and the logo count who is currently the <unk>.
Members of the logo Council. We are currently rolling out the responsible gold mining principles I think all of us as an industry are very well advanced on this but particularly at <unk> that is the case, we're looking to be achieving full compliance.
52 key principles by the end of 2022 and I think.
Operations are well positioned for us to achieve that and then just lastly, I want to give recognition to Mount Milligan you can see here during the quarter they received.
Our mine Reclamation award from the British Columbia.
Regulators and again, just recognizing that proactive approach to reclamation. So that was a good achievement during the quarter.
With that I'm going to look to pass the presentation over to 10 days <unk>, Chief operating officer, and Dan can provide some more detail on the operating highlights then over to you. Please.
Thanks Scott.
Good morning, everybody.
Let's move to slide nine.
<unk> continues to prioritize the health safety and well being of its employees contractors communities and other stakeholders as COVID-19 is still with us.
Have put great emphasis on vaccinations this quarter and all of our sites have higher vaccination rates than the regions that they work.
We continue to modify our COVID-19 protocols at all of our locations to help prevent infection and reduce the potential transmission of COVID-19.
All of the great efforts of our people have allowed us to reduce the potential transmission.
And continue our operations and the normal mode.
Just as other businesses, though we are seeing stresses in our supply chain.
Our supply chain management experts have been staying ahead of it and there has not been a material negative effect on any of our operations.
For employees and other works and Workers' safety in Q3, we continue to focus on improving the safety performance of center.
Companywide with good results are tripper for Q3 was one to one which is in line with our target of 126, but we still did have eight reportable injuries in the quarter.
Which was a 7% improvement over the previous year's quarter.
As part of our Worksite Homestay program, which is a focus on employee behavior at work and at home, we have rolled out our training virtually.
With great success, and we continue to rollout our.
Critical control management approach.
An excellent milestone Scott spoke to was that our Oxford mine, where we did achieve 2 million man hours without lost time injury, and then Darko had an impressive eight years without.
Without an LTI.
One year at our Thompson Creek mine in laying law.
Metallurgical facility.
On the production front, we had another strong quarter with our two operations producing as Scott indicated near 77000 ounces of gold and $17 9 million pounds of copper at an all in sustaining cost of $630 per ounce sold Mount Milligan produced 39060.
58 ounces at 774.
After the copper credit and Oxford produced 37255 at $481.
Of note Mount Milligan.
Mine had an excess of 6 million cubic meters of water in our tailings inventory at September 30.
And we have had a steady level of water now for the last eight weeks as we benefit from having access to well understood underground aquifer water as well as the permitted draw that we had from surface water earlier in the summer.
We do still have access and permits to the end of 2023.
We continue to work with our first nations partners.
And regulators to permit the long term surface water solution or a life of mine as part of our long term water strategy and we feel confident on that.
Both Mount Milligan, and Oxford mines are running well and we are well on track to achieve our 2021 production targets as we approach the end of the year and Scott also indicated we are lowering our cost guidance for Oxford.
All in sustaining cost of $680 to $730 per ounce sold.
Please move to slide 10, and we can talk specifically about Oxford for 2021.
Safety again is our highest operating priority and we continue to roll out our safety programs to consistently improve our safety performance.
We did have the milestone of 2 million man hours without an LTI, but unfortunately last week.
Therefore in the fourth quarter.
One of our contract Drillers did injured his hand, which got squeezed on the drill rig.
We're reviewing that in detail.
This incident to further improve our guarding and employee adherence to our safety policies and procedures.
Oxford continues to mine in both of our pits with the majority of the ore coming from <unk>.
We are moving into the higher grade zones as you can see from the table below and plan to have access to these levels over the next two years.
We have expanded the near mine exploration drilling program to 30 meter at 30000 meters in order to work towards further expansion of the reserve and resources are.
Final point as mentioned earlier, we are seeing good good results. So far in 2021, therefore, we have lowered our cost guidance for oxy to the all in sustaining costs of $680 30 for the year.
Turning to slide 11, and looking at our key focus for the remainder of 2021.
Our Q3 results reflect what we will continue on and focus for the rest of the year.
We are putting great.
Emphasis on improving our safety performance throughout the company.
Exploration has been a big focus and we continue to try to drive to zero harm in this area.
Oxford has been a great addition to our operational mines and continues to deliver better than planned financial and operating results.
We are much more confident in our access to the required water from Mount Milligan and we require we continue to manage this area closely.
To ensure that we have water to run at full capacity.
Our major continuous improvement project of the installation of the staged flotation reactor is on target and to be operational by the end of the year at Mount Milligan.
Oxford mining is continuing as planned in higher grades in both pits and we're putting a strong effort to understand our near mine resources with additional exploration meters plant.
Moving to slide 12 on guidance.
We have detailed out as you can see our cost guidance for 2021 overall as we approach the end of the year. We are guiding a total of 270 to 300000 ounces of gold and 70 to 80 million pounds of payable copper.
At a very competitive all in sustaining cost of 700 to $800 per ounce.
With a strong copper credits at Mount Milligan.
Has an excellent all in sustaining cost of $530 to 580 per ounce.
On 100 to 200000 ounces of gold production.
<unk> suite, we are guiding 90 to 110000 ounces of gold at an all in sustaining costs of $680 to $7 30, which was lowered by $50 from the last quarter guidance.
<unk> expenditures on a consulting basis.
Still looking to come in between 95 and $115 million for the year.
So that is well under control.
Now over to Darin, our CFO to review, our third quarter financial results.
Thanks, Dan and good morning for those following on the slide deck amongst slide 14.
<unk> recorded $220 million in revenue during the quarter, consisting of the Matt Neeley Goodbye, the oxygen by molybdenum business unit.
Revenue materially consisted of 118, meaning golf sales 53 me in copper sales and 52 million incremental molybdenum business unit.
During the quarter the company's operational average gold price realized was 15 $842 per ounce of gold.
255 cents per pound of copper this.
This incorporates the existing streaming arrangements over the baton to like a month.
In the quarter, our continued operations, so 75721 ounces of gold.
38517 ounces from the Mount Milligan mine.
<unk> 204 gold ounces attributable to the typical Oxford mine.
We also sell to $18 5 million pounds of copper in the quarter from Mount Milligan.
The adjusted net earnings during the quarter from continued operations was $35 seven demand.
The net earnings from a consolidated operation was $27 6 million. This included the adjusting items of $8 1 million are attributable to legal and other costs related to the seizure of the cultural alignment.
Earnings attributable from an operational perspective were $19 4 billion contributed from them at Milligan mine.
$37 4 million contributed from the oxy bind and $6 $9 million from the original business unit.
The adjusted earnings from continued operations was <unk> 12 per share for the quarter.
Now moving to slide 15.
<unk> continued operations in the quarter over quarter production cost of 600 $630 per ounce and an all in sustaining cost of $791 per ounce.
At an asset level Mount Milligan recorded an all in sustaining cost of $727 per ounce at oxy recorded all in sustaining cost of $603 per ounce for the quarter.
The key cash flow metrics of note for the quarter work.
$62 4 million in cash provided by operating activities from continuing operations free cash flow from continuing operations of $41 million with our ending cash balance for the quarter has now grown to $912 million.
As you'll note on the bottom right hand chart and terrorists continued operations year to date has produced 217 ounces of gold were tracking well to achieve 2021 production guidance.
The bottom left hand chart notes at free cash flow year to date of approximately $140 million from our continued operations with up to 175 being guided for 2021 at a gold price of 777 $750 per ounce.
I would draw your attention to two things Firstly 2021 capital expenditure guidance in the MDI remains unchanged.
Milligan, we are guiding to tap to capital expenditure of $770 million to $80 million with either died expenditure of $48 million.
<unk>, we are guiding to total capital expenditure of $15 million to $25 million with year to date of 15 year. Therefore.
Therefore, we are guiding to elevated capital expenditure in the final quarter of 2021.
Secondly, there has been congestion congestion at the port of Vancouver as reported by other uses of the Port we are targeting for shipments in Q4.
Matt Milligan operations this might have an impact on timing of cash receipts.
Now moving to slide 16.
As notified down on slide 10, we have now entered the high grade phase of the Oxy mine, which will continue into 2022.
The result of processing the higher grade material is evidenced in the bottom left hand chart with a targeted 40% increase in consolidated production comparing guidance beat point from 2021 to 2022.
As noted by Scott and Dan earlier, we have also reduced our 2021, all in sustaining costs ex Oxford to the new range of $680 to 730.
Dallas per outs on a consolidated basis, reducing the new range to 700 to 750 per ads from rolling forward sustaining cost perspective.
At mid point all in cost for 2021 is now $875 per ounce and reducing to a low of $575 per ounce in 2022 as per our guidance.
If gold and copper prices remain at current levels significant margins will be achieved as we move into 2022.
Now finally, given the cash flow generation of our continued operations and a closing.
Closing cash position of 912 P. M. <unk> Board has declared a quarterly dividend of <unk> <unk>.
Per share for the quarter.
With that I'll pass back to Scott.
Thanks Darren.
Just to sort of close out our prepared remarks here on slide 18.
Referencing some of the bullet points here in the top left of this slide.
As Dan and Darren already spoken to it continuing to guide up to 310000 ounces of gold production for this year.
Seeing good operating momentum as we've spoken to we have favorably reduced all in sustaining cost guidance for the full year. So we're expecting to produce this goes at a cost as low as $700 per ounce in terms of the all in sustaining all in sustaining cost metrics second bullet point, we continue to see a good.
Gold and copper price environment and again, just given our strong operating performance. We continue to guide for free cash flow of up to $175 million U S. Just in terms of the last bullet point there in the top left the strong operating momentum profitability free cash flow generation as Darin just spoke to we finished the quarter with a debt free balance.
<unk> sheets.
Total cash reserves of approximately $912 million U S. So again this in conjunction with our available revolving line of credit facility. We have very strong liquidity and I think that allows us to advocate that since <unk> is operating a fully funded business model here moving forward.
Earlier, the Middle chart, there down the bottom I think we're seeing very strong contributions from offset right now and we do expect that to continue now that we're into the higher grade sequence and as Darin spoke to it and as we look forward to next year offset is going to underpin some meaningful.
Getting growth in terms of our gold production levels from some Tara.
Just lastly.
A key announcement I want to make and we referenced that in our.
Disclosure today.
Particularly in terms of my CEO quite but I just wanted to reiterate that.
We here at <unk>, we would like to recognize that after more than 15 years of some terror John Pearson, Our vice President of Investor Relations, who is on the call John will be retiring at the end of this year.
Obviously, we all want to congratulate John on his upcoming retirement and thank him for his continuous commitment and dedicated surface. So John on behalf of myself the company and the board we'd like to wish you a very happy retirement and we'd also note that upon John's retirement.
Investor Relations responsibilities are going to be assumed by Toby <unk>, who is our treasurer and director.
Our Investor Relations moving forward.
With that I'd like to pass the proceedings back to the operator, and we can move into the Q&A segment. Please.
Thank you.
If you would like to register a question. Please press star one four on your telephone you will hear a three pronged technology a request for.
If your question has been answered and you would like to withdraw your registration. Please press the one followed by the <unk> III.
One moment please for the first question.
Our first question comes from Trevor Turnbull with Scotiabank. Please proceed.
Yes, Thank you and I'd like to add my congratulations to John as well on his upcoming retirement and thank him really for many years of discussions and great tours over the years.
And congratulations to Tobey as well.
My first question I guess is about the higher grades at <unk>, Dan mentioned theyre going to carry well into 2022 I just wondered if the grades that we saw placed in Q3 were kind of typical of what we can expect for this higher grade material.
Or if that one six grams was really.
Particularly high relative to what we should be thinking about.
Dan I'll, let you take that please.
Yes.
Very good point I think Thats fair.
Fairly fairly close on target, obviously through the year, we will be placing us.
We pulled the high grade out of the bottom are mostly <unk>, but also <unk> pit, but we are looking.
Probably slightly less than that.
Closer to maybe one or two but.
Through the year average, but.
But certainly it'll be blended and we'll try to maintain our steady steady rate.
And travel gaming mice.
Sorry, but just from my perspective, just to help with your modeling.
Would expect to be at the upper end of our gold production guidance in terms of where we're going to finish this year and perhaps you could kind of just back calculate what the what the grade is just given where we're expecting to finish the year on guidance.
Sure.
The one two grams that Dan just referenced that's for this year or for 2022.
No.
You're speaking.
Sorry, you were speaking to 2022.
Okay got it.
And then just to follow up on that I was wondering if <unk> approval is still expected kind of mid 2022 or is that date up in the Arabic.
Then.
To speak to that Scott, Yes, that's fine.
We have commitments from.
From the government in.
The legal authorities to be tightly reviewing that by the end of this year early next year.
Then we go through the normal permitting process. So we're still feeling fairly confident that by mid year.
We will have the new footprint, we do we are fully permitted and good and choppy and we do have plans.
Is that permanent was continued.
Continued to be delayed we would continue on with our original.
Design and the access so right now we are mining and good and choppy and but within the oil permitted.
Footprint.
Alright, okay.
And then just changing gears I wanted to ask.
About the comment in the MD&A about the resignation of the.
Appointed International Arbitrator and I'm wondering if that worries you in terms of finding a new arbitrator to take on the role.
And I ask that because it sounded like the arbitrator wanted some protections against future prosecution from the courteous, which he wasn't able to secure and I'm just wondering if.
Any arbitrator wouldn't want that same sort of protection.
And so I guess the question is are you worried about the timeline for arbitration.
And finding someone to replace that person.
And what other avenues can you really pursue for a timely resolution on the whole <unk> story.
Well the first part of the question Trevor.
We're in that process right now in terms of appointing a new arbitrator, obviously lawyers are looking at this pretty carefully but.
Fortunately I'm not really in a position to comment any further.
On that aspect.
In terms of expediting a resolution of the complement of the second part of your question I think as we've always said, we obviously would prefer to engage in a constructive dialogue with the authorities.
Authorities to resolve this dispute.
And there has been some engagement, but really absent any indications in the kirghiz authorities that they are willing to reach a reasonable resolution through such dialogue. We will of course continue to pursue our legal avenues.
Full force, which is currently underway.
Okay I understand thanks Scott.
Our next question comes from Anita Soni with CIBC World markets. Please proceed.
Hey, good morning, and I also ask you I congratulate John Pearson on.
Well deserved retirement and all of that contributed.
Contributing to the analyst community over the past 15 years.
My question is with regard to Oxy I was clearer now I'm confused so in Q2.
Im looking at the outlook that you guys had put out for 2022 and 2023 I believe in the MD&A and I'm not sure I'm sure you don't have it handy, but in the MBNA quickly say that.
Grades would be.
Currently to two Gram per tonne material during 2022 and 2023.
And so I'm, just kind of trying to reconcile that to about one point to that was just called us.
And my question was with regards to that original question was with regards to the grades and throughput.
Typically the throughput.
It's also that your parks.
Offset by lower ore tonnes stacked. So I was just trying to get an idea of.
Relative to the average for the year are lower relative to the pretty good stacking rate that you saw in Q3 and probably in Q4.
Anita Thank you for the comments regarding John initiative, Thank Trevor as well early I. Appreciate if we obviously appreciate that onshore John appreciate that recognition.
Dan the first part of the Neatest question.
When you put it one or two that I think you and I may have misspoken I think we will trying to reference Trevor as a previous question on what could be the great profile for Q4 of this year.
Yes.
Great.
Yes.
Sure enough.
Yes.
I think we both got a little dig it up but but.
We have only one other I can speak to that Scott.
Part of our adjusting plan.
We are we do we have added to our life of mine in the last couple of months.
Some run of mine ore, which we.
We did not include in our plan before that that will bring down the grade and increase the tonnes.
Unfortunately, I don't have that those numbers right in front of me. So I think I'll have to leave that to Toby to are drawn to fallback follow up later.
On a separate communication.
Maybe run of mine.
Cutoff is that is that a fair assumption.
That's a fair assumption, but it is economics so we.
And we've included that a lower degree substantially.
Okay.
So maybe the throughput levels remain the same but the grade will be a little bit lower than what you guided to in Q2.
We're still targeting in Q3 if needed.
Alright.
Q2, you had guided to.
The specific number when you were updated when we refresh our outlook for 2022 to 2020, that's what I'm talking about right now is much much lower tonnes of ore, but higher grade that's corrected we keep adjusting our plan based on additional tons.
And including some.
Much lower grade.
Okay, and then secondly on along the same vein as we.
Given.
Relative to the prior guidance, which would have been a very slight.
Now again for next year.
Is there anything we should think about that might've been updated within that plan.
For 2022.
We havent come forward with with the numbers from our updated life of mine.
We're still we're we've just finalized our drilling program and we're working on our resource and reserve block models to bring to a new a new pit designs. So I think it would be premature to speak to that.
At this time.
Last question would be on Q4 at Mount Milligan.
So slightly lower grades this quarter you did have that planned shutdown at that as a result of that we should expect higher grades going into Q4.
Normalized <unk> had that as an average for this year.
Dan we are.
Shutdown is as planned here in the later in November So we are doing that.
We're still feeling.
As Scott indicated will be coming into.
At the higher end of guidance.
We are looking at.
At normal grades so we're proceeding both from stockpiling and from run of mine.
Oh, I'm, sorry, I thought I found in the MD&A.
The shutdown had already occurred.
I'll take a look at that again, okay alright.
Yeah.
Okay.
Yes.
Yes.
Operator is there any for any additional questions in the queue.
Our next question comes from Dalton Barreto with Canaccord. Please proceed.
Thanks, Good morning, Scott and team and Yeah, I'll jump on the John Pearson, Congratulations bandwagon as well.
I'm also confused with regards to the gold.
Profile at <unk> here, So I just wanted to Gary.
I'm talking about 2022 now okay.
Your previous guidance suggests.
An average grade of two two grams per ton and production guidance of $2 10 to $2 40000 ounces is that a valid.
Yes, theres been no change.
So I'm sorry, you got confused Dalton I think Dan and I got confused when Trevor was asking the question the way Trevor frame. The question I think you can put us through June but everyone confused but when it comes to 2022 there is no change.
Okay, So 22 and 'twenty three there is no change.
Correct.
And the overall ounce ounce guidance correct.
Average guidance, but.
Based on what Dan said earlier, the tonnage and grade profile has changed picking up these amount of my time.
There will be some changes in that but we won't necessarily be.
Filing a new 43, one so it's not material at this point, but.
That's correct.
The <unk> guidance that we had indicated is not changing.
Got it okay. Okay, and then just maybe switching gears.
To the whole <unk> situation again I got to ask just given everything that's happened and what these guys are doing to the mine do you actually want to mind back or would you prefer this be resolved.
Yes.
From a monetary perspective.
Those and obviously.
Steadfast right now in terms of our focus on protecting our rights and protecting the value as well as instrument from a shareholder's perspective doing everything we can from that perspective.
But I think if one was to say in the context to your question that some of these steps that <unk> has taken it may be difficult to want to envision.
How you would return back to that position of owner and operator of the project. So.
We've had a number of shareholders, who would certainly advocate that.
Moving on from the situation in some form of clean exit would be the appropriate measure for syn <unk> to take so obviously, we're taking all that into our calculus in terms of what's going to ultimately be the.
The best sort of long term value proposition since our shareholders.
There's certainly a sentiment that.
Parallels with the context of your question.
Okay, Great and then you exited Q3 with more than $900 million in cash on your balance sheet here.
And as Youre thinking about capital allocation going forward I know Scott in the past you've said buybacks are not an option.
You wouldn't want to increase the concentration of the curvy possession is that is that still your possession given the restrictions you put on their shares.
I think it is dosing.
And again when it comes to capital return initiatives Thats, obviously, a board decision.
In terms of US management Strategizing deliberating with the board we recognize that there is various capital return initiatives available to US obviously, we've been focused on dividend distributions and we have been growing that.
But in terms of.
Some form of meaningful share buyback I think it's very difficult for us to envision doing that until with tobi situation has been resolved.
You pointed out so we're just.
That ownership position.
It will just be off strategy.
I know you've referenced the current restrictions that are in place in terms of their ability to load trends or sell their shares et cetera. Those restrictions continue to be in place.
And just because you can't project, what the future might look like.
What would be a very significant decision in terms of.
Share buybacks at a meaningful quantum levels.
In terms of how this is stage cases.
Separately I think we need to resolve the <unk> situation for us.
Okay that makes sense and then as I look at your consolidated production outlook. There is a reasonably substantial drop coming in somewhere about 'twenty four 'twenty five timeframe, how important is M&A right now.
Sorry, Delta and you broke out how important is that.
Is that an EBIT coming.
A much more important priority for you and the board.
So that's still quite a ways out we would put forward.
In terms of production declining and really that offset.
Indicative lease.
Based on the prior sort of 40 140, <unk> hundred one profile you would be seeing production starting to decline three years out.
What Dan and his team and our exploration Division, we're very focused on our exploration program and offset we've got a pretty significant sort of exploration budget underway and we are seeing.
Yes.
It's early stage, but we are.
Some interesting results we are doing some additional internal work on what we think the life of mine profile is going to be moving forward. As you can appreciate like most companies. We're now sort of budget cycle right now as well as our long range planning cycle.
I think we are seeing some conceptual opportunity that offset that may assist us.
In addressing that production decline.
I recognize your question is more focused on M&A, but.
So I wouldn't say that we're spending an inordinate amount of time on that topic right now and I think as I've said before it's a pre.
The strong gold price environment, and I think valuations are reasonable so the ability for one to identify.
A transaction thats going to create meaningful shareholder value I think its still pretty difficult right now and just given where we're at in the cycle. So.
Portfolio like you've seen for the last two to three years, we continue to be pretty intently focused in.
Again, just coming back to any sort of production declined three years out we're going to try and do everything we can in terms of optimizing our existing assets as well as success for the exploration drill bit to try and as best possible.
Find every bit of organic growth internally that we can.
Okay, Great and then maybe one last one if I can squeeze it in.
Molly is north of 19 Bucks a pound now is there a market for your <unk> business.
I mean are you looking to offload it other potential buyers has anyone approached you.
Yes.
We have seen is significant.
Appreciation.
In the multi product multi price as we referenced in.
Coinciding with that we have seen interest.
Unsolicited interest from third parties.
As and when.
As and when there is interest we closely engage and hear out what are their proposal what could be the inherent value proposition here.
There are there are a couple of parties that we have been having discussions with again, it's too early stage.
We'll see what comes with all of that using analogy will pull on that string and see where it takes us but.
Suffice to say that if any and if any of those led to a again a value proposition that we think is going to surface value and create value for our shareholders. Then we would.
Proceed accordingly.
I think the current molybdenum price, it's strong and maybe maybe this will present.
Window of opportunity only time will tell.
Great. Thanks, that's all for me guys.
Thanks, Tom.
Our next question comes from Fahad Tariq with Credit Suisse. Please proceed.
Hi, good morning, Thanks for taking my question.
One other things that struck me was that.
We're comfortable with.
Not even.
Completely.
Safe from the inflationary pressures that with your.
Your peers.
So I'm just curious can you talk a little bit too.
Despite the lower cost guidance, and how you're able to achieve that.
Pretty high inflation environment.
So Dan do you want to speak to that first and then once you've done that maybe positive to Darrin just to talk about hedging as well, but then you. Please sure.
Very good.
We are seeing some small amount of inflation pressure.
Especially on steel, but our usage of steel at Mount Milligan for example is.
It's not like you would see in an underground mine and we had longer term contracts some fairly large inventories. So we're still looking very good there at <unk> suite.
Combination of it's a very small operation we have in ADR plants long term contracts with R. R.
Our major supplies as well, we benefited somewhat from the exchange rate improvements in Turkey.
Although we did have wage pressures.
We were able to offset that and again.
Our biggest cost in Turkey, as our contracted mining cost and Thats, a long term contract as well, so I guess where were.
We're looking at better guidance.
Good productivity.
We're solid on those numbers.
And Darren as it goes out.
So sorry over to Darren.
Darren maybe that Columbia is certainly to go ahead Doug.
Yes.
Turning your attention to page 28 of the MD&A and basically what Youll see there as we have for many years been implementing FX.
More Canadian dollar.
Our fuel hedges and.
I call it the fruits of that labor it paid off.
Year to date from an FX perspective, we realized $14 million in gains on FX hedges recognized $19 million and gains from a fuel perspective, as we head into 2022.
The FX hedges, we're getting a range for 2022 between 130 to 137, obviously a lot better than the current rate case 91 dollar and we've got some forward Fitbit 120.
Similar to <unk>.
50% coverage.
Similar to the fuel hedges are actually got.
Coverage of approximately 70%.
So I think <unk> got sort of three year rolling.
Programs have kept us in good stead in particular.
Fix that.
That's kind of kept us in good stead.
Sure.
Okay, sorry, I just wanted to catch the number you said, 70% covered for fuel next year.
Yes, yes that is a table on this on page 28 of the MD&A and that is approximately.
70% coverage on our fuel hedges for next year.
And then into 'twenty three we've actually got.
40% coverage.
In 2020.
Two.
Yes.
It's all laid out there.
Okay great.
It looks like it's worked out well I'm not aware of any other gold producer keeping costs flat let alone.
Lowering their cost profile, okay, great Thats it for me.
Our last question comes from Anita Soni with CIBC World markets. Please proceed.
Yes, sorry for the follow up I, just checked the MD&A and it does say that there was a shutdown in the third quarter as well against those are another one planned in November or is that what you were saying.
Dan you want to take that please.
Believe that too that when did get pushed it was.
Who is going to be in late September and we push we're able to push it into November.
Okay. So it didn't actually happen so.
So then can I. So it hasn't happened. So then can I ask why the throughput and grade was a little lower at Mount Milligan this quarter than your run rate.
Yes, we did have a couple of them.
More minor maintenance issues and we've been we've been working with.
<unk> are liners in our big Sag mill. So we took the Sag mill down a number of times for 12 hour shifts to remove crack lenders et cetera, but it was fairly much normal maintenance.
Okay.
And then next quarter, there might be a little bit lower throughput with the shutdown how long of a shutdown.
The plan is five days.
Okay. So.
Okay, and then in terms of the grade is there could.
Could we expect a bump up in great first of all you had this quarter or was that.
And that's something that we should expect going forward.
First is that.
<unk> been running.
Yeah again.
Don't have that in front of me, but the guidance.
You can back calculate that.
Okay.
Okay alright, thank you.
Operator are there any further questions.
Don.
Okay.
Further questions at this time.
Okay. Thanks.
John did you want to close out the call.
Sure Scott Thanks.
Want to thank everyone for their kind words and remarks.
It's been a pleasure working with you all over these.
Many many years and.
Just wanted to thank you all so with that we will end.
On the call here.
If you have further questions to me Toby or the team and we'll get back to you.
Sure.
That does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect your lines have a great day everyone.
Sure.
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<unk>.
Yes.
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