Q3 2021 Endeavour Mining PLC Earnings Call
Okay.
Ladies and gentlemen, todays conference is scheduled to begin shortly please continue to standby. Thank you for your patience.
[music].
Ladies and gentlemen, thank you for standing by and welcome to Endeavour Mining's Q3, 2021 results conference call.
At this time all participants are in a listen only mode. After management's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.
Today's conference call is being recorded and a transcript up the call will be available on a debit website tomorrow.
And I'd like to hand, the call over to management. Please go ahead.
Hi, everyone I am Mark counter future, Vice President strategy, and Investor Relations I'd like to welcome you to endeavors Q3 results webcast.
Before we start please note the usual disclaimer.
On the call today, I am joined by Sebastian Mark Joanna and Patrick.
Today's call will follow our usual format.
And Joanna I will start by discussing the Q3 operational and financial highlights and Mark will then walk you through the Utah mine by mine.
We will try to be as quick as possible to leave time for your questions.
I will now hand, it over to our CEO Sebastian to walk you through the highlights.
Thank you Marcelo and Hello to everyone from book can affect so.
Where I'm currently 2021 is shaping up to be a tremendous year for endeavor and it was particularly pleasing earlier this week to be able to host our board members on site to show them the progress being made.
I wouldn't look for recurring themes, which I believe are the hallmark of us, becoming a resilient and reliable business.
First is our continued strong operating performance we are on track to again beat our full year production guidance for the ninth year in a row and produce over one 5 million ounces.
Second is our continued balance sheet strength with a close to zero leverage ratio.
Third is our focus on shareholder returns, which has seen us returned nearly $225 million to shareholders. Since just the beginning of the year.
And fourth is our success in advancing our robust organic growth pipeline. The subdued on Massawa phase one is on track for completion in the fourth quarter. We have a number of studies currently underway and we recently announced our exploration plan to discover up to 20 million ounces over the next five years.
Moving to slide seven we have provided a snapshot of our key operational and financial results and we will go into more details on these in the following slides.
The third quarter is typically the rainy season comparison to our record second quarter result is not necessarily the best reference point.
I think a better comparison is to analyze the performance vis vis Q3.
Last year and year to date versus last year, specifically on a per share metric given the recent transactions that were completed.
You can see here the production has doubled versus the same year to date period last year, while cost decreased by 4%, but more importantly, the cash flow per share has increased by over 30% and the adjusted net earnings per share have increased by over 50%.
On slide eight you can see a strong performance across all key operating metrics.
Our production performance to date has put us well on track to achieve the top end of our guidance range, while keeping all in sustaining cost within our guidance range.
Turning to slide nine.
And then it takes pride in our focus on safe work practices and systems and our ultimate aim is to achieve zero harm performance.
As many of you know we reinforced this by having a group safety Kpis in the annual bonus scheme every year.
Our lost time injury frequency rate remains low compared to industry standard five times lower in fact than the.
Industry average was just to LTI is during the quarter and the lost time injury frequency rate of <unk> 21 times for the past 12 months.
However, we will always make it a priority to drive that figure even lower.
Alongside our focus on safety. We've also been supporting the COVID-19 vaccination campaign in our host countries. They started a bit later than in the U K and Europe and I'm pleased to report that over 50% of our employees are vaccinated with that number increasing every week.
Okay.
Following a record second quarter the rainy season in Q3 had a limited impact on production.
This quarter, we actually performed better than initially projected and we're particularly pleased with the performance of Hyundai and some of it I must hello.
<unk> is benefiting from the high grade ore from the CARICOM deposits when somebody that MSR, what grades increased due to higher grades from the Sofia main pits.
Compared to last year, we increased Q3 production by 138000 ounces driven primarily by the integration of the turn your assets into our portfolio and higher production at those who need an E T.
All in sustaining cost to increase simply as a result of the scheduled higher sustaining capital spend during Q3.
This year, our diversification is stronger with seven mines in production spread across three countries accounting for an increase of 500 series 73000 ounces year to date compared to a six operating assets in two countries in 2020.
We've also seen a drop in our audience sustaining cost of $36 per ounce on a year over year basis, which is a strong achievement given the industry inflationary pressure.
Yeah.
Turning now to slide 12 touching.
Pitching upon our costs and inflation controls, we thought it would be helpful to share a bit more color on the subject following the semi for winter and gas transactions, we've been able to leverage our collective strength as the largest mining company in the region to renegotiate longer term contracts with price valuation provision for key consumables such as fuel.
Sheila reagents and tires.
By using our increased group tender volumes, we've been able to take your contract terms that give us greater cost certainty well into 'twenty, two and in some cases as far out as 25.
In some instances, we've achieved significantly better prices compare to what your own guidance and muscle we're paying.
We have also increased our efforts on managing our supply and stock containment across the group.
Even we have many operations in West Africa, we can assess our spare parts inventory as a region and nuts in isolation at the mine site level only.
These efforts have helped us navigate through the cost inflation with the industry that the industry has seen.
Moving to the next slide our all in sustaining margin continues to be very healthy in my role as the trends seen on the previous slide.
Given the low all in sustaining cost per ounce during the quarter, we had an all in sustaining margin of $858 per ounce.
Average realized gold price of $17 $63 per homes, that's a high margin of over 50%.
Compared with Q3 last year all in sustaining margin has increased by more than $90 million and this is partially due to stronger production at our legacy mines and of course, the acquisitions of semi fluids or assets.
Yeah.
On slide 14, we can see you can see the trend of our operating cash flow, which increased by $110 million over the third quarter of 2020, we.
We saw strong cash flow in the third quarter compared to the second quarter of 'twenty, one despite lower realized gold price in sales and this is because Q2 is typically the quarter, where we pay higher taxes.
On the following slides John I will take you through our financial performance into more detail John actually want.
Thanks Sebastian.
Moving to slide 15, we bridge, our Q3 operating cash flow over that of the second quarter.
Q2 performance was not fully representative of the operating performance due to our tax installment payments, which are always higher in the second quarter of the year.
And you see here that this was the largest factor factor in explaining why operating cash flow was better in Q3 versus Q2, despite lower production as you paid $51 million more in Q2 protecting it.
Largely offset the lower realized gold price of production with details provided in number one and two on the slide.
Regarding working capital it was a decrease of $14 million in Q3 2021 compared to an increase in Q2 2021 mainly due to a decrease in accounts payable and manner you do that.
Timing of payments in the two quarters.
This was partially offset by a decrease in inventories, resulting from the unwinding of the fair value adjustment to stockpiles at the start of a dollar massawa.
As long as the decrease in inventory stockpiles and finished good balances at Hyundai entity.
Slide 16 shows how our liquidity has evolved during the quarter.
Finding financing activities during the quarter include a repayment of long term debt of $80 million $100 million of shareholder in minority interest dividends and $35 million on share buybacks.
Investing activities included a $55 million spent on sustaining capital expenditures or.
$42 million on non sustaining capex and $11 million on that project.
At quarter end Endeavour's liquidity remains strong with $760 million of cash and significant headroom of 370 million Undrawn on our credit facility.
After the end of the quarter in October we also restructured our long term debt.
We financed our existing bridge loan that was used to repay the trend of higher cost debt facilities, and the acquired triangle, but the $500 million fixed rate senior bond offering.
The bonds have a 5% coupon and mature in 2026.
We also refinanced our existing RC up with a new $500 million unsecured Garcia.
The new our CF has an interest rate of two 4% plus LIBOR and is due in 2025.
The proceeds of the notes together with our cash on hand, we used to repay all amounts outstanding under our under the comedy company's existing on facilities and to pay fees and expenses in connection with the offering of the notes.
Our new long term debt facilities extend the maturities of our debt.
As well as providing enhanced financial flexibility and additional liquidity headroom.
Turning to the next slide page 17 shows our balance sheet continues to strengthen as our leverage ratio is close to 0.05 times net debt to adjusted EBITDA.
This quarter, we generated over $300 million of operating cash flows and it's frightening to $70 million dividend and buying back $75 million worth of shares we were still able to continue improving our balance sheet and maintaining our net debt at around $70 million.
In fact, if we'd wanted to we could have been in a net cash cash position by now.
Our capital allocation framework, we are taking a balanced approach, where we are continuing to strengthen our balance sheet. While also you're also continuing to invest in our exploration our growth project and crucially and rewarding our shareholders.
Moving to slide 19, we have a detailed breakdown of our net earnings over the past two quarters.
Usual I won't go through every line here, but we'll address a few of the most significant item.
Our corporate costs, and our acquisition and restructuring costs were significantly lower during the quarter because of the slightly elevated costs in Q2 related to our listing on the London stock exchange and the completion of several integration projects related to the triangle transaction in Q2.
Our net earnings and adjusted net earnings were lower during Q3 2021.
Our earnings from mine operations due to lower gold sales at E. Carmen Wang on due to the anticipated lower production during rainy season as long as the lower realized gold price of $17 63 per ounce in Q3 compared to 17 $91 per ounce in Q2.
I'll now hand, it back over to Sebastian so that he can comment on our shareholder return program Sebastian.
Thank you Joe and are.
Moving to the next slide I would like to reiterate our commitment to shareholder returns.
Already this year, we've delivered over $220 million in shareholder returns and this remains a key capital allocation priority for US we are keen to reward shareholders, which is why we offline. This three year minimum progressive dividend outlook earlier this year.
A minimum commitment for this year is $125 million and is expected to increase to at least $175 million by 'twenty three.
I say this is a minimum dividend because it will be supplemented with additional dividends and share buybacks provided the prevailing gold price remains about 1500 per ounce.
And that our leverage remains below <unk> five times net debt to adjusted EBITDA.
During Q3, we paid our H, one interim dividend of $17 million, which is over half of our guided fixed minimum dividends for the full year. So shareholders can expect more than the fixed minimum of $125 million to be paid for this year.
In addition, we continuing share repurchases and since launching the program in April with load back $94 million of shares we still believe our share price is significantly undervalued and it makes a good capital allocation to continue buyback our shares given our strong cash flow generation.
As you can see on this chart are attractive shareholder return program.
Are you well positioned versus our senior gold peers from a yield perspective in particular, when you add up all dividends and the active buyback program.
Looking at gross we are fortunate to have built a robust pipeline, which is able to compound to compete for capital the immediate priorities to compete to complete the phase one expansion at South Antelope, which is on track to be completed next month. We are currently commissioning five out of the six packages.
As the gravity circuit to be added in December.
And I can't comment about it because we just visited the progress on site yesterday.
We're also making good progress towards completing the definitive feasibility studies for Sabadilla Massawa phase III clinical.
Critical and Kalana.
As we have had so much exploration success. This year at some other time massawa and fit accrual, we will finalize resource updates.
These two projects in the coming weeks and incorporate the new resources into the DFS.
We expect to publish the results from all three studies in Q1 next year.
Moving now to exploration.
Those of you who have followed our story closely since 2016, no just how important exploration has been to our value creation success.
We have already discovered eight and a half million answer it in a short timeframe. This has allowed us to not only extend the mine lives of core assets to beyond 10 years, but also to discover new project as well.
This year, we are on track to discover a further $2 5 million ounces of indicated resources as we've I've had very good exploration results from the drilling programs at all three of our cornerstone assets, meaning itchy Hyundai and some other land massawa with new discoveries at each sites expected to be published in the coming.
Weeks.
Following the acquisition of semi for an Taronga, we've been busy developing a new five year exploration program to prioritize our exploration efforts and integrate the new assets we.
We've applied the same unique ranking in screening methodology, which has underpinned our success and the conclusion is that we remain extremely bullish on the prospective nature of our portfolio.
As you may have seen a few weeks ago, we published a new exploration strategy, which is targeting to discover between 15 to 20 million ounces of indicated resources over the next five years at less than $25 for arms.
This represents discovering more than two times annual mine depletion.
Cost studies over three times lower than the global average discovery cost.
At each of our assets, we see potential to more than replace depletion.
Achieving this goal will not only provide us with production stability, but also strategic flexibility as we advance our pipeline projects.
Well. This outlook is also showing is that when factoring in the history of production. Some other on Massawa Hyundai in EG all have the potential to be over 10 million nodes enrollments and are expected to account for the bulk of our future discoveries.
Because it is very unusual in the industry to publish discovery targets. We've been asked over the recent weeks why take the risk and publish this ambitious targets.
Well first.
We believe that yes, while ambitious.
These targets are achievable.
These are not arm waving numbers.
We've done a lot of work to assess all potential and spend by these.
But beyond this the other reason is because we wanted to be accountable and transparent with our exploration investments.
Just like our operations team is comfortable for production and costs.
Our project team is that comfortable for timelines and Capex.
So exploration team is also are comfortable for the money to spend and the answer is that the discover.
It's important for them and for me to be able to compete for capital within our capital allocation framework.
And of course, they keep finding higher grade ounces and new projects for less than $25 per homes. We will of course continue to be more than happy to invest further and further in their success.
Before I hand, it over to Mark I, just wanted to touch on our listing on the premium segment of the London stock exchange in June.
We've increased our liquidity significantly in the U K as we are seeing a strong demand and growing interest from U K and European General These funds.
About a quarter of our volume is now traded on the LSE and nearly 20% of our shares outstanding have migrated over to the U K.
These are strong starts with just the first few months of trading, particularly when compared to some of our dual listed peers.
In September we were included in the FTSE 250, and the FTSE all share indexes, which we expect to continue to drive both direct demand and passenger demand as investors start to take notes of our index inclusion.
Which should continue to boost our liquidity on the UK lineup.
As our share price continues to perform well we have sites on becoming eligible for other than this is Nick.
<unk> up could be the FTSE 100, which has a market cap review date on searches in November.
As of right now we are just between the nineties hundreds position. So we're watching that closely.
I will now hand over to Mark for a detailed review of our operations.
Okay.
Thank you Sebastian and Hello to everyone on the call.
Joining this webcast from the <unk> Gold mine, where we have made great progress this year on some really fun.
<unk> recently received the final approval to allow us to stop mining and processing ore from the Le plaque deposit.
As you can see on slide 26. This posture has been a very good one for US we are on track to meet our full year 2021 production garden.
Record production for the group.
Production increased by over 131%.
This is 2020 due to the full benefit of consolidated production from $7 Massawa and one of them.
Strong operational performances, most notably at ETE and Hyundai while the group all in sustaining costs have remained fairly flat.
Moving to slide 27 production at Donlin Massawa increased in the third quarter of 2021 compared to the previous quarter, mainly due to the good grades being mined in the Sofia Miami at myself.
Thanks to the good progress made on the fist one upgrades at several dollar we have progressively I would've paid higher prices through the plant.
Maintaining throughput and recovery efficiencies.
Total tons mined or some increase due to a higher proportion of bulk salt mature with demand in the north pit and good productivity of shovels and extra London, all of which contributed to improved mining prices and unit costs during the quarter.
Mining in the sub $2 was recommenced in the quarter in order to progress the waste stripping program for future use oil production.
Despite these improvements in all in sustaining cost per ounce increased slightly during the quarter, mainly due to an increase in the strip ratio associated with the white shirt.
No.
The higher sustaining capital spending which was mainly related to the purchase of additional mining equipment.
Given the strong performance year to date.
Yeah, 2021 production is well positioned.
At the top end of guidance.
Sophie inline skating or pizza are expected to continue to contribute the majority of all of them on for the rest of the year, while Leipzig traction that the PD northern separate dollar piece will continue.
Advanced grade control drilling explaining undertaking that prison at the Massawa.
Long, we play some sterilization and bush clearing activity in order to be ready for money next year.
On slide 20.
To provide an update on the progress of the CIL plant upgrades at sub one dollar massawa.
We are tracking slightly ahead of schedule for completion of phase one by the end of the year with mice packages going through commissioning.
Gravity circuit will be the last package Commission in early December.
Yes grades will allow us to process more of the high grade 3 million tonnes of ore through this type of dollar processing plant.
The definitive feasibility study for phase two is well underway with daily work focused on de risking the project schedule, including additional engineering design and procurement of long lead equipment.
Following successful exploration drilling resource updates are expected to be published in cortisol and will be incorporated into the study which is scheduled to be published in early 2022.
On Slide 29, you can see the photographic evidence of progress on phase one.
The picture at the top left shows the additional electrowinning, so while the two broad pictures of the carbon regeneration kiln building and elution Teng.
The bottom left pizza shows a different view of the carbon regeneration and illusionary at time.
Lastly, the bottom rock pizza shows the top of the additional wage thing.
On slide city production home values on track to be near the top end of guidance.
Thanks in large part to the success of Kari pump.
Is that better than expected mining productivity during the pre stripping fight and some positive grade resource reconciliation.
How grateful I am to boost production and help lower all in sustaining costs.
Total tonnes mine increased marginally with the startup of Kari West and continued by stripping at Kari pump and brings a lot of money.
Or tonnes mine decreased significantly.
Due to limit on that.
Kari pump oxide ore during the rainy season.
With us on pre stripping of the Kari pump phase III.
Tons milled increased slightly and what tools from Kari pump and Vindaloo Center.
And supplement both stockpiles of Kari pump, who will talk to you in prior quarters.
Overall.
Lower grades resulted in a lower production quarter on quarter.
All in sustaining cost increased due to a combination of drawing down stockpiles in quarter, three compared to building stockpiles in quarter, two and increase capital associated with waste stripping.
Moving on Slide 31, we have also had a very strong you Tonight.
Production is on track to be near the top end of guidance.
Strong performance has been down to a combination of higher throughput grade and higher recoveries by some phasing more back into high grade.
Other than 70 refractory to put hard drive, which has a lower dose cohort.
The mine has also had benefit from.
Details of the simplification.
All stockpiling and blending arrangement, coupled with the use of a mobile crusher in Palestine to create a more homogenous oxide product, which is fixed through the surgery as opposed to the mining jaw crusher.
And we still have to get the higher throughput that we play in the treatment.
During quarter three production decrease is guarded due to the lower average price they cite in tonnes of ore mined.
As we focus on stripping activities affected too easy and Collins would be.
Oh, it was mainly sourced from becker to into play as.
As well as the heat stockpile supplemented by ore from the <unk> and Collins.
We started mining at la <unk> during the quarter and expect to start trading off from day during quarter four.
We should contribute some higher grades and increased sale blending optionality.
All in sustaining cost per ounce increased due to much lower ounces sold compared to the previous period, just what level of operating and capital costs.
But the.
Through the drawdown of stockpiles driven Bryan we chose.
So it has a negative impact.
Moving on to Slide 52 production remained in line with the previous quarter as the greater throughput and recovery rates were offset by lower grade.
Total tons mined victories in call it straight from the accelerated activity in the first half of the year.
In order to catch up on the wise mono shortfall from 2020.
The focus was on all mining in the lower grade ties to the west.
And waste stripping in.
In the HP and phase III of the west here.
All in sustaining cost per ounce decreased compared to the previous quarter due to the victory.
Signing capital, resulting from less stripping at the west pit and a decrease in unit volume and pricing and cost due to shorter hauls associated with the phase.
<unk> stripping and increase plant throughput.
Who is expected to achieve its full year 2020 on production guidance, which would mark a good year following the Basel III style.
On slide 33, Atlanta production for 2021 is well positioned to be near the top end of guidance.
Production was very consistent quarter on quarter on Kansas, maintaining a similar claim profile of fresh ore from both the voice and one of them.
Okay.
See you underground.
Total tons mined decrease compared to the previous period, that's a minus at stage two and three pits merged into a single credit that was the.
The strip ratio will decrease.
In the morning by mid 2022.
Total underground tonnes of ore mined at <unk> decreased as a result of the lower contribution from development headings as the Montney is now largely developed which was offset by a higher contribution of started production.
All in sustaining costs increased slightly due to higher prices and maintenance costs and much lower priced waste capitalization compared to the previous period.
Offset by a buildup on the stockpile.
And the last quarter of 2021 started production will continue with the <unk> underground mine, which progressively lower development, which will be offset by commencement of Tracon development from the <unk> underground.
Good morning activities that lineup will continue to wind down through to completion by the first half of 2020.
Moving to slide 34, which is also on track to achieve full year guidance.
<unk> decreased during the quarter as lower mill throughput and lower recovery rates, resulting from processing, a higher proportion of fresh material.
High moisture content oxides prices during the wet season to minimize plant blockages.
But total tons in ore tonnes mined decrease in quarter three due to the impact of the wet season, and the increased focus on waste stripping over sourcing barely north really sale and for Colgate.
All in sustaining cost ramp increase compared to the previous quarter, mainly due to higher unit mining and processing costs.
Continued focus on construction and lithium is sold in the period.
Turning to slide 35, and Karma will be well positioned to meet full year production guidance as well during.
During the quarter production decreased due to the lower average ride as well as the expected lower recovery rates, which resulted from the.
Higher proportion of hard coal plant and carbon content or from the that would stack from the <unk> pit.
The all in sustaining cost per Gram increased lower mining cost due to <unk>.
Tampa sold compared to the previous quarter.
Looking forward mining activity will continue to focus on the GT one piece.
Last quarter of 2021 supplemented by ore from the ramp up period.
Overall quarter, three was another strong and consistent quarter across all of our operation to spot the wet season.
Continuing to improve that performance through better planning and mining.
As a group we are well positioned to be that full year.
Production guidance and meeting our own sustaining costs.
As Sebastian mentioned this will be the not sooner right that we've made at Cod, which is something that we are incredibly panel testing.
Testament to the quality of our assets and the strength of medicine.
I'll pass back to you Sebastian.
Thank you Mark.
Before we close I just wanted to reiterate that our business remains resilient and is on track to deliver its ninth consecutive year of meeting guidance as mentioned again Mark.
It is this ability to consistently deliver on what we say we're going to deliver on across all aspects of our business that has granted us a strong social license to operate and it is why we believe we are trusted partner to all our stakeholders.
Our resilience as a business is what also enables us to continue to invest in organic growth through our successful exploration program and our exciting development projects opportunities, while ensuring we are able to continue to return capital to shareholders over and above our guided minimum.
Before we move on to questions.
Can see are a key upcoming catalyst listed here, which we have described throughout the presentation.
Interestingly. This call is made through multiple locations I am calling from Morgan do go in Burkina Faso, where I will be meeting the Prime Minister Tomorrow and after two days of tabular mock he's calling from ETE in Cote d'ivoire, and Joanna just came back to London.
After three days of Sabadell.
This is not a sign of traveling arrangements easing and reopening after two years of Covid. This is what we do on a continuous basis, including during the Covid Lockdown period.
Being on the ground with our host countries and at our mine sites is how we've been growing this incredible platform in West Africa, and we will continue to develop irrespective of COVID-19 or security perceived restrictions.
On that closing note I would like to thank our team once again for their hard work this quarter and look forward to presenting our results at year end.
With that I would like to thank you all for dialing in and open the line up to questions.
Thank you ladies and gentlemen, we will now begin the question and answer session.
So I think covering analysts due to time constraints as a reminder, if you wish to ask a question. Please press star one on your telephone and wait for your name to be announced please standby, while we compile the Q&A queue since I only take a few moments and if you wish to cancel your request. Please press attach case once again. Please press star one if you wish to ask a.
Question.
The first question is from the line of obese Habib from Scotiabank. Please go ahead.
Thanks, operator, congrats Sebastian and endeavor team on a solid quarter.
Despite the rainy season.
Just a couple of questions from me.
Starting off.
Year to date you.
In deference to produce around 114 million ounces and really achieving the top end of guidance implies about Q.
Q4 production of at least 350000 ounces of gold produced 380000 ounces in Q3 about 409000 in Q2 now.
Q4 is typically endeavor strongest quarter should we expect Q4 to be around the Q2 level any any kind of color you can provide on that.
[laughter] thinks of as I knew I knew you would ask the question.
I think what we safely said is we are on track to reach the top end potentially obviously beat the upper end of the production guidance for the year.
I think that there are a lot of work going on and as you know we are embarking in a strong capital.
Investments in 'twenty, two and 'twenty three.
So I would simply say that we will be on track in Q4.
In a similar numbers this Q3 and Q2 in between Q3 and Q2. The objective is not to overshoot in terms of production.
There is a lot of work to be done. There are also a lot of work to be done at some mine sites in order to open up new deposition and do some pushback to prepare for 'twenty, two and 'twenty three.
I think what we want is to be consistent and make sure that we prepare appropriately for 'twenty, two and 'twenty three.
Sounds good so bedroom and then just based on that in terms of sustaining capital.
Now how do you see sustaining capital kind of going into Q4 and is expected to decline quarter over quarter as most of your stripping campaigns for the year are complete or about to be complete.
Essentially just trying to gauge the expected free cash flow for Q4.
Uh huh.
I would say that.
I think we've demonstrated that if you put on sites on specific one off items, you know on Texas, and so on which we base mainly in Q2.
What we are trying is to be consistent a tonne of gold price environment in getting around you know the $150 million to $200 million of net free cash for the business.
So that's what we will be again trying to trying to target.
Ensuring that we prepare property 2223, but in terms of sustaining cap story, we will be in line with.
Around what we had in Q3.
There were some big Big capital that were done in Q1, and Q2, but as I said I want to make sure that we do prepare properly also 22 and 'twenty three.
Okay and just a final question for me.
In regards to the FTSE 100, infusion or potential inclusion I believe that's based on market cap.
On that and are you already bought the cutoff, mark or whether at that center.
Say that again sorry.
In regards to the FTSE 100 inclusion.
I believe that's based on the market cap of the company.
Or you're already above the cut off mark.
So the way the way it works is.
You need to there are quarterly reviews, I mean for the for the FTSE 100 inclusion.
When you are below I mean in the top 90, you are automatically included in the do it in the in this is if you are between 90 and 100 and it depends on how long and how stable you have been into a certain period for a certain period into this 90 to 100.
If we look at the last the last few days you know based on the increased share price and our non tobacco gold price. We are currently just below a 100. So we're now into the 90 to 100.
Top companies in the in the FTSE.
So it really depends on the on how things evolve over the next I would say next three to four months to see whether we're able to either get into the top 90 or remain on a sustainable basis in terms of number of days within this 9100 to be able to get included into it.
So we're getting there and I think that are in or we don't have any rush or we're just pleased to see that progressively.
Shareholders and investors are recognizing the strong.
Quality of the business.
Been developing in particular after the successful integration of.
Some of the Taronga and chemical.
Thanks for the color.
And then thanks for taking my questions Thats It for me.
Thanks, everybody.
The next question is from the line of Dan Shaw from Morgan Stanley. Please go ahead.
Hi, just one question for me.
Another strong performance from an operational standpoint, and you're flagging.
Outside risk to the guidance can you just outline from your perspective, what are the main factors have been driving the outperformance relative to perhaps your budget assumptions.
I know these things that could potentially carry on either into into 2022 or are they more one off in nature. Thank you.
Sure.
But I think that.
As we tried to highlight is we've been doing a stronger Q3 compare to the.
The budget, we expected usually Q3 has.
Some risk because of the rainy season, I think this year was well prepared but we had some.
Some concern on some of the recently acquired assets bits I must say that you know there was a stronger strong production thats about what our Massawa and also strong production at <unk>, which allowed us to have this.
<unk> Q3 than the than initially anticipated. So that's a that's a good news the two main factors I mean for those increased production in particular, it's about at all and in whom they were clearly the the higher grades.
We are getting from Bose Kari pump for whom the end from a Sofia for Sabedra Massawa.
So mark do you want to comment on top of that but overall very pleased with the.
With the Q3 and going very strongly into Q4.
Yeah sure I'll get a couple of things that for example.
With what we were doing through the search feature being able to sustain that.
Very good throughput and the processing plant.
Above what we had targeted and as Sebastian mentioned to be able to sustain that through the wet season.
Something that we're particularly proud of.
For one day, the Kari pump his proposal and for $7.
<unk>.
Performed below.
And then manner has been very very consistent through both the wireless and the underground.
Underground.
The main contribution to the strong performance of the.
Thank you very much.
Thank you. The next question is from the line of Don Demarco from National Bank Financial. Please go ahead.
Oh, Thank you operator, Hello, Sebastian and team congratulations on a great quarter, just a couple of questions from me.
First of all on your share buybacks do you plan to maintain these or was this more of a tactical move recognizing at time when share prices were lower.
Things done well no I think the way we're looking at it is really true.
Layers of capital allocation.
So.
We see today, that's a I mean, we believe that we have seen strongly undervalued.
Just seem to have lost Sebastian's line that please standby, while we reconnect.
Yeah.
So Don.
And it's just reconnecting, perhaps I can jump in here, but she was actually in let's say.
We're looking at the share buybacks as part of our capital allocation strategy.
Ultimately, it's competing against other investments in our business.
So as long as we can.
To see a strong return.
That's that's competing with a 20% IRR, we're seeing on projects, we can continue to do buybacks.
What <unk> seen in our Q3 results that we got about $35 million in Q3 alone.
Before for the year to date.
Yeah, Okay. Thanks.
Thanks for that Martina.
Maybe I'll just give it a second the CFS Sebastian reconnects, otherwise I'll continue with my next question.
Perfect and then the team with Mark wins around are also available to take questions. So.
Given to us in a while ago with core connection I suggest we continue an introduction will join as soon as we can okay sure well with that.
So we have the sabadell of DFS completed next month hazards indicated.
Per guidance for modeling non sustaining capex increasing into Q4, we would expect us to continue into 2022.
Two questions on for Phase two can you remind me of any potential scope changes.
That we might expect versus the previous to Ranga study.
Inflation has been topical across the industry do you have any preliminary comments uninflated pressures as you're preparing the DFS.
Sure. So on the on the Massawa Phase two we ran 90 tradeoff studies.
Ultimately.
In fact that the PFS route was the best one perhaps mark you can comment more on what we're seeing on the project side.
Yes. So it is too early to give any sort of hard numbers on any inflationary impacts, but we certainly know that they will be.
Just some of the indications from steel costs and shipping costs.
A few other.
Thanks.
In terms of.
From a store perspective, probably one area that we're really focusing on was just looking at how we deal with the transitional rule.
A topic you've got oxide.
A free milling ore and then.
But the full year refractory, but then the designs.
The ultra between the different lenses of the ore bodies, but also a different day.
Will be transitional in nature. So we've been looking at how we best do that.
Which is most likely through the flotation circuit.
The flight titled.
So that's been publicly benign.
The main difference if you want to the terrain study.
Okay.
Okay. Thanks, so much Marc and thanks, Martina that's all for me.
Okay.
Hey, Don Sorry, I apologize my line was cut off.
Oh no problem Sebastian that's okay I've asked my two questions.
Pass it off to the next person in queue. Congrats again on a good order.
Thank you Don.
Thank you. The next question is from the line of Justin Stevens from Pls Financial. Please go ahead.
Hey, guys congratulations on a good quarter, obviously, its nice to see despite the rainy season, but everything is ticking along well.
Most of what I was looking for has been already asked and answered.
Only thing I was just wondering if you could give us.
Yeah, obviously with these DFS is for further crowd kalana.
Coming down the pipe.
The sort of rough timeline, you would expect in terms of permitting before you'd be looking to potentially make a construction decision. Once those studies are in hand.
Sure.
Hey, Justin I think on the.
On both projects would it fit accrual or the biopsy for somebody like myself well, we do have all the licenses in place.
So it's not just about a decision for construction, which is required which will be made on the back of the.
Publication of the Isabella.
Feasibility studies, both visibility study as you know it should be completed by year end beginning of next year. So again, we would expect a construction decision for both projects you know sometime in Q1 and in it's about then in 18 months construction period for both projects.
Great.
Can you remind me about kalana as well.
So kalana.
We've been waiting to see the DFS for Kalana, but what we said is that we would build only two projects in parallel at the same time.
Right now and again, you know providing a there is no changes during the feasibility studies released no. We clearly see the bio explore subdue MSR and physical to be stronger.
<unk> in the short term than Colorado.
Which is somehow good because then it will give more time for kalana to do more exploration and be able to grow the project.
If you look at the pre feasibility study for Kalana, we'd been looking at something which is more around 150000 homes and your production for 10 years, what we're looking for projects I would say the docs you know significantly above 200000, knolls annual production per year.
Which is the case of political and obviously these other unless our project, which is critical for bringing some other land massawa into a tier one territories.
Yeah, I would say that.
Without having yet the DFS I'm pretty convinced that the outcome would be construction decision on the back of DFS for cyber Massawa and for physical and give more time for kalana due to continued to build the pipeline. So the calendar would come you know, India and the rest of the pipeline in two or three years down the road once.
The center exploration is done the better we're able to continue to grow with that kind of a project.
Got it that makes sense and yes, as I said, just confirm there you'd be happy building.
Like based on your priorities and how the numbers it looks like you'd be happy building.
The phase II and the Greenfield project in tandem.
As long as the gold price hangs in where it is.
Yeah, exactly I mean, we I mean as a team.
We feel comfortable in running both projects in parallel in particular, because you've got one which is a brownfield was already a lot of the infrastructure and the other one being a complete greenfield, but a complete greenfield in a country, where we had already two constructions.
<unk> done so we know extremely well you know it could you go out in the environment. So yeah, we feel we feel comfortable in the in building those two projects and bought it.
Sounds good.
It for me thanks, so much.
Thank you very much Justin.
Thank you. The next question is from the line of Andy to Stony from CIBC World markets. Please go ahead.
Tony that's a new one.
Good morning, guys. Most of my questions have been asked and answered I just wanted to ask a little bit more about our cost expectations going into next year could you talk I know this does it seem to you talked about some of the costing for higher end because of fraud and security and I'm quite calls there could you.
I, specifically talk about cost pressures in Burkina and then also just review some of the cost pressures that you have across the operation.
Sure what I'm thinking of the the cost I mean, there's really a function of the.
The grade and.
Throughput for the different mines. So we've got I would say you have pretty strong visibility on those for the next the next few years with the life of mine plan.
So what we are monitoring is really the additional inflation pressure.
We would see on the on some of the mines are linked to the to the supply chain.
The good thing is that over the last 18 months, we've been able to consolidate and renegotiate a lot of the key contracts things too.
New volumes that we added with the semi and the Taronga acquisition we.
We had some very strong and positive outcome of all those negotiations, including the most recent one that we've done between June and September.
Being able to you know through that ensure that we would have on current prices and limited inflation costs on the east coast base for 'twenty, two and put some of those key commodities until 'twenty three 'twenty four so I feel you know pretty pretty comfortable.
The time being given the strong contracts that we have that are you know, we shouldn't see any significant impact of inflationary cost.
For 'twenty, two and 'twenty three and in fact I see.
We'll further opportunities for us to continue to improve our cost structure base in particular with a you know improvement.
Of mine sites and I'll, just give an example, but you know.
When you own that we acquired from Taronga. There was about 70 72, Ex-patriot onsite wind all down to about 50, because we've got a very strong program of growing local talent.
Taking out 25 Ex-patriot. It's you know that's you know two or $3 million you know off the bottom line that you are adding a simply you know boy you know growing local talents and this gives you a lot of leverage to absorb any any small inflation on some of the other costs. So overall, you know are still pretty strong.
<unk> inflationary seen around in a limited impact on our costs for 'twenty two 'twenty three.
And then just perhaps a question for yourself, where Martina when when the people providing guidance for 2020, which brings me to me.
So we usually do that in the third week of January around the third week of January.
Alright, Okay. Thank you very much.
Thank you.
Thank you. The next question is from the line of Shifang Pfau from Avondale. Please go ahead.
Hi, My friend I have two questions about the investment activities.
Jim.
The first one I read about the initial capex of two greenfield projects.
How has the initial capex being deployed or whats the timeline for the Capex deployment.
Sure so the.
Two projects that we're talking about our physical the greenfield pinnacle in and cut you off and subdued on Massawa.
Expansion in.
In Senegal, and those two projects, we expect to complete the feasibility study by year end. So the construction decision should a cure in the beginning of Q1. So no capex has been deployed so far on those two projects and are expected to stop once construction decision is taken.
Okay and then my second question is.
Since the company leverage is so low and what's the company's future strategy.
Maximum continue to.
To look for M&A opportunities or what's your target for the.
Maximum leverage.
Yes, so as part of our capital allocation strategy that.
We presented to the market during our London listing in in June the back in June.
Key message around the capital allocation was that are we don't want to go back to above four five times net debt to EBITDA in terms of leverage. So we currently sitting at about zero in the end, we expect that our strong cash flow in Q4 will put us in a net cash position to retreat.
By year end.
And that's what we want to maintain you know as long as possible. So the objective is even during the construction period of those two projects in 'twenty. Two 'twenty three is not to go at any point over five times net debt to EBITDA.
Okay.
One five times.
Five 0.5.
Okay.
The covenant until all of the leverage.
The covenant is at a three times.
EBITDA. So we've got a you know.
Ample room. So it's really it's really a I would say a strategic decision.
Leveraging you know more of the business, ensuring that we're able to maintain a very strong discipline and a more.
Going towards accumulating a minimum net cash position of $250 million $50 million.
And that's really because we believe that whatever the gold price.
Environment, we want to have a strong balance sheet to ensure that we are able to continue to deploy on exploration and on building new projects, Despite lower gold price environment.
Okay. Thank you that's all on my side.
Thank you very much.
Thank you that will conclude today's Q&A session I would now like to turn the call back to Martina to cheer for any additional or closing remarks.
Thank you everyone for joining our call today.
All the time, we have left but we remain available for further questions by call. It right now thank you.
And that will conclude today's conference call. Thank you for your participation ladies and gentlemen, you may now disconnect.
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