Q4 2021 IAMGOLD Corp Earnings Call
Thank you for standing by this is the conference operator, welcome to the Aimco 2021 fourth quarter and full year operating and financial results conference call and webcast.
As a reminder, all participants are in listen only mode and the conference is being recorded.
After the presentation there'll be an opportunity to ask question.
Join the question queue, you May Press Star then one on your telephone keypad.
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At this time I would like to turn the conference over to Graeme Jennings VP Investor Relations and corporate communications for Ion Gold. Please go ahead Mr. Jennings.
Thank you operator, and welcome everyone to our conference call today.
Joining me on the call are Daniela Dimitrov, President Chief Financial Officer, and interim CEO .
Craig Macdougall executive Vice presidents growth.
No Lemelin senior Vice President operations and projects, Tim Bradburn, Senior Vice President General Counsel and corporate Secretary.
Our remarks on this call will include forward looking statements. Please refer to the cautionary statements included in the presentation under the heading cautionary statements regarding forward looking information and be advised that the same cautionary language applies to our remarks during the call non-GAAP measures will also be referenced on the call and we direct you to review the cautionary statements included in the presentation.
The reconciliations of these measures include in their most recent MD&A each under the heading non-GAAP financial measures.
With respect to the technical information to be discussed please refer to the information in the presentation under the heading qualified person and technical information.
Slides referenced on this call can be viewed on our website.
Now I will turn the call over to our president and interim CEO Daniela Demetrius.
Thank you Graham and good morning, everyone. Thank you for joining us.
The last 12 months has been a transformative period for the company as we reposition for the next chapter with New leadership, the advancement of Canada next tier one generational gold project Cotai golf.
N D assessment of opportunities to uncover value at existing operations.
A renewed leadership began at the beginning of 2021 when the board adopted new diversity and when you won't guideline.
With a view to ensuring an optimal mix and diversity of skills experience and expertise at the board level.
We had four new directors join us in 2020 , one followed in 2022 by the retirement of where it started as our CEO and director on charter as our chair Richard Hall, and Ron gauge all members of the board.
In addition, Tim Snider, one of our long standing director is not standing for reelection at our next AGM in May.
We would like to thank these individuals for their dedication and commitment to the company and wish them well.
In step with his departure, we announced the appointment of Murphy's belong shape as the director and the chair of our board as.
As long as the appointment of two new directors, David Smith, and Ian Ashby we.
We are pleased to welcome Buffy Dave.
David and Ian to Aimco.
Their combined knowledge perspectives and experiences will be invaluable to the company.
So that's very important phase in our evolution.
Leadership changes also came outside of the board what the year on the appointment of Jersey or the Koski Executive project director for coking coal.
Jersey assumed management of the project at the beginning of this year and he brings a wealth of experience in delivering large projects.
Adding significant horsepower to our project team.
Ensuring the delivery of Cotai gold is Keystone for bridging the value gap between our valuation today and potential value growth for the company Tomorrow.
Our search for a permanent CEO continues with our CEO search committee comprised of monies belonged shape, David Smith, and Kevin Okay with the support of a global search firm retained by the company in January .
We will start our review with health safety and sustainability.
I am golf continues to strive to achieve high standards in environmental social and governance practices, which are reflected in our long held at a zero harm vision.
This is our commitment to reach the highest standards in human help minimize our impact on the environment and work cooperatively with our host communities.
Ensuring all of our employees go home safe continues to be a key focus for the company last year.
Our dart frequency rate was 0.37 and the total recordable injury rate was 0.76 coming in below our global annual targets of 0.510 0.85, respectively.
At Coca Cola, we achieved another milestone with over $3 4 million hours without a lost time injury today.
We continuously assess opportunities for investing and partnering with local host communities near our operations at both Essakane and Rosebel, we established in our seating community funds.
At Rosebel, we have committed to make on the annual contribution off 0.25% of gold production to that turn them on environmental and mining Foundation. In addition to the existing 0.25% of annual revenues contributed to the Rosebel community fun.
So that's again, we continued our participation in the mining fun for local development.
I've also.
As well as advancing the public private partnership with the Canadian government, one drop foundation and cold water on the triangle Doe project to bring potable water to an additional 75000 people in the region.
We recognize that mining activities are energy intensive and generates significant greenhouse gas emissions.
In September we announced that we have set a global target of reaching that negative ghd admission by no later than 2050, and we plan to provide a more detailed roadmap and interim targets later this year.
We have and will continue to enhance our reporting under reporting frameworks by continuing to report under G. R I and FASB, which we did in 2021 and committing to also report under T. C. F D.
By the end of 2022 .
Our efforts are on track record on ESG matters.
Our well established and continue to be recognized and we are very very proud of the work of our teams.
And there's a critical area got contributes to value creation.
Turning to our operating highlights last year, we produced 601000 ounces of gold, which was at the upper end of our updated guidance targets announced in July .
If they can continue to be the engine of the company.
Reporting record annual annual attributable attributable production of 412000 ounces.
And exceeding our guidance range of 390 to 400000 ounces, which was raised mid year.
Rosebel produced 154000 ounces in 2020 one on an attributable basis also at the upper end of our updated guidance range of 140 to 160.
Earlier in January we announced spend your life of mine plan with a path to return the operation to an annual production rate of over 300000 ounces by 2025.
On a 100% basis.
With a need for increased capital investment in stripping and processing times improvement over the next few years.
At Westwood, we restarted operations on your ground midyear.
And we have seen steady improvement.
While ensuring a safe and secure restart.
2021 production was 35000 ounces coming in at the lower end of guidance of 35 to 45000 ounces.
The ramp up continues into 2020 two.
Cash costs came in at 11 32 announce an all in sustaining costs came in at four 1400 and $26 an ounce.
Which was in line with the updated guidance estimates.
Cash costs and all in sustaining costs were impacted by a $50 per ounce noncash net realizable value or NR be write down on.
On ore stockpiles and finished goods.
This write down primarily relates to Essakane and Rosebel and it was due to an increase in the estimated cost of processed ore stockpiles.
After adjusting for cost increases stockpile grades and gold price assumptions.
Looking forward to 2020 two.
We are forecasting production to be in the range of 570 to 640000 ounces.
Our Spokane is expected to continue its strong performance with attributable gold production of 360 to 385000 ounces.
Head grades are expected to normalize closer to reserve grades this year, which will be offset slightly by higher recoveries as mining moves into areas with lower graphic or content.
Rosebel attributable gold production is expected to be in the range of 155 to 180000 ounces.
With improvements expected in recoveries from the ongoing refurbishment initiative.
Mel complex, while stripping activities ramp up as outlined in our life of mine plan.
Which we will get into later.
Lastly, Westwood is expected to produce between 55 to 75000 ounces from the complex.
Assuming the safe restart of the central and West underground zone in the first half of 2022.
Part of the continued ramp up of underground mining activities coupled.
Coupled with increasing grade from the satellite Garn, Duke open pit.
Cash costs for the year are forecasted to be between 1100, and 1100 and $50 per ounce and all in sustaining costs are expected to be between 16, 50 and $60 90 per ounce.
Our cash cost guidance incorporates assumptions related to inflation.
As we are forecasting the cost of our main consumables, consisting of explosives cyanide lime and grinding media to be between 5% to 7% higher on average compared to 2021 pricing.
This translates to an approximate 1% to 2% increase in cash cost and has been incorporated in our cost guidance.
The increase in all in sustaining cost is primarily due to an increase in sustaining capital expenditures.
Resulting from a higher proportion of stripping costs classified as sustaining capital rather than expansion capital in alignment with World Gold Council guideline.
For example at <unk>.
Again, we are guiding towards total capital spend of 170 million of which a 165 million is classified as sustaining.
Primarily consisting of capitalized stripping.
Previously there was a higher proportion of stripping costs.
Classified as expansion capital the.
The end result is a higher all in sustaining cost trigger.
Yes.
There are minimal impact on net cash flow from the operation.
Turning to our financial the following are some key highlights of our fourth quarter and year end financial results.
Gold revenues in the fourth quarter totaled $294 6 million and 1.2 billion for the year with an average realized gold price of $17 90 per ounce.
Adjusted EBITDA came in at 90 million for the quarter and.
And 356 million for the year, excluding the noncash impairment charges at Rosebel and the N. R V write down on stockpiles in finished goods at Essakane and Rosebel.
This translated to adjusted net earnings of 43 point.
$44 3 million or nine cents per share in the fourth quarter.
And adjusted EPS for the year at six cents per share.
On an operations basis operating cash flow before changes in working capital was 76 million for the quarter.
And 293 million for the year.
Which after accounting for capital expenditures for extra development project translates into mine site free cash flow of $12 3 million in the fourth quarter, and almost 134 million in 2020 one.
In terms of our financial position, we ended the year with $545 million in cash and equivalents.
And $7 6 million and short term investments.
In addition, we had almost half a billion dollars available on our secured credit facility.
Which matures in January 2025.
Taken together with our cash balances resulted in total available liquidity.
$1 1 billion at the end of 2021 .
We started the year or what $941 million in cash and equivalents and this balance decreased by almost 400 million over the course of the year.
Cash generated from operations of 293 million was partially offset by an $8 million outflow from movements in noncash working capital items, including an increase in inventories of almost 37 million primarily related to higher stock stockpiles in finished goods inventory that Rosa.
Bell on Westwood.
This was offset by a decrease in receivables and an increase in accounts payable and accrued liabilities of almost $29 million.
Outflows from investing activities reflect net capital expenditures.
I'm, almost 625 million primarily related to Cotai gold construction.
And almost 7 million for other investing activities and capitalized borrowing costs, partially offset by the sale of a portfolio of royalty assets completed earlier in 2021.
Net cash used in financing activities.
The payment of lease obligations of almost 19 million dividend.
Dividends paid to minority interest repayment terms like what men Lawrence at our operations and the impact of FX fluctuations on cash.
We are scheduled to complete the remaining construction of Cotai during 2022 and 'twenty 'twenty three resulting in significant additional capital expenditures that together with sustaining and expansion capex at our existing mines.
Our expected it takes each total current cash and cash generated from operations.
The result, we expect to make the first draw down on our credit facility in the first half of 2022 and we expect the draw down most of this facility over the course of 2022 and 'twenty 'twenty three.
Assuming no significant changes in coach a gold cost and assuming the continuation of prevailing commodity prices and exchange rate <unk>.
And operations performing in accordance with our 2022 guidance and 2023 plan. We believe we should have adequate liquidity with our existing credit facility and the coating equipment at least as we previously disclosed to implement near term operational plans and complete the development of Cotai gold.
The strength of the Canadian dollar impact Cotai project costs as they are primarily included were incurred in Canadian dollars.
And we have put currency and fuel exposure hedges in place as part of our risk management during the construction period.
Updated information relating to our hedges is contained in the presentation.
In addition, during 2021 we entered into gold sale prepayment arrangements in respect of 150000 gold ounces.
With an average forward contract price of $17 53 per ounce on 50000 gold ounces.
All a range of 1700 to 'twenty 100 per ounce on 100000 ounces.
Which is being funded and up over the course of 2022 a $1700 an ounce.
This will result in a total prepayment of 236 million to be received over the course of 'twenty two.
And the requirement on our part to physically deliver 150000 gold ounces over the course of 'twenty 'twenty four.
The prepay arrangement has the effect of rolling the hundred and 50000 ounce Goldfield prepay arrangement that we entered into in 2019.
From 'twenty to 'twenty two to 'twenty 'twenty four.
After completion of the construction of cold take hold.
To illustrate how this is working for us on a monthly basis.
In January we received $2 $5 million in cash.
We delivered the first 12500 ounces of gold into the 2019 prepay.
And separately, we received $19 $7 million in cash under the 'twenty 'twenty to prepay.
And we're expecting a similar occurrences over the course of the rest of 2022 .
We will now walk through our operations in more detail.
The COVID-19 .
Pandemic continued to involve in the fourth quarter.
And in 2022 one remains a significant focus for us.
But as I can.
The management of COVID-19 remains stable, although we did see increased cases into 2022 .
Vaccination rates of our workforce, a 64% continued to be well above the country average which is under 4%.
The COVID-19 situation in Suriname, and at Rosebel started to stabilize and improve in the fourth quarter. However, the new one micron variant remains a concern in December and January 2022.
To give you an idea of of impact he says uncertain am in January where the highest recorded since the start of the pandemic.
Cases in country and at Rosebel are now declining and the government is moving towards normalization.
Vaccination rates at our site has increased with approximately 41% of our workforce fully vaccinated.
Which is really right in line with the country average of about 40%.
And Westwood.
The COVID-19 situation in the fourth quarter was stable, though we saw absenteeism in January .
Associated with a new variant.
About 77% of our workforce has reported that it is fully vaccinated.
Step up from previous reporting.
Likely due to federal and provincial mandates, having a positive effect.
On this statistic.
Through most of last year at Coty, we saw minimal impart due to COVID-19 at site and we talked about previously the protocols that we implemented including the regular testing of wastewater.
Starting in December with a rapid rise in cases in Ontario and in other provinces.
Oh Micron began to have an impact on project activities Covid outbreaks during the holidays and then January forced a slower re mobilization of the workforce sites.
Site staffing was approximately 60% of plan through a part of January with a large number of infections in various pockets of the workforce, including in the steel installation team and the earthworks team.
Site staffing has continued to ramp up since then and by mid February .
We returned to full plan rates of about 750 to 850 personnel.
We implemented a number of site restrictions and at this time, we expect such restrictions to be lifted by March one.
We introduced a mandatory vaccination policy in January and by February one 100% of the site personnel had at least one dose of vaccine.
And two doses are required under the policy by April one.
Yeah.
Moving on to Essakane.
That's I can't had a strong finish to the year producing 98000 ounces in the fourth quarter.
Translating to record attributable production of 412000 ounces for the year.
A notable achievement considering the challenges present in 2020 one.
During the year Essakane mine 60000, 60 million tonnes of material an increase year over year as a result of operational efficiencies.
And reduction of cycle times achieved from the modification to the hauling fleet.
The strip ratio of 2.8 in 2020 , one was higher by 12% than the prior period than the prior year. As a result of continued focus on stripping campaigns in the upper benches.
Mill throughput all of almost 13 million tonnes was modestly higher than 2020, yet with higher grades at 1.31 grams per tonne.
The improvement in capacity from the mill optimization project is really important is that they can manage the greater volumes of transition and hard rock versus the softer ore in the coming years.
Cash costs and all in sustaining cost of $8 95, and 10 74 were lower by 4% and 2% respectively, compared with 2020, primarily due to higher production and sales.
Partially offset by higher operating costs, including the N. R V right down noted previously.
All in sustaining costs sold also included higher sustaining capital expenditures of 51 million versus 37 million in 2020.
Last year, we reported on certain security incidents in Burkina followed by the military coup in January .
All of our personnel continues to be safe and associated supply chains have not been significantly impacted by the security situation or change in government.
The workforce has been increased to close to normal levels. Following a temporary reduction towards the end of 2021 .
We continue to monitor the situation as we assess returning control work with workforce capacity towards the end of the first quarter.
Additional investments in infrastructure in the region and at the mine site are being made for further strengthened security measures.
While we continue to engage with relevant authorities and other partners in Burkina in relation to security in the region, including supplies and transportation routes.
These measures and investments are captured in our cost guidance presented earlier.
Production in 2022 is expected to be between 360 to 385000 ounces.
Relatively steady over the year.
We have moved into the execution phase of our I am all in operational improvement program focused on executing on opportunities to increase melon mine productivity.
Our workforce is very engaged in this program with several initiatives underway, including in the area of equipment maintenance to improve availability rates mill recoveries and inventory management.
This is a program we will be rolling out to Rosebel next.
Turning to Rosebel 2021 presented numerous challenges which have been described in our continuous disclosure documents.
The operation reported attributable production of 154000 ounces, which is 27% decline from 2020.
Fourth quarter production of 42000 ounces demonstrated quarterly improvements as ground conditions dried up and productivity initiatives were launched in the latter part of the year.
Mill throughput up $2 4 million tons was down 8% compared with the prior quarter due to the maintenance related work and improvements in the ADR circuit, which were nearly complete at the end of the year.
Recoveries of 86% improved quarter over quarter.
As a result of higher grades of 0.78 grams per tonne in the fourth quarter.
And we expect to see a continued work on recoveries into 2022 as a result of these improvements.
I can share with you that in the first two months of the year, we have averaged 90% recovery.
Cash cost of 15, 33, and all in sustaining cost of $18 59 per ounce sold were 48% and 52%.
Higher respectively than in 2020.
Due to a lower annual production and sales as well as the noncash and RV write down.
Whichever way that almost $120 per ounce sold at Rosebel.
This year Rosebel is expected to produce 155 to 180000 of attributable gold ounces weighted for the second half of the year following the rainy season.
Mill refurbishment improved sequencing increased stripping under their new life of mine plan are expected to improve operating performance compared to 2021 .
In response to the challenges at Rosebel, we conducted an assessment, culminating in an updated mineral resource and reserve estimate and a corresponding updated life of mine plan prepared on partnership with external third party engineering firms F. R. K consulting and double U S P, Canada, which we.
We're released on January 12.
The updated Rosebel mine plan outlines a path to ramp back up to an estimated 300000 ounces per year.
By 2025.
On a 100% basis.
The mine plan was based on revised geological models, incorporating drilling results over the last two years accounting for cost increases the operation has experienced.
And incorporating parent capital allocation of the company.
Two of the key priorities for Rosebel.
The stripping and mill capacity to treat hard rock costs.
Considerable stripping is required to access deeper higher grade ore in existing pits at rosebel, resulting in the necessity for a material capital outlay in the next five years.
Our capacity for the mill could deal what the rosebel or ore hardness.
Could be alleviated by the replacement and expansion of two crushers at a cost estimated in 2021 of approximately 30 million.
Which capital has been built into the updated mine plan.
We are looking to start allocating capital towards this improvement.
Starting in the fourth quarter of 2022, and this has been incorporated in our guidance.
The investment into the stripping.
It's proceeding forming the basis for the increase in production guidance.
With $140 million in capital allocated to this operation in 2022 of which $105 million of sustaining.
With the majority of that being allocated to capital stripping.
Turning to Westwood gold production of 35000 ounces was 56% lower than in 2020.
Due to the underground operations being under care and maintenance for the first half of 2021 .
Q4 production was 13000 ounces or 86% higher than in the prior quarter.
Benefiting from higher underground grades coupled with an increase in the grade of material sourced from Grand Duke.
Although underground mine productivity is improving the pace of the ramp up remains cautious as we continue to prioritize the implementation of enhanced ground support and additional safety measures.
Coupled with ongoing training to increase productivity rates.
Gold production at the Westwood complex is expected to be in the range of 55 to 75000 ounces in 2022, and this assumes the safe restart of the central and West underground zones.
In the first half of 2022 .
Production levels are expected to progressively increase quarter over quarter benefiting from higher grade underground ore.
Turning to coated.
2021 was the first full year of construction of what will be I am Gold's Keystone asset.
Project completion was 43% at the end of December 2021 and detailed engineering is now nearing 100% completion.
What plants are on concrete deliverables principally complete.
In the fourth quarter, we expand at $147 million in line with previous guidance bring.
Bringing their total spend in 2021 to 359 million and total incurred cost to $412 million.
With a balance between spend and incurred costs relating to timing of payments and working capital items.
Key activities over the fourth quarter and into January are all well described on slide 19, and in our M. D N a.
We have seen productivity for earthworks lagging targets and mitigation plans are in place and continue.
Equipment delivery is ongoing and inventory on site continues to increase.
Major components of the ball now such as motor Chillers and shells have started shipping.
We continue to closely monitor global logistic risk.
And at this time, we are not expecting material impact although challenges in our global supply chain continue to persist.
As discussed earlier, the Covid outbreaks. It at the end of December and into January or a slower re mobilization of the workforce and absenteeism on the first part of January was high.
This impacted the clotting process of the processing plant building, which lagged in January and February although it is more than 50% complete as you can see from the pictures.
We have put in place mitigation measures to ensure that the clotting is no longer on the critical path and we are now optimizing for the mechanical erection access state.
The focus is on driving the start of the concrete works inside the building for mechanical erection can commence in the second quarter.
We will complete the building clotting when appropriate resources are available and the logistics do not interfere with our critical path work inside the building.
We have highlighted the key remaining targeted milestones on slide 21, which included the initiation of a processing plant equipment installations that I have just discussed.
The Cotai project continues to be on track for commercial production in the second half of 2023.
This estimate assumes no further disruption caused by COVID-19 and related impact on the timing of activities avail.
Availability of workforce productivity and supply chain and logistics.
And consequently, we do caution that further disruption could impact the timing of actual commercial production.
Our previously disclosed estimate of remaining cost to completion net of leases from January one 2022 onwards was approximately $710 million to $760 million.
And as of January 31, our estimated cost to completion continues to be in this range.
However.
Inflationary and other cost pressures have been identified impacting Earth works execution.
Electrical and instrumentation components operation spare parts and consumables trade cost indirect cost and a P. C M services.
This has put pressure on the budget with project cost curve trending upwards above the high end of the range of the previous estimate.
Our contingency has decreased from $85 million last July to 25 million going into March forming a trend that we were flagging today.
Trend reports continue to be updated and refined weekly.
With the appointment of the New Executive project director.
And as a result of the circumstances, we discussed the project team is in the process of evaluating these impact.
Completing a risk analysis of the cost and schedule.
In step with this assessment. The team is also evaluating potential off say offsetting mitigation and or optimization opportunities in various areas, including earthworks processing. The life of mine plan and operations during initial ramp up.
This evaluation may resolve in a potential cost and schedule re baseline, which may include an increase in cost to completion.
This assessment has commenced and we intend to provide an update before the end of the second quarter.
I know we got the first question on this matter would be what range are we expecting.
And the answer is it is too early to quantify at this time.
The evaluation involves over 50 personnel from our own team and the E. P. C M and it is complex.
In terms of schedule at this time, we are not seeing anything material around the corner that could result in initial production not being achieved in the second half of 2023.
Our Board management Executive project director and all of the Cotai teams are focused on ensuring culture is.
Is the broad across the finish line on schedule and as close to the cost guidance as possible.
Taken together I am gold is at a critical junction juncture at Cotai.
This is a project that is by all definition of transformative asset for the company.
He is a generational asset with average production of nearly <unk>.
500000 ounces on a 100% basis.
In the first five years.
All in sustaining costs of below $800 in the first five years.
And an initial mine life of 18 years based on current reserves of $7 2 million ounces.
With another $6 4 million in measured and indicated.
In addition, we believe we are still in the early innings of uncovering the full potential of Coty.
We announced in October an initial resource at Gosselin deposit, which is located immediately adjacent to the coach a pet.
And we reported an initial resource of $3 4 million ounces of indicated and one 7 million ounces of inferred.
Gosh, one remains open in a number of direction and has only been drilled to have the depth of cotai.
We do have a lot more work to do to bring goslin into a conceptual mine plan and are excited about the potential.
To extend out higher grade period of quota beyond the first five years.
After year end, we released additional drill results, which compare well with predicted grades from the resource block model and in some cases have extended the mineralization outside of the reason why the boundaries of the mineralization model.
Our planned drilling program in 2022 we'll target areas with potential for resource expansion.
Colton Gosselins are located in a large land package of over 540 square kilometers.
This is a massive gold bearing system and we're confident in the potential for additional discoveries in that region.
There is no doubt that high quality Canadian assets once clarity predictability and stability has demonstrated trade at a premium in this market and we believe kotte as annex such Canadian asset.
Thank you to everyone for joining us today I will now pass the call back over to the operator for Q&A.
Thank you.
We will now begin the question and answer session.
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Our first question is from Carey <unk> with Canaccord Genuity. Please go ahead.
Hey, good morning, just wondering if you could.
Color on what you're looking at in terms of potentially adding more liquidity to the balance sheet I'm, just noting that she has seemed to be against that hotels are those still something you're considering.
Thanks.
Thanks for for the question, we as we know what our capital allocation for the company continues to be a key priority of ensuring that we allocate capital to generate the highest return on.
Uninvested capital.
As we are as we noted in our MD&A and press release, assuming no significant change in in the Cotai gold cost and and a continuation of of a prevailing commodity prices and our operations performing.
We are we believe we should have adequate liquidity. We've also noted that we continuously assess our liquidity and our operational performance are the continuation of the development of the Cotai project and capital markets and that we may take measures to increase our liquidity.
At this time, we don't know the outcome of this evaluation.
And we will provide more information by the end of the second quarter.
Great great. Thank you.
Our next question is from Fahad Tariq with credit Suisse. Please go ahead.
Hi, Good morning, Thanks for taking my question just a follow up on the liquidity can you touch on the gold price assumption that's baked into.
The quick liquidity comment you made.
Our our our budgets are price back for 2022 is 17 hundreds.
Okay and could you share what it is for next year or is it the same 1700 1700.
Okay.
Okay and then my second question just on the coated costs I appreciate that you can't comment too much on it but.
But could you just tell us like high level Mike.
Given the detailed engineering is 92% complete our procurement is 87% complete 79% of the contracts have been awarded whereas the surprise factor coming from in terms of.
At least the uncertainty around the overall costs remaining costs things.
So a portion of the remaining costs that that we have left to spend or in a sense fixed so to give you. An example, the autonomous vehicle fleet or the autonomous drills.
We entered into those commitments.
And in a in 2021 and and those costs are relatively fixed we havent expanded those costs, because we will start to do that in 2022.
And and and so there was there's no risk around all components of the remaining cost left to be spent.
A big component of the remaining costs relates to actual construction.
And the impact Ah Ah Ah Ah Ah different productivity rates than what was be assumed in the plan would have one impact on the remaining costs to be in card.
As a number of the of the contract such as the Earth works for example, or time and materials contracts.
<unk>, rather than a fixed or fixed price contracts.
That's helpful. That's it for me thank you.
The next question is from Jackie first blow ski with BMO capital markets. Please go ahead.
Good morning, Jackie. Thank you good morning, Daniela I'm going to start with a really quick one if you don't mind, you you'd mentioned I think in the MD&A that's it.
The building is no longer critical path I think you mentioned that earlier, what what is the critical path. Maybe can you just talk a little bit about.
Where where do you see the bottleneck at this point.
Yeah. So the the the cladding of the processing building was on the critical path as a result of the necessity to actually do work inside the building.
Including our concrete work to actually get to what is really on a critical path, which is the <unk>.
Hum the mechanical erection of of the necessary equipment and inside the building. So we were at about 32% a completion on the clotting at yearend and and that progressed, you know into January and February or but about where over.
50% of the building clotted, however, as a result, particularly of our contractor that is responsible for or.
Putting off the the steel crowding on the building really being negatively impacted by Covid.
In January and actually continuing into February are weak.
We've pivoted and have made arrangements to be able to actually work inside the building.
And progress what is what is really on the critical path, which is a which is that that the ability to progress with with ultimately the mechanical erection installation inside the building and so.
As a result of our focusing on on that and and on those logistics. The clotting is going to be completed.
At a time and and what resources and more importantly to not impact the logistics of what was actually what happened in the building. We expect that we will complete the clotting into into the second quarter.
And and at the moment, we're really focused on what's happening inside the building.
Great and my second question I'm, sorry is a little bit of a compound question I think but can you can you comment on the timing I really just risk analysis that is necessary to do to make sure that you have appropriate.
Appropriate budget, but the timing just seemed a little bit funny to me given you're you're currently undergoing a CEO search and you've got a pretty big push for board renewal going on can you talk about how the.
Risk analysis would coincide with the new CEO coming on board and if you would envision any kind of.
Further changes or if the new CEO might have some ability to do.
Influences before it's completed.
The risk analysis started at the beginning of January and as is well known.
It's driven by a number of key factors one was just the overall impact on.
Well, it's happening on flight in and what the workforce and that impact.
And the second factor is is really does that.
The start you know New York is I get a project director with a Jersey.
On onboard them.
Got it.
<unk> dot risk analysis of cost and schedule that we talked about also includes opportunities for for mitigation and optimization in and we're really looking at.
The next 36 months and are in the life of the project through completion of construction and into the into the ramp up to look for.
Offsetting mitigation opportunities are two in the evaluation of doing this assessment or our new directors have been and are in the process of being oriented. We spent some time you know last weekend and into this week doing got it and that will continue.
I don't expect the timing.
The completion of this assessment.
To really be delayed them on on that in a sense that that project is moving and and and it's got to move forward and we've got a you know we've got to manage the schedule on the cost line on that front.
Makes sense, thanks, very much that's all my questions. Thanks Danielle.
Thanks Duffy.
Once again, if you have a question. Please press Star then one.
Our next question is from Josh Wolfson with RBC capital markets. Please go ahead.
Hi, Josh.
Hi, just a couple of questions on the on our financing outlook.
So first off in terms of the debt and the expectation to be able to draw down in the first half of this year is it safe to say that the that that assumption is based on and the requirement to drawdown is based on the company being fully funded to completion based on the most up to date capital.
Estimate.
So we we've we've been having discussions with without our the financial institutions in our lending syndicate for for some time and we've been indicating I think from certainly the third or fourth quarter of last year that we expect their drawdown.
Under the facility in the first half of 'twenty.
22, we have also indicated previously that.
We intend to maintain a minimum cash balance of at least 200 million in times that minimum cash balance might be higher we do have.
Certain cash management.
Requirements, particularly in relation to our prepay. So for example, we deliver.
The gold ounces under the 2019 prepay at the beginning of the month and then we receive payment under the 2020 to prepay closer to the end of the month.
And then with respect to the hedges that we put in place for our risk management strategy.
Some of our hedges, we've got a growth at all rather than not at all and therefore that impacts our cash balance them on on that.
Our credit facilities are secured credit facility.
I'm going to say it is fairly common unfriendly, we've got two financial covenants in that debt to EBITDA of three and a half times and an interest coverage ratio, which is a which is a.
That is the one that we're not concerned about in the calculation of the net debt to EBITDA financial Covenant the Prepays.
Do not count as debt, although I certainly treat them as does that since we've got to pay them back.
However for the purposes of that net debt to EBITDA calculation, they they do not count them. So.
But that obviously helps us manage the covenants going forward I'm not sure if I've answered your question.
Partially.
So I guess I'm trying to more directly ask you in the event that the capital estimate changes.
And there is a funding shortfall are you still able to draw down on the credit line.
Yeah. The the credit facility is not isn't like project, they're driven or a construction driven.
And the the draw down or.
Or not.
You know, we do not expect the dropdowns to be impacted by.
By our capital or liquidity shortage on on that front and we do have.
We do have headroom in our financial covenant to lets say assume additional debt.
If.
We do need additional capital and we determine to paint out additional capital in the form of debt.
Okay and then.
Maybe last question when Youre looking at the available options in the event that liquidity as required Oh beyond asset dispositions of which there's a number of opportunities that might be out there.
Is the company considering or would you consider more hedging or gold forwards are in place or is that.
The upper end.
The limit at this point.
We we do have some restrictions on that credit facility with respect to the volume of ounces that we can sell forward under a prepay arrangement, we are not at that headroom yet what the 150000 ounces that we have I heard that to prepay or arrangements that were jogger.
Thank you.
And we do have the capacity.
Under our various instruments to do additional hedging.
Of of of gold.
Thank you very much.
This concludes the question and answer session I'll now hand, the call back over to Graeme Jennings for closing remarks.
Thank you very much operator, and thanks to everyone for joining us this morning and for your continued engagement with island gold.
To have you join US again for our first quarter results conference call and Goodbye.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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