Q3 2021 Equinox Gold Corp Earnings Call
Thank you for standing by this is the conference operator, welcome to the Equinox Gold third quarter at 2021 financial results and corporate update conference call and webcast.
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I would now like to turn the conference over to religion, Bailie, Vice President Investor Relations for Equinox gold.
Please go ahead.
Thank you Shari and thank you everybody for joining us today for the Q3 call. We will of course be making a number of forward looking statements. Today. So please visit our website SEDAR and Edgar Covid to read the rest of our continuous disclosure documents I will now turn the call over to Christian <unk>, our CEO. Thanks.
Thanks, Lynn and welcome everyone to our Q3 results, but another active quarter for us and I just wanted to quickly summarize where we're at right now and we've got the seven producing mines here in the Americas. It's soon to be eight with sad to lose in quarter, one when it hits production and also we've now got five gross projects.
They're nicely distributed amongst our regions and we'll go through those a little bit later in the presentation.
We're working really hard in the fourth quarter here too.
To hit our target of around 600000 ounces of gold for the year, so it'll be a big quarter on quarter number four.
And we've got our balance sheet in good shape right now with with available liquidity of about $500 million in some investments on the balance sheet and we're funded to achieve our long term growth objective about a million ounces a year. So we're working hard on executing on that growth strategy as we've articulated in the past and when.
Turn to slide number four you know the recent highlights so just do want to mention that there's been a lot happening corporately.
Santa lose construction is progressing well at the moment, we're in a we're on schedule on budget.
Greenstone construction is starting to ramp up now we've had a good summer of work and we'll highlight a bit of that later on in the presentation.
Or is one expansion.
Has been demonstrated through the pre feasibility study and we've almost doubled the mine life through that.
Also there is more to come there we think the exploration potential is fantastic as we move forward and we'll keep drilling.
Also completing a drill program in Bahia and those drill results will come out when we're we've got all the results in.
And Corporately, we continue to focus on the ESG front and Youll see our data on our website as being updated and enhanced on almost a quarterly basis now.
And one thing that we're really pleased we've been able to complete the new water treatment plant at the Autozone a village. So that is basically done here in November and we're able to provide enhanced water system for the local community.
And as Ive said Theres a strong start to Q4, we mentioned that we've produced over 65000 ounces in October and on track for guidance and we'll be pushing hard towards that 600000 ounce mark for the full year.
Yeah.
Peter I'll hand, it over to you for our quarterly results.
Thanks.
With respect to our health safety and environment. Our lost time injury frequency rate remained low at one to nine per million hours worked in.
With respect to an environment are significant environmental incidence frequency rate also remained low at <unk> 26 per million hours worked.
As to COVID-19.
It continues to have low impact overall in our operations Thats, primarily due to vaccine rollouts in the jurisdictions.
Mitigating the impact of Covid, starting to eliminated hopefully and but we continue with our proactive measures of the mine's doing testing and education.
With respect to our operating results it was our highest quarter for production to date.
We produced 140000 ounces of gold sold of 137 at a realized price of $1780 an ounce.
Our cash cost came in at a $1109 an ounce and that reflects the upward pressure that everybody is seeing across the world and I'll comment on that in a minute further in our mine all sustaining costs, reflecting the investment that we've been as we've previously reported we've been doing through the first half of the year and then into Q3.
What came in at $1327, an ounce, so coming down from prior quarters, but still reflecting overall investment in our assets.
Included in our cash costs of $3 million of write downs that we don't expect to reoccur.
About half of it came out of <unk>.
Very large mine that takes a while to ramp up.
And and we see it doing that now so we don't expect that to reoccur and RDM was an unfortunate timing of mining sequence and when the quarter came to an end they run a lower grade area of the mine.
Which led to an N RV right down there that we again don't expect to see again.
We're on track to achieve our 2021 guidance.
On the back of a stronger Q3 of production.
And look forward to a strong Q4, we should be overall in about the mid range of the guidance, which is 560 to 625000 ounces for the year.
On a cost basis, we actually expect to come in on the higher range of the cash cost and all in sustaining cost on a mine by mine basis.
We expect let's see those to come in at the higher range of that of the guidance. We have there mesquite to be in the lower range and Arizona and the other mines to come in about mid range overall on an annual basis.
Yeah.
With respect to the costs that I, just mentioned like everybody else, we're where we're seeing pressure on consumables, especially cyanide in line.
Seeing a lot of pressure on diesel.
As an example, we've seen diesel costs in the U S up over 50%.
<unk> experienced a period of high cost for power.
Due to a lack of rainfall in most of our power there comes from hydroelectric.
Settled back down, but overall, we're seeing upward pressure our year to date were up about 4% or $46, an ounce compared to last year.
To help blunt or mitigate the cost escalation that we're seeing now that we're a bigger global company, we're putting in place global supply chain measures a to help with economies of scale and reduce costs and also of course to help with the logistics and supply chain disruption that we're seeing that are leading to some of the cost increases.
With respect to our financial results on the back of the sale of the 137 ounces 137000 ounces of gold sold we had revenues of $245 million.
Mine operating earnings of $49 million and adjusted EBITDA of $62 million.
We had a net loss of the year by.
About $5 million, which is about two cents a share on a basic basis.
But net income on an adjusted basis of about $7 million or two a share.
On a basic basis.
Cash flow from operations was $48 million before changes in working capital and $65 million after changes.
Noncash working capital and year to date 100.
Third 47 to 142 million pardon me.
Before changes in $165 million after changes in noncash working capital.
Our balance sheet remains strong at 300 million of cash on the balance sheet net debt of $245 million and liquidity, which is when you take our cash and add our undrawn debt of 500 million. This leaves us in a good position to fund greenstone construction, which we announced last week.
And in addition to that we have investments with a market value well in excess of $400 million should we need to help bolster cash flow.
From operations Undrawn debt.
And.
And.
And so we're in a strong position to fund greenstone over.
Over to Doug to talk about operations. Thanks, Peter.
On the operations side, we had a real focus on stripping programs in the first three quarters of this year, but that would be especially at mesquite RDM and lots of pillows.
And now we're getting the benefits and this was for Portola and our guidance that we have a back ended weighted here and that's what we're seeing.
During the quarter, we produced our millionth ounce. So that was a good milestone for equinix.
And then as we look at the individual mines mesquite.
Trends transitioned from waste stripping over to mining oxide ore and the brownie pit, we're now placing ore on a new pad area and that means that we are providing quick ounces quick recovery of gold because the solutions don't have to go all the way through the paths, we're benefiting from that.
And we're also continuing to work on taking that exploration success, where we've had an increase in the resources of 65% and building that out into.
More reserves and adding to the mine life at Mesquite mine.
We produce 23264 ounces.
And all in sustaining cost of 1400 $1402 per ounce.
<unk> been a consistent producer it's down 135000 ounces for over 13 years.
And interestingly, it's going to produce its four 5 million pounds as we get into 2022, so a good steady performer for us.
Castle Mountain when we had higher production.
Reflected in the optimization efforts that have been done on the leach pad in the <unk>.
Plant.
Q3 production was 7873 ounces at an all in sustaining cost of $1067 per ounce.
And the team continues to work on optimization efforts of the feasibility studies. So that includes various studies that will work on the met test work in other ways to approach that to make it more efficient overall.
Preparing to submit for the permitting for phase two the expansion will take this up this mine to around 218000 ounces a year for over 14 years.
Looking at Mexico Boss Fellows.
We resumed resumed full operations in July we ramped up very quickly. So we benefited and we're able to.
Through that ramp up production of 32837 ounces for the quarter at an all in sustaining cost of $1647 per ounce.
The core has been coming from the Guadalupe open pit, possibly let's open pit in Las villas underground and we continued drilling and the Guadalupe most people's underground crews while its appeal. Its underground has had annual drilling programs that are focused on reserve replacement and given the higher grade nature of that ortho is a benefit for us to be able to extend that life. So we.
You work in there.
And on the expansion.
Projects.
That'll take production overall to about 350000 ounces per year.
Already mentioned the Guadalupe has now transitioned from stripping to being part of the ongoing operations.
Burma Hall underground, we are continuing with primary development, we did produce the first ore from their two and a half a gram per ton, but the real focus is getting the development down to the central zone, which was the highest grade portion of the Bermingham underground.
We continue to work on the CIL plant, especially on the front end engineering and design.
That's 8000 ton per day plant and it's being incorporated in the rest of the production schedules for that mine.
Overtook Mercedes.
Work is underway on a large development program that will increase access to multiple ore bodies. We currently.
<unk> from <unk> in the pizza.
And we're gonna add in Mariana.
In the radar area and that'll enable us to.
Increase the plant throughput, which is currently we're kind of campaign basis.
Q3.
Sandy has produced 9722 ounces at an all in sustaining cost of $1261 per ounce.
And going to Brazil.
Production of Arizona was 34583 ounces at an all in sustaining costs of $957 per ounce.
Really good production at <unk> in the quarter.
And during this quarter, we delivered the pre feasibility study on the expansion and that saw the mine life get extended to 11 years.
It was six before so its a real nice nice result.
And that will be by mining the underground and additional satellite open pit deposits.
Production will peak at 160000 ounces, a year and total production will be one 5 million ounces.
Going forward.
We continue with additional drilling that we will look to add more on the underground, especially adjacent to the mine design. So we saw the opportunities to do infill and on strike extensions within the underground.
So we're looking forward to that coming into into the underground next year.
Our next step will be applying for permitting for portals, and we'll probably have more than one location and just continue advancing on that project.
That's agenda production was 15598 ounces at an all in sustaining cost of $1098 per ounce.
Exploration success offset mining depletion that was shown by the delivery of a technical report that was filed in the quarter, which showed almost three years of production was totally offset by a resource reserve replacement.
So net net.
<unk> on the reserves.
So for presenter so it's been a very good result.
But we've also ramped up exploration in a big way and present, a sad to lose district. So presented it's really three parts to the exploration and resource Reserve work, we do resource to reserve conversion program, we do drilling for near surface deposits that are near the mine because we are seeing a shift presented towards not just.
Being an underground mine, but underground combined with open pit feed to the plant.
Plus this big effort in the belt between presented in Santa lose which ultimately those targets could contribute to either one of those mines.
Hum RDM.
The stripping program continued it goes right through this year.
We're mining higher volumes.
Low grade at the end of the quarter that did ultimately ended up with a one 5 million write down.
Been reflected in the cash costs.
Production was 15880 ounces at an all in sustaining cost of $1733 an ounce.
Importantly, it RDM, we restarted the exploration program focused on strike extensions from the open pit area.
First exploration program that's been done on this program in several years so.
We're looking forward to seeing the results come out of that.
Work on doing more exploration in the RDM area.
Okay and looking at Santa Lucia construction is on budget and on schedule to pour gold in Q1.
This is a past producing mine, which means refurbishing existing infrastructure. So we benefit from that and retrofitting the process plant, but theres lots of additions that are happening. There is a new ball mill, new new resident and Leach circuit gravity circuit primary crusher and conveyor is totally being redone and ultimately we ended up with a two 5 million tonnes per day.
$2 5 million ton per year plant.
The cost that will be $103 million on the initial capex, we've spent $51 million to date we're committed.
$84 million to the end of Q3.
This mine will be delivering 110000 ounces per year for the first five years and it averages out over the almost 10 year life at 95000 ounces a year with an all in sustaining cost of $877 per ounce.
Construction is 70% complete mining commenced in June we are well ahead of schedule on the mining all major concrete cores have been completed already.
Sag mill refurbishment is 95% complete ball mill is complete for the installation both of them are in commissioning now.
Dairy grinding has 85% of equipment in place.
The work on the TSS and the water storage them will be finished this quarter.
So I would encourage you to have a look at the photo gallery on the website and check out the time lapse video that goes right to the end of September and Youll see the advance on all the work that's been done.
All the work on the process plant at Santa Lucia.
With that I'm going to hand, it over to Christian.
Thanks, Doug.
I do want to stop here and sort of pause as we look at greenstone a little more closely it's the big news for the quarter. The announcement, we made a I guess it was last week.
We are building one of the largest gold mines in Canada, it'll be in and the number three or number four gold mining, we're doing that alongside our partner Orion who own 40% of the project just as a refresher it's a $5 5 million ounce Gold reserve and there's significant exploration upside both.
Underground and some satellite potential deposits there. So we start out with a great 14 year mine life and about 400000 ounces of annual production.
Just as a refresher the infrastructure there is excellent and we spent a bunch of time in the last few weeks out there with the team and we're right along the Trans Canada Highway we've got good communities right in the nearby region. So we're really looking to integrate into those communities and not be sort of a permanent camp for for people to live and so it's a real opportunity to become part of that.
Region.
We'll have about two years of construction and six months of commissioning so that'll put us in place to pour gold in the first half of 2024, and this will be a cornerstone asset for equinox and it's something we're really excited about.
I'm really excited to get going on and as we turn to slide you can take a good look at a few of the early works projects that we've progressed, along very nicely, particularly over the summer months and you can see there the temporary camps open and actually in place we got to have our meals there in the last trip and actually use the facilities.
If you look also at the water treatment plant that temporary water treatment plant. That's now operational great to see and that's a key key factor for getting the project up and running and allow us to get the mining and the excavation work going.
In due course here.
We're also starting the road building and tree clearing which will allow us to get into the tailings facility, which that work is just underway and also the engineering is about 85% complete.
Turning over to the next slide the groundbreaking ceremony that was just a fantastic event in opening we had.
Last week at site, we had full participation from all of the local communities. The mayor first nation Chiefs, where there is wells administer minds of Ontario, and it was a real groundswell of support for this project. It's been a long time coming I think it's a project that's been on the radar for this region for many years and it's really not had a.
A quick start and ramp up until basically this April one to two new partners came into place.
I think the real feedback we got was excellent significant progress since April one the close the acro acquisition of Premier So really pleased to see that support in the ceremony really just highlighted and if you do want to see it we did livestream that actually online. So you should be able get access to that on our site.
Looking a little more at the project.
On a 100% basis, it's $5 5 million ounce reserve $7 1 million ounce resource, which is an inclusive on an inclusive basis, we'll be doing between 360 and 400000 ounces in the early years, we'll be at the higher level. There. So really nice large scale producer and it'll be a low cost mine, we expected around that $700.
The sustaining cost so.
Really good cornerstone asset for this company going forward construction costs will go through the detailed a little bit later, but just over $1 $2 billion U S.
Expansion potential I mentioned, theres $3 5 million ounces in inferred resources, but lots of potential underground and in the near mine deposits.
Looking more closely at the capital the updated capital costs.
We did take the time since the acquisition in April to actually update these costs.
The one point to two 3 billion initial capital that's a U S. Dollar figure about 80% of that is in Canadian dollars. Just as a reminder, we've got $177 million contingency in there, which is approximately 14% of initial capital. So a healthy number we've obviously factored in the recent.
Escalation in that that we've seen as well with about $125 million for the mining fleet and we hope to lease up to a $100 million of that which would reduce our upfront cash spend.
And we haven't factored in we've excluded actually all the upfront preproduction revenue, which is about $70 million. So this is a gross capital that we're talking about the key changes from the 2020 estimate which was about $1 billion. When you gross that up for the $50 million of preproduction revenue our foreign exchange, we've actually used a more conservative rate and more basically the spot.
Right now of one to five which has increased by $50 million inflation and escalation, we've added $80 million and our contingencies increased by about $90 million, which also includes COVID-19 related costs.
So the total increase is about a 20% increase from that original number.
Which is kind of in line with a number of other projects that you've seen out there and we've had the benefit of seeing other projects and how they've reacted to the escalation of inflation.
On page 17, just looking at the timeline, we thought it would be worth highlighting this because some of this project will be new for some people, but this is an area that was mined in the 30% <unk> and onwards, and it was very interesting being out at site meeting some people where their actual parents had worked at the mine and so theres a real understanding of mining in this region are real excitement to see the mind coming back up.
In the near term here in 2018 and 19, the environmental assessments were approved in 2020 that was the updated feasibility and really from there we've seen a real quick quick move towards construction, obviously under the equinox and Orion ownership. So.
I think the real feedback we got was they are amazed at how quickly we're able to move it from sort of a concept in our mind that we hope to build in the next few years to actually being in production and actually seeing activity on the ground.
Page 18, just quickly.
Touching again on our ESG, we do publish our data quarterly on the website. So I do encourage you to look at that we're trying to enhance it almost a regular basis and adding new data regularly.
We just awarded a chairman Safety award to Castle Mountain They had a LTI free construction at the site, so kudos and well done to them.
We're also planning on our long term strategy under ESG as well we've been gathering data we've been setting up our baseline information and we do need to be looking at our long term opportunities around ESG and we really do look at ESG is something it's a fundamental part of our business whats smart in terms of our business what will save us costs, but also what's good for the environment and what's good for.
For our footprint going forward and Youll start to see more and more data more information coming out on that and I think I've mentioned previously we're looking at things like independent power sources in Brazil that could come from full solar and wind power, but it will save us potentially $10 million a year in cost so that kind of initiative, we see is really a perfect mix.
What we want to see is a smart business decision, but also good for the environment for our footprint.
Okay.
And then stepping back and looking at the company again on page 19.
We're now a diversified for jurisdiction for country mid tier gold producer with an ambition to be in that sort of top 10 to 15 in the world very soon so we continue to advance the diversification of the portfolio.
We've got an opportunity also to.
Have these growth projects in all of these regions and we do have to phase them. We're focused obviously on Canada. After Santa Luiza has done and looking to ramp up greenstone. Then we also have the castle mountain phase, two which will be looking to permit over a couple of years, what we're building greenstone and we also have the expansion down at last CLO, so lots of growth coming from all four regions.
And when you step out on page 20, and you look at the three right hand side graphs here on this page we're near the top in terms of production over the next few years towards 1 million ounces or just over 1 million ounces. We're by far at the top end of growth with over 90% growth in that period from 2021 to 2024, we've got to just excellent reserve.
At a base of $16 4 million and again, we're targeting.
Reserve and resource growth growth through all the exploration programs that we have in place.
We're still working on obviously left hand column, which is the price to net asset value multiple we're trading at just under six times at the moment and we really do need to just continue to execute on that growth platform keep delivering the ounces and the on time on budget projects and we've been building basically a mind per year over the last three years and greenstone will be a slightly longer.
Build but we just have to keep executing on that and we'll start closing that valuation gap towards one times multiple.
On page 21, just stepping back and Pete touched on this previously, but I do want to hammer it home here.
Simple way we are.
But about $500 million and liquidity cash and Undrawn revolver, we have almost half a billion dollars in market investment so it's almost $1 billion.
Of avail.
Available liquidity investments that actually will support our growth as well as the ongoing operating cash flow and next year, we should be well over 700000 ounce a year and so we will be starting to see also the operating cash flows starting to increase as well as we grow the production base.
And in summary on the final slide you know there are a lot of catalysts that we've been working on this year and there is a lot more to come operations and the development of had a lot of activity, obviously with all the construction builds and the focus on integrating the new mines into the portfolio. So execution is the key in that area and we'll be working very hard to get towards that 600000 ounces.
Production for this year as Peter said as well, we're working on various programs to manage the inflation across the board.
It's something that we're definitely starting to see in Q3, and we'll be working hard on our 2022 budgets to try and manage that as well.
Exploration, we've had good results that continues to be ongoing and you should expect to see more news from that.
This quarter.
And just in summary that 600000 ounces of production growth from the five projects. So we have we will be working on that over the next three or four years to bring that into our portfolio and that 1 million ounce Mark is within.
It's been a nice shot here in a couple of years as we get Green zone up and running so.
A lot on the plate what happening in Q3 was a nice improvement over Q2 results in terms of production in Q4, we're really looking forward to seeing the results from that and obviously, we gave you a preview of that with the October production at over 65000 ounces. So.
I'll end it there and open it up for questions perfect. Thank you Christian operator can you. Please remind people how to ask a question.
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I'll pause for a moment as callers join the queue.
So the only question we've got online right now is when is greenstone going to go into production.
Yes, so greenstone, it's about a two year construction build we started obviously here in October and we expect to be pouring gold in that sort of first half of 2024.
Construction completion of the <unk> will be done around the end of 2023 and the early part of 'twenty. Four so we can get it up and running and get first ore into the mill in quarter. One. So we can be pouring gold in the first half of 2024. Thank you. We can go to the phone lines now please.
The first question comes from Kerry Smith with Haywood Securities.
Please go ahead.
Thanks, operator.
Maybe just kind of a general comment the contingency that you think you raised for green dot to $177 million, which is.
Any basis, and an absolute basis pretty significantly from the old study just wondering how you.
Think about that as it relates to San lose your 70% through that build are you expecting to use all your contingency on that project that continues she was actually quite a bit lower percentage basis.
And then also how that might relate to <unk>.
T that you've that.
That you've put out in the studies on Castle Mountain Phase II at which you might use for this last year was updated study, which is coming up by year end.
That's a fulsome question there, let me start with Santa lose I guess not to lose.
The past producing projects a lot of the infrastructures. There. We also have the team that was building, Arizona and.
Do you want us to learn a lot from that process and this is a slightly different environment, it's not the wet northeast of Brazil, slightly drier environment, obviously, and we just felt that.
Much smaller contingency was warranted there and we're tracking really nicely do we expect to spend it all probably will spend most of it.
I think that's probably a fair assessment and so you should assume that it will hit the $103 million, but tracking really well.
Some of the challenges we experienced at Arizona, we've been obviously, keeping a very close eye on and we seem to be ticking those boxes as we go along so we're feeling pretty comfortable with that smaller contingency on that one.
With greenstone you know its a big Greenfield project in a new area.
And we just felt that with the current sort of supply chain logistics and logistics issues or it could be an experienced around the world and escalation that it was better to have a slightly larger contingency we think it's.
Maybe at the upper end of things, but in this environment, it's more prudent to have that in place.
Love to over deliver on that and obviously build it under budget. So that I think it gives us much better chance.
There is a lot more that we need to do on that project, yes, theres. Good infrastructure, there, but we are building a lot of it from scratch in a sense. We don't have a tailings dam in place like we did at Santa lose we.
We don't have the power line set up we will have to put in place the power plant and all that so theres more to do and I guess, there is a different environment, where when we were ordering equipment and that foresaddle lose we found the supply chain are lot easier. We had a lot of the equipment on site as well, which are actually ordered pre I guess the merger.
And so we benefited from that were here, obviously, we're ordering everything brand new pretty much so.
Yeah.
And you kind of asked a little bit of a castle and while steel is up a little bit further down the line I think.
As we go into call it construction at castle and hopefully a couple of Years' time Hereafter greenstone built we'll obviously look at that a little more closely and in that environment at that time, but.
One of the things you guys are looking at right now is how to enhance that project. The operators are getting very involved in that study and the permitting process.
Looking at ways to maybe reduce capital and also speed up permitting.
Lot of that has got to do with how we actually.
We present ourselves on the environment.
In terms of permitting what kind of footprint, we have so they're doing everything they can to keep it as tight as possible look at any kind of.
Cleaner sources of energy less emissions.
Anything that makes it more amenable to quicker permitting obviously.
Is that okay. Okay. I guess that's helpful and then just a.
I am bit nervous I guess.
The contingency that we might see atmos fields could be bigger than maybe what we expect I guess.
And Christian maybe Doug just a second question on loss Cmos.
You mind I think it was about 100, just slightly over 100000 tonnes from the underground in Q3, what might that number looked like in Q4, and perhaps you could also comment just on the whole labor relation situation at La Scala you seem to be able to keep it operating now I'm just wondering how things are with everybody.
On the production side for mass appeal of its underground, it's probably going to be a little bit lower than it was in Q3, but pretty consistent through into next year. Eventually will be shifting most of the effort towards the north side of Las villas underground.
More giving in regards to resource reserve replacement.
The sell side, but otherwise.
So next quarter should be just a bit off of what it was in Q3.
Yes in terms of the community and maybe I'll just take that.
It's still fairly raw and recent and we need to continue to work on building that trust in those relationships back we are back and operating and we have seen.
Good enthusiasm from the workforce to be back.
We're hoping to actually go down in visits in the near term here and actually.
<unk> communities as well, but we've been pretty straight up here. This mind, we need to have a partnership like we're experiencing excellent partnership in Ontario, with the communities and the local government there and we need to see the same sort of thing in Las villas, and we've said we will focus on greenstone right now put our capital into that mine and.
When we're ready and things are stable, we will go back to investing in a bigger way at <unk>, but not at this stage and so it's a process of repairing those.
We've got to go through Union negotiations in the latter part of this year. So that's something that's on our radar and something that we need to work through but that's something that's had a reasonable track record in the past.
They're always hard negotiations, but.
The mine has always got through them and Theyre more straightforward in a sense that it's a contract in our ongoing relationship that that.
<unk> needs to be resolved and worked out and we're seeing an inflationary environment, but you've got to manage as well in terms of the.
Labor relations as well.
Okay. Okay. That's helpful. Thank you Christian index.
Thanks, Terry since we're on the topic of Lafitte, let's I'm going to ask an online question. When do you think lofty loss costs are going to come back in line with previous cost level.
Well because of Guadalupe going through stripping program and actually Las villas open pit also had stripping.
Elevated it.
As we go through Q4 and into the into the new year, it should start to become more normalized.
But I do think theres going to be a period of time next year as we're still working to get into the higher grades that Burma Hall, and we don't have the CIL plant and so I'm expecting also some elevated costs, we're not going back to where they were.
As quickly next year, you know there may be another higher little more elevated year next year.
Thank you operator, we'll take another question from the phone please.
Sure.
Next question comes from Anita Soni with CIBC.
Please go ahead.
Good morning, Thanks for taking my question.
I'm just.
With respect to the capital guidance that you guys have for this year I think you reiterated with this.
This release.
186 for sustaining and $2 51, and I noticed in your disclosure that you've spent I think about half of that one or two on the sustaining capital.
The 186 and <unk>.
60% of the.
I've been on sustaining at $1 50 ish, either the $2 50, so does that imply a really big capex spend in Q4 will you be understanding I would assume that <unk>. Since you mentioned youre not really going to be catching up on that non sustaining capital that you had originally guided to but some of the other assets as well.
Gaining capital here.
Alright are being I understand and then second question again, a long question.
It would be like this that have what kind of implications does that have going into next year, because obviously understanding it's not cost savings in this environment. It's just a matter.
Being able to get the work done.
I'll pause there and listen.
I'll take that I needed to Peter I'll take the first one out of the question Q4 is traditionally.
Hi, sustaining.
Capital expenditure period for us that is in part driven by seasonality in Brazil.
Where they do sales lift in the fourth quarter.
And we do expect a high Q4 <unk>.
Sustaining capex spend rate, which is why.
In the earlier comments I mentioned that we expect to come in at the higher end of our guidance on sustaining cost.
It's also in part driven by operating behavior. They start to realize our budgets are annual they don't get to carryover in the following periods and so they tend to take a look at where they are out at the end of Q3 and realized some of those projects. They made that had been lagging need to get done in Q4 because.
Otherwise they don't get to do.
So yes, we do expect that rate to be high for Q4 and in line as I mentioned earlier in line with guidance and I do think.
Sure.
Peter saying I'm, just going to add.
The CSF rates, particularly in Brazil, we see a higher stripping rate because theyre able to Arizona to move double the tonnes in the dry season, so you're going to see a lot more stripping in the second half and into quarter four particularly.
The other thing on the non sustaining piece, we're wrapping up greenstone very significantly in this quarter. We're also seeing Santa lose is hitting its peak probably right now and it's a lagging capital. So a lot of work has been done during Q3, and you're going to see a lot of that capital to flow into Q4, and we're kind of in probably almost peak manpower right now so quarter four is pretty heavy.
I think you're probably right, there's usually a little bit of a lag and a bit of it will slip into next year, but.
But we don't feel that.
We won't achieve what we need to achieve this year in terms of capital spend and the work on the ground per se.
Except or loss pillows, where disruptions, obviously caused us to have to restart on capital to develop programs and so it just pushes things out you are quite right.
It doesn't mean, it's being done cheaper as just being shifted so unfortunately, you don't get the work done and pushes into the into 2022 for some of the Capex work.
Okay. That's it for my questions. Thank you.
Thanks again.
The next question comes from Arun <unk> with TD Securities.
Please go ahead.
Hey, guys.
Sorry, if you've already mentioned this earlier, but.
How do you still coming by year end.
We still have some negotiations going on it might kind of push you on <unk>.
Thousand 22.
I would say no.
Essentially we've been through the front end engineering design work on the CIL. It went really well, but we also have to update all the production scheduling and everything and when there's a disruption we have to.
We go through an update all of that so.
It's a delay and not just on things like Capex spend but also on the study work, but we continue working on it it will be into into 2022.
Great and just lastly.
Several organic growth projects in the pipeline so M&A.
M&A is not really a focus but is there any.
Interesting.
All the mines.
To kind of focus more on the growth or are you just happy with your current portfolio.
So I think we still consider that as a as a.
Opportunity to really enhance the portfolio and it's a healthy process. So we will entertain and consider maybe selling one of those small assets along the way here.
So we haven't we haven't stopped that process.
And Youre right, we absolutely want to focus on those bigger sort of development projects and that's our focus in terms of internal growth at the moment, probably more of the external M&A from an acquisition perspective is secondary to that.
Internal growth and development of our key projects.
That's great.
Thanks, a lot.
And I appreciate you guys.
October production was.
So thanks again guys.
Thanks Mark.
The next question comes from Wayne Lam with RBC.
Please go ahead.
Good morning, guys.
Sure.
In Brazil you.
You had noted higher power costs, but I was just wondering if you've seen any risk of power outages blackouts in terms of impact to operations as well.
Yes.
Okay.
The higher costs were driven by.
Low rain drought conditions.
Interestingly, they've actually had quite a bit.
<unk>.
Yes.
Out of season rain.
So the the reservoirs and dams are full again and we've seen the power costs come right back down. So there's been costs are back down supply is back on there has been no interruption, we don't anticipate any going forward.
Okay, great. Thanks, and then just wondering that stand to lose.
In light of the inflation that you've been seeing in Brazil, I guess two questions. The first is have you been experiencing any impact on it.
Terms of hiring as.
As you ramp up the operations and the second is.
I guess, how should we think about.
The cost in relation to the technical report as you guys.
In terms of operating costs.
As you guys move into production here.
So for hiring.
Have we.
<unk> had most of our ops team coming on board for a while now so we've actually deployed a lot of them to go to some of our other mines for training than we are.
Consistently had a group working on our pilot plant so.
That has been well in the works for a long time and proximity to present I meant that a lot of our team that had worked at Santa lose previously had moved over to presenter. So we were able to have them come back over to Sam to lose so I think we're in good good shape, there and we've got the full project team working with the ops team right now as we will.
Enter through commissioning and then ultimately the handover.
As we get into Q1.
On the cost side, yes, there is inflationary pressure of obviously consumables will be going up so we've initiated a program.
<unk>.
Several months ago, where we're looking at how we can improve our group purchasing.
Leveraged towards trying to bring some.
Cost benefits, but also being being more proactive with our suppliers, ensuring that we're getting the quality and delivery.
Timing on deliveries so that is part of the overall thinking to make sure that we're taking that into account, we'll do everything we can to.
To ensure that the costs as we come on stream are as low as possible, but we do acknowledge that.
Obviously costs have been going up.
Okay got it and then maybe just lastly, let's.
Mercedes.
Is there any guidance that you can you guys are able to provide them the level of capital needed for the underground development program and how you're thinking about the level of spend there in relation to how the asset kind of fits in the portfolio.
While the.
Okay.
At Mercedes.
That's being done on owner mining teams.
We knew that eventually we needed to do the primary development to get into additional mining areas.
We brought in a contractor they've been set up.
Been doing development for I think.
About a month and a half now we're getting to the development levels, where they should be we know what we're bringing in mariana and rate of oral <unk>.
But thats going to be an ongoing ongoing thing so.
It's all about taking advantage of availability in the plant and being able to bring in additional mining areas. So we can fill it up because we can get more ounces out of it overall, rather than having an idle plant for a few days each month.
Okay got it that's it for me thank you.
Thanks Lee.
The next question comes from Mike Parkin with National Bank.
Please go ahead.
Hi, guys. Thanks for taking my questions, mostly just focused on greenstone can you remind us what percent of engineering is complete on that project.
It's 85% complete.
Okay, and then we've been hearing about some from other.
Here's a bit some labor tightness in Australia, and Canada with greenstone in Canada in Ontario, specifically with a lot of other activity on the mine development side going on in.
This province can you give any color in terms of what you are seeing you are at least you removed jurisdiction really a bit from.
Whereas some of the other activities focused but are you finding labor availability, both on workforce and contractors good.
But we already had a team in place that green.
Greenstone, that's the benefit of it wasn't just picking up a project that had a.
<unk> feasibility study it was an active team that just delivered the feasibility study and was ready and Raring to go so it's been a matter of augmenting their team.
<unk> added a lot of people very quickly.
And then also we have a salt and pepper arrangement with G mining where they are.
Putting in probably.
Yes.
30% to 40% of the overall team.
A team Thats already experienced with the project because they worked on the feasibility study on the engineering and.
I think overall health.
It helped us to be able to come up the curve in regards to staffing for the project.
Faster than if you had to do.
Build up your team from scratch, and then bringing the bcm contractor or something like that in regards to operations.
There are a couple of areas, where they're hunting very actively a lot of the key positions have already been filled there's a lot of interest in this project due to its location being.
Not too far of a drive from Thunder Bay and being in Northern Ontario, So they've had good interest overall in the project and we're doing our best obviously to bring in the local first nations and communities into the workforce train them up some of them of other experience thats related to forest you are mining.
And there is.
Some local contractors as well we are trying to engage as much as possible and so far I think we've had a pretty good experience.
There are certain key roles, maybe that are tougher to find at the moment, but generally it's been not too that I'd say, they're more on.
Ultimately going to be on ops side, but we have time for that versus project, where they have been filled.
Excellent thanks, very much guys.
Some patents and answered.
Thanks, Mike Thanks, Mike two questions from the webcast does your long term million ounce production target include greenstone and where could the portfolio peak out over the next five years with all your projects and exploration underway.
Yeah. The 1 million ounces does include greenstone. So that's why we sort of indicate probably call. It second half or later in 2024 run rate starts to hit that 1 million ounces on roughly a quarterly basis.
And it could peak out at a little bit higher than that sort of I think we have $1 1 million ounces in there of an estimate it could peak out a little bit higher depending on that.
Timeline of all these growth projects.
A couple of them might come down a little bit, but then we've got obviously a castle coming in a couple of years later as well, which is another 150000 ounces.
Can you talk a little bit higher.
One of our investors have been very impressed with mesquite step as it seems like the gift that keeps on giving can you foresee an expansion of operations from mystique, given the relative inexpensive production and exploration costs versus your other assets.
I think it's going to be a twofold answer here from my perspective, it's been really rewarding to see.
All the investment and the drilling that's been done over the last few years.
Keep progressively increased the resources there is a lot of work underway towards turning that into reserves.
We've obviously year on year, it's been adding into into the reserves and extending the life. What we wanted to do now trying to make a big jump on and show Big steps in how we're going to increase the reserves overall.
And I'm going to ask Scott Heffernan to make a few comments about exploration opportunities and potential there.
Yes, the exploration has been focused.
Inside the census, as we like to say growing the deposits brownie was it.
Particular.
The big driver behind that resource growth from that deposit continues to grow along strike and at depth.
And certainly when one looks at the gold price environment, we're in and there's much more opportunity.
Brownie as well as the two.
And Rainbow as well and then bigger picture you have the real Blue Sky, which is the distal strike extent, where.
Do you project across the highway and Blue.
Blue Sky for medium term five plus years down the road.
It's been a real real success story real turnaround story, we had the asset for three years.
When we bought it at least a three year mine life, we still have that three year mine life.
I have a couple of hundred million tonnes and measured indicated and inferred on the books now and the drills are still turning so pretty.
Pretty great story.
And another way to view R. R.
To look at our view of mosquitoes, we transitioned the mining fleet.
We put it in.
New more efficient mining fleet, and we did that because we can see the long term.
<unk> here.
That mine and clearly as it's produced.
Over the last three.
13 years.
35000 ounces, a year and we're looking forward to the $5 million 5 million pounds next year.
It's the gift that keeps giving.
Great minds.
One thing I don't I don't think we expect to really expand it in terms of higher production rates or anything I think it is probably going be more consistent.
It's a range from 100 to 140 to 50000 ounces and I think that's still consistent sort of range. It will we'll be working with it yeah. It has a tonnage per your.
Cap that we can deal with.
Keeping within that means that it makes for consistent production and that kind of 130, <unk> hundred 40000 ounce per year level.
We have no further questions numeric clothing into the one our remarks I will turn it back to Christian for closing remarks.
Well, thanks, everyone for joining in.
Again, another active quarter, we're really looking forward to the fourth quarter, and then sitting down with you after year end and.
This should be our best quarter ever in I think October is a great preview as mentioned by one of the callers 65000 ounces in one months as it is a heck of a months and so we're really looking forward to finishing this year strong.
Keep updating you on our growth projects, because Santa Lucia be in production in Q1, and greenstone is off often running now and we're seeing real activity on the ground. So stay tuned on that front. Thank you again for joining and we'll speak to you again soon thank you for joining US today operator, you can now disconnect the call.
Thank you. This concludes today's conference call you may disconnect your lines.
For participating and have a pleasant day.
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