Q1 2022 Alamos Gold Inc Earnings Call
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This conference is being recorded so it's close to the house at all or is this thing.
Please standby your meeting is about to begin.
Good morning.
I'd like to turn the meeting over to Mr. Jamie Porter Chief Financial Officer. Please go ahead.
Thank you operator, and thank you to everyone for attending Alamos first quarter 2022 Conference call. In addition to myself, we Havent built line today, both John Mccluskey, our president and CEO and Peter Macphail, Chief operating officer, we will be referring to a presentation. During the conference call. It is available through the webcast and on our website I would also like to remind everyone that our presentation will be followed by a question.
A question and answer session.
As we will be making forward looking statements during the call. Please refer to the cautionary notes included in the presentation news release and MD&A as well as the risk factors set out in our annual information form technical information. This presentation has been reviewed and approved by Chris Bostwick, Our senior Vice President of technical services and a qualified person.
Also please bear in mind that all the dollar amounts mentioned in this conference call are in U S dollars unless otherwise noted now I'll turn it over to John to provide you with an overview of the quarter.
Thank you very much Jamie and a very good morning to everyone.
Yeah.
So let's start with slide three.
We produced 99000 ounces of gold in the first quarter in line with guidance Young Davidson had another solid quarter with average mining rates exceeding the designed rate offsetting planned lower production from a lot of us.
That's what production our costs were consistent with first quarter guidance and both are expected to improve through the year.
We expect higher grades from island gold to contribute to stronger production in the second quarter and La Yaqui Grande to drive a more significant increase in production and decrease in cost in the second half of the year.
We remain well positioned to meet our full year guidance and with higher production lower costs and lower capital spending we expect to transition to positive free cash flow in the second half of 2020 two.
Now turning to slide four.
We are advancing our growth initiatives and expected to deliver on several significant catalysts starting in the middle of 2022.
At Island Gold, we achieved key permitting milestones with the approval of the closure plan Amendment in March, allowing us to ramp up construction activities on the phase III expansion.
We held a groundbreaking ceremony earlier in April with key stakeholders, including the federal member Parliament, the provincial Minister of Northern development of mines, the minister of energy.
And digital partners and municipal Representatives.
As we ramp up construction activities. We are also working on an optimized mine plan to be released mid year.
Given the 37% increase in mineral reserves and resources since the phase III expansion study was completed in 2020.
Including higher grade additions in proximity to the client shaft, we expect the new mine plan highlight a significantly more valuable operation.
Within the <unk> district, La Yaqui Grande construction is more than 90% completed and we expect to start stacking and leaching ore in June with.
With initial production expected in the third quarter, La Yaqui Grande will transform them of laterals district, bringing higher production and significantly lower costs.
Finally at Lynn Lake, we continue to advance permitting and expect approval for the environmental impact statement in the second half of this year.
Now moving to slide five.
These catalysts are key components of our strong long term outlook, we expect Lee Aki Grande and higher grades at island gold to drive our production closer to 500000 ounces per year over the next few years with all in sustaining costs decreasing 18% to approximately $1000 per ounce by 2012.
Four.
Following the completion of the phase III expansion at island gold and with the development of Lynn Lake, we have the capacity to increase our production by 65% to approximately 750000 ounces of gold per year.
At 30% lower all in sustaining costs of $800 per ounce.
We also have additional upside opportunities through the updated phase III mine plan at island gold as well as with the development of the new higher grade PDA underground deposit up a lot of which we will be detailing later this year.
We have a number of attractive growth opportunities and we control the pace of development.
Island Gold is one of the highest grade and lowest cost mines in Canada, and our most attractive growth asset.
As our highest return lowest risk investment, we will continue to prioritize allocating capital to the expansion at island gold.
With our strong balance sheet and free cash flow generation returning to the second in the second half of 2020 two.
We can fund this growth internally, while providing ongoing returns to shareholders through our dividend and share buybacks.
I'll now turn the call over to our CFO , Jamie Porter to review our financial performance. Thank.
Thank you John .
Moving on to slide six we sold 98500 ounces of gold at a realized price of $1874 per ounce for revenues of $185 million in the quarter as expected total cash cost of $992 per ounce and all in sustaining costs of $1360 per ounce were higher than our full year guidance driven by lower grades at <unk>.
Island Gold and the continued processing of stockpiles or are a lot of we expect similar costs in the second quarter and again as previously guided significantly lower costs in the second half of the year with the start of production from La Yaqui Grande.
We continue to see inflation across many of our input costs, including diesel cyanide steel and labor. We are actively mitigated this impact through various means including hedging and long term contracts. We took an active approach to hedging early in the year hedging the majority of our Canadian dollar exposure for 2022 as well as our diesel exposure at our Canadian.
We are also less exposed to input costs, such as diesel given that our Canadian operations, our underground mines that are connected to grid power.
Operating cash flow before changes in noncash working capital was $71 million or <unk> 18 per share in the first quarter, we reported a net loss of $9 million for the first quarter, which included a noncash after tax impairment charge of 27 million triggered by the sale of the noncore Esperanza project.
Unrealized foreign exchange gains of $6 million, which will recorded within deferred taxes, and foreign exchange and other losses of $6 million.
Excluding these items, our adjusted net earnings were $18 million or five cents per share.
In February we announced the sale of the Esperanza project that could take US Silver Corp. For total consideration of up to $60 million from an accounting perspective, the fair value of the consideration received was less than the carrying value of Esperanza, resulting in a noncash impairment charge of 27 million after tax.
Capital spending totaled $87 million in the first quarter, including 23 million of sustaining capital and $59 million of growth capital and $6 million of capitalized exploration, we expect capital spending to increase in the second quarter as spending on the phase III expansion at island gold ramps up and then to trend lower in the second half of the year. Following completion of construction of La Yaqui Grande.
<unk>.
Free cash flow in the quarter was negative $41 million, primarily driven by capital spending on La Yaqui Grande and planned lower gold sales, we expect to return to positive free cash flow in the second half of 2022 with a start up low cost production from La Yaqui Grande and lower growth capital spending with its construction complete.
We continued to return capital to shareholders through our quarterly dividend of 10 million or <unk> 10 per share or an annualized basis and with recent weakness in the share price, we expect to be more aggressive with respect to our share buyback.
We remain debt free and ended the quarter with $124 million in cash $22 million of equity securities and $500 million of Undrawn credit capacity, we remain well positioned to fund our internal growth projects, while supporting ongoing returns to shareholders.
I will now turn the call over to our Chief operating officer, Peter Macphail to provide an overview of our operations.
Thank you Jamie.
Moving to slide seven we had another excellent quarter at young Davidson, producing 51900 ounces degenerative mine site free cash flow of $23 million.
Average mining rates of 8200 tonnes per day exceeded design rates of 8000 tonnes per day for the third consecutive quarter.
Mill throughput increased to average a record of 8200 tonnes per day with grades mined and milled at the top end of guidance.
Total cash costs of $840 per ounce and mine site all in sustaining costs of $1044 per ounce were both below our guidance driven by higher grades and the strong operating performance.
With the solid start to the year young Davidson remains well on track to meet its full year production and cost guidance.
Over to slide eight island gold produced 24005 hundred ounces of gold.
Cash costs of $745 per ounce and mine site all in sustaining costs of $1083 per ounce production and costs were impacted by lower mill throughput planned lower grades reflecting mine sequencing.
The lower mill throughput up 1100, and 20 tons per day was driven by colder than colder than average conditions in January and February which resulted in all four handling ore handling issues on the on surface, primarily with freezing in New Orleans.
With planned higher grades through the rest of the year, we expect stronger production and lower costs and remain on track to achieve our full year guidance.
Over to slide nine the approval of the closure plan Amendment for island gold in March with a key permitting milestones, allowing for the ramp up of construction activities at the phase III expansion.
Earlier this month, we officially broke ground on the expansion and look forward to starting on the precinct of the shaft in July .
We're also working on an updated mine plan to be released in mid year, which will incorporate the $1 4 million increase in high grade reserves and resources since the phase III expansion study was completed in 2020.
This will also incorporate the higher grade additions.
In island East sooner.
With a larger reserve and resource base and higher production earlier in the mine life, we expect the value of island gold will continue to grow.
Moving to slide 10, <unk> produced 22005 hundred ounces in the first quarter at total cash costs and mine site all in sustaining costs, but 1500 71782.
<unk> per ounce, respectively, which was consistent with our first half guidance for the operation.
And costs are expected to remain at similar level similar levels for the second quarter before production ramps up and costs decreased in the second half of the year as La Yaqui Grande It comes online.
As previously guided we expect approximately 65% of <unk> full year production to come in the second half of the year at substantially lower costs.
Moving to slide 11 construction of La Yaqui Grande is now 90% complete and the operation remains on schedule to achieve commercial production in the third quarter of this year and the.
The first quarter. The primary crusher was commissioned the secondary tertiary crushers are being commissioned as we speak.
Elaboration system and pond construction are complete and the heap leach pad carbon columns in ADR plant or over 90% complete.
816000 ounces of.
Our goals have been mined we expect to be stacking and leaching or starting in June with production ramping up through the second half of this year.
<unk> Grande is expected to significantly improve the production cost profiles in the Whitehouse and drive strong free cash flow from the operation starting in the third quarter.
With that I'll turn the call back to John .
Thank you Peter.
That concludes our formal presentation and I'll now turn the call back to the operator and open it for your calls and questions.
Thank you.
And I'll take questions from the telephone line. If you have a question on using a speaker phone.
Handset before making your selection.
Have a question. Please press star one on your devices keypad to cancel my questions. Please press star two.
At this time, if you have a question there will be a brief pause participants register thank you for your patience.
And your first question is from temperature involved from Scotiabank. Please go ahead.
Yeah. Thanks, I guess, the first question probably for Peter I was just curious with the really high performance of throughput at young Davidson are you bumping up against any permitting restrictions or do you have plenty of room to go beyond 3000 tonnes a day.
Yeah, we've got lots of room, there Trevor we in fact, I think we're permitted to go well beyond there are at least 10000.
<unk> tons, a day, but you know we don't have necessarily the.
Infrastructure to do that but the permitting is not it's not going to be an issue there.
Okay. Yeah, I just wasn't expecting you guys to be so much above 8000, but it sounds like things are going really well, but we need to be we need to be above 8000 for the times that were you know below 8000, well will average [laughter].
No I understand.
And then maybe another question for you just with La Yaqui Grande getting set to start stacking can you remind us a bit about the timing of the leach cycle is it relatively fast such that the.
Stacked ounces are gonna correspond fairly well with what you recover in the same period.
Yeah, I could Grande is much like la Yaqui in which is high recovery.
Fast bleaching buggy silver oxide ore. So it's the best stuff that we've ever seen in the mulatto system. So yeah, it's going to be good.
Okay.
And then the last question I had just with respect to Turkey, and the investment Treaty claim that's out.
Outstanding I was just wondering does that preclude you from looking at any other options for the property such as sale or partnership or you're kind of locked in now to the investment treaty claim.
This is John Trevor note that doesn't preclude us in any way.
And is there any update you can give us just on on Turkey kind of where where things are at.
There's nothing really to report just going through the process.
Okay I appreciate it that's all I have thank you.
Thank you.
The next question is from Cosmos <unk> from CIBC. Please go ahead.
Hi, Thanks, John Jamie and Peter.
Maybe my first question is on inflation, you know Jamie it's good to hear that you've hedged a lot of the input cost, but I guess, one input cost you cannot really hedge as labor could you maybe talk about the labor situation and our inflation in cost of labor in Canada.
Sure Cosmos, yes, no. So when we set our budget for 2022 I think are our average salary increase in Mexico was between five and 6% and then.
In Canada for our Northern Ontario operations was about three 5%. So that's a that's pretty consistent with what with market, though we are seeing upward pressure and I wouldn't be surprised if we see labor rates going beyond that when we go to set our 2023 budget.
Yeah and that leads well into my next question, Jamie can you remind us what kind of inflation assumption overall did you factor into 'twenty.
2022 our cost guidance and is that still what you know consistent with what you've seen so far in Q O Q1.
Yeah. So we are we assumed a 5% across the board inflation increase that that's what the inherent in our cost guidance and you know as we indicated in our MD&A and press release, we don't see the need at this point to revise our cost guidance upwards.
[noise] fortunate that we hedged the majority of our Canadian dollar exposure, we've hedged our Canadian diesel exposure at rates, you know, 45% below current spot. So that's benefiting us for for for 2022, and I think we're in pretty good shape, we will see inflationary impact again is as we look into 2023 and beyond.
Of course.
Maybe switching gears, a little bit on Lynn Lake.
Good to hear that you are moving ahead with it you know and hopefully you get the permitting done.
E I E approval U S approval later on this year.
But I see that you know the law.
Last feasibility study was done in 2017, so could you maybe talk about that.
Yes.
And then the next step is for the approval of the quick construction kind of approval, but would you need to update your feasibility study first are you planning to before you make that final step in terms of approving it for construction.
Yes, that's absolutely the plan Cosmos. So we're hoping that the permitting will come in later this year at which point, we will be releasing an updated technical report feasibility study that will will provide a detailed capital and operating cost estimates and in today's dollars, but as John mentioned in in.
In his comments our priority from a capital allocation perspective as island gold. So that's where our first capital will go Theres no doubt that the Lynn Lake capital costs will be higher than what it was in December 2017 that said, we have expanded the deposit quite significantly and we think it's a it's going to be a very.
You know a good project, but island in phase III.
And beyond is really the priority.
Of course, and then and then to follow up on that.
How much you can tell me, but if I look at the 2017 feasibility study. It returned a 21, 5% IRR is that still sort of feasible in today's environment is that still what youre looking for.
Is that what you have in mind.
So we're targeting north of 15% IRR and then again that 2017 feasibility study was based on a mine plan that had one 6 million ounces were up to $2 1 million ounces in reserves currently and we see the potential for a conversion of at least another three or 400000 ounces. So the debt.
That's a positive and as expanded considerably and that will support the higher capital and higher operating costs.
Okay, and maybe one last question on this jamey, if I walk through the timeline here I mean, you know understanding appreciating that as you said capital allocation goes to island gold worst, but there might be a possibility.
Things kind of lined up you know you might need to construct Lynn Lake and island gold at the same time is that something that's a possibility is that something that you're considering although as you said you know for sure Island Gold's Sorta comes first cosmos. The likelihood this is John that the likelihood of that scenario.
It's very very slim just based on the process that we're going through right now in Manitoba are we done.
Not really foresee that at all and keep in mind that our you know where we're at.
Not a were not an oil tanker, we're more of a speedboat and.
We can control our our rate of spend in our rate of development.
As we see fit and if we were to perceive there being too much stress.
In an attempt to try to construct two projects at once but just wouldn't do that.
We clearly have the auction of staggering those projects to some extent you know maybe get a couple of years of development at.
At Island Gold finish before say, we'd started Lynn Lake that's very much an option, but keep in mind you know.
This company is built as many as three projects at once and we were doing them the big expansion that.
At young Davidson and an expansion at island gold and building.
Cerro Polone all at the same time I'm just worked out it very quietly nobody seemed to have any any concerns about it spend.
We spent the capital and brought everything on time and on budget and continued on so if there was any concern about the company having the say the.
The management capacity behind that handle a two projects same type of I would say that that's not something we're really concerned with it would be more a question of of capital allocation and how we want to approach it that way.
And given the market environment.
At the time.
Thanks, John I don't know if you still have all that here.
Now I have this picture in my head up you on a speed boat. So I'm, just just putting out there for the audience as well so.
Thanks, John .
Thank thank you cosmos.
Thank you. The next question is from Sohrab <unk> from Credit Suisse. Please go ahead.
Hi, Thanks for taking my question just on the island Gold Phase III expansion study.
Is it right way to think about this obviously it'll include higher grade reserves that were not previously factored in but at the same time, you probably will see them higher.
Assumptions for some of the cost elements I'm, just trying to understand like.
Do you think kind of offset each other.
Any thoughts there would be helpful.
I would just say this one thing that I know theres a lot of focus on inflation right now it's a it's very very topical but with a project like island gold and the way it's evolved.
It absolutely required us to look at it and update it and we.
We announced phase III two years ago.
Surprising.
How much has changed over the course of about two years, but the biggest thing that has changed.
Is the significant increase in reserves and those reserves are higher grade reserves and naturally youre going to look at revising the mine plan to bring that high grade reserve forward and at the same time.
You really should look and we are looking at a change in scope rather than refurbishing. The old mill you know what would it look like for example, if we built.
New mill say 2400 tons a day, while effectively what happens is the economies of scale.
They come into play and there there is so significant in terms of their their enriching the profitability of the projects that being more than offset the inflation component.
So from that point of view Island gold is one of those very unique.
Businesses that that you see from time to time in the mining industry that can really.
Just by virtue of the fact that it's very high grade and its.
It's really relatively straightforward to mine and mill.
Putting all those things together that that project is going to be the last one you would worry about it.
It's more than likely that when we come out with the economics.
The increased scope for that project that we're that we're looking at right now.
It's going to have to more than offset any.
Any inflationary costs and I think it will.
That's really helpful. Thank you and then just.
Switching gears to them a lot too I know Q3 is what everyone's kind of waiting for but before then is there any opportunity to.
Include the production in Q2 or not or not really.
It kind of set us apart profile, yes.
Yes.
Peter here right and it's it's a it's a long leach cycle when the big heap leached.
The facility at <unk>.
At mulatto so it's.
We're currently stacking.
Or we did stack through Q1, a fair bit of sulfate a car, which is slower leaching. We are currently transitioning to more.
Two more fresh ore from the from them lots of pit.
That will continue over the course of Q2 and through the rest of the year and for the four four and well into next year. So we'll start to see that but it's a it's like a it's almost like a quarter behind in terms of when you see that gold coming off the pad. So it really won't impact us too much in Q2, but two things that happened for the rest of the year.
Is that are we bring on la Yaqui Grande, which you know which is much higher grade.
Fast leaching will will see immediate see immediate production from that it'll be you know.
<unk> Leach pad right on plastics, so we'll start to see that quickly as well as you know we.
We will see the effect of the fresh ore coming out of the mulatto.
You know from a lot of pit itself, rather than the stockpiled assault sulphide ore that we've been living on for the last nine months or so.
Okay. Thank you.
Thank you. The next question is from Kerry Smith from Haywood Securities.
Please go ahead.
Thanks, operator, and good morning, everybody here first thing on the power line.
That would be energized and can you give me a rough used to what the impact might be a cost per ounce basis.
So it's still some time away carry maybe by the end of this year is what we're now working towards.
So you know delays with frankly with Covid has been.
Dennis.
Hurting us there getting getting it finished with the contractors as well as the government changed a bunch of regulations on now what you have to put in place for four for power monitoring and control at the substation and so there's some supply chain challenges with that so it's got pushed out of it it's still a tremendous project will draw.
Our costs by on the order of $40 per ounce when we when we get it online.
Oh, okay.
Yeah.
And just on the Yaqui Grande it looks like the greed that use.
Stockpiled in that 16000 ounces mined already today is pretty high it looks like it's north of two grams is that is that correct. Because it's the average grade there is about a gram in the quarter, so why or why not.
Not sure where you would see that carry reports I think no well I saw the 200.
16000 ounces contained.
Okay.
Okay, I honestly don't know what the grade is I haven't followed.
All of it that close enough to more like one point.
231 point to 1.3 is what I'm hearing so maybe our maybe our numbers are a bit rounded or something in terms of the type of analysis that sure.
But it's performing if anything better than at this point, it's early stages, but it's performing well.
Okay.
And how many tons do you expect to put on the pad. This year you got to be granted you. Once you start putting that ore on the pad.
Okay.
Terry just a more precise answer to that is that.
16000 ounces was cumulative in the 200000 ounce of 200000 tons was what was mined in that quarter.
Got it okay.
It wasn't clear to me in the press release, Okay. Thanks for the clarification.
And can you give me a rough idea as to the terms that you think you would stack on the pad this year there Peter.
I mean, it's designed for 10000 tonnes a day at the I'm not sure if the mine planning quite feels about this.
Once we get going or not but I think it I think it does so it'll be in that range.
For six months roughly then okay. Okay got you.
Okay, and and the gold just on the feasibility study when you put the Afghan who went out later this year, what sort of gold price might you use sort of the economics that you look for it.
Kerry we present the sensitivity looks like we typically do with with those reports. So so we've used a more conservative gold price that's something that's a.
Our proxy for kind of long term consensus and around $16 50, and we'd show what the economics look like it at a higher gold price as well so you'll probably 1500 1700 1900, what would be the range of prices that we present.
Okay. Okay, perfect and then just one last question on <unk>.
Well you you will still be putting some tons in a pad come from the stockpiling second half I presume.
Would that be would that be a large amount of <unk> in the second half Peter.
No it's gonna be maybe like.
Somewhere around 10% herself.
10% to 20% in that range.
Okay perfect. That's helpful. Okay, great. Thanks, very much guys.
Thank you. The next question is from Mike Parkin from National Bank. Please go ahead.
Hi, guys. Thanks for taking my question just going back to Lynn Lake when could we expect you to start you know the big spend on that.
It's it's difficult to say because we're effectively.
In that.
Isn't that at that point, where.
We're.
Negotiating impact benefit agreements with the with first nations and that's really not an easy timeline to predict and it's very unlikely that we will see.
Permitting from the federal side completed until after the IV eight agreements are in place I mean, that's just that's very typical for Canada.
So.
I'm.
I love to throw out a date I mean.
Managements are often getting questions about things that life out of outside of their control, but you know if I were to take a guess at it I'm I would guess that some time by the AR.
Before the end of the first quarter of 2023, we should have the federal permit something like that.
That would be sort of a that would be my outside date, but it really will depend on on the pace of progress that we've made with our impact benefit agreements.
Okay.
So just to be clear you could potentially be shovel ready for spring like kind of this time next year.
But you could potentially see.
Quinn Lynn Lake to follow or maybe you don't have island quite fully complete with the phase III, but you'd have it more largely complete before you would commit to the big capital I've been late cause that.
Okay.
That's fairly accurate I mean, its its certainly what we'd like to have is the flexibility.
I mean.
I mean, if if.
If gold prices where to run them.
To $3000, an ounce or something like that for example, and we're generating.
Tremendous cash flows from operations.
It wouldn't be too much of a stretch to to say well, let's take advantage of these go good gold prices and accelerate the development of Glen Lake something like that if gold went the other way.
And we saw that the cash flow from operations comfortably support the island gold but would be.
Difficult to say to piggyback Lynn Lake over and above that we would just we would just hold off on Lynn Lake until we could reasonably.
Reasonably finance it.
The idea is to be able to to be able to maintain the strong balance sheet.
We're known for.
And develop really good quality projects at the same time I mean, ultimately our business is to develop mines produced gold and make money.
Some point, we've got a we've got to get there, but we look back at our this group of individuals around the table that we've been together for.
18 years and.
No we've never made a false step we've always maintained a strong balance sheet, we've always developed good operations.
We've always made money for our shareholders and we're just going to continue to do that.
I would hate for people to think that we're going to lose our minds all of a sudden and tried to do too much at once and and put the company in some sort of jeopardy. We were just never do that.
No that makes a lot of sense.
Also just on Lynn Lake can you remind me you have got the Mclachlan and Gordon.
Deposits, but then your latest exploration update indicated some interesting results kind of in between the two it to loon.
Whereas the mill on the 20th 17 study, it's sitting closer to Gordon or Mike walk into that.
Mclaughlin, which is the higher the higher tonnage deposit.
But can you.
Following trying to collect.
Yeah, if we vote.
Both said it wrong.
<unk>.
Oh, okay.
Scottish isn't till you get them.
But if you're having tremendous success.
At that new target could we potentially see did you graphic kind of center.
The shift to the east.
It's early days and all of that deposit and you know there would be a whole new round of permitting and whatnot. So I you know.
Sure depending on success there.
Could change thinking, but we're nowhere near that.
Okay.
Alright, that's it for me guys. Thanks, so much.
Thank you. The next question is from Matt David Hoffman from Stifel. Nicholas. Please go ahead.
I may have overlooked it in your release, but did you buyback any shares in the first quarter.
No we didnt buyback any stock in Q1, we bought back about 11 million shares of $11 million worth last year, but we're we're blacked out for the majority of the first quarter just given our year end results.
So we are as I mentioned in my comments, we are looking to get more aggressive on the AR on the share buyback.
Especially given where share prices currently.
And in the back half of the year correct.
That's right.
Okay.
And I don't know if you can disclose this or not but have you been approached by any potential acquirer for part of your resources are all of them.
We wouldn't talk about that on a call like this.
That would get us into a lot of trouble so.
Okay, I only asked because the Rite aid company just had a conference call two weeks ago and didn't say anything and then it turns out they have gotten and offered during the quarter, but they didn't release it so.
So.
That we were sitting on of a material nature, we would release to the market okay.
Okay fair enough.
Thank you.
Okay.
Thank you.
Next question is from parents.
From <unk> research. Please go ahead.
Good morning, Thank you for taking my question.
Exploration you mentioned, you had $22 million budgeted for.
Ireland.
But you also have the 15000 hectares outside of it 22 million is the only into my side area or is it doesn't include the original exploration as well.
We've been financing both so we've been doing both regional and and near mine site and your deposit side exploration, we have sort of parallel programs running.
But the $22 million you mentioned in the press release that includes.
Yes, it would.
That does include both yeah.
Well, that's a program for 2020, a tool to get any probably covered in the red.
The regional exploration budget for at island for this year is $6 million up at 22.
And the rest of the exploration program for the inappropriate to young Davidson onwards for the year.
Sure.
So we have a budget of about 6 million for at young Davidson and another $10 million at at our <unk> operations and the models district.
Okay.
Just one other question I have with respect to the.
In Turkey.
The cases in the past and in fact a.
Whereby barrick made a deal with still a bunch of partnerships.
And the country is it possible to make a deal like that within the country itself because they had some private interests that you think youll freight and I remember the Normandy.
Mind you years ago.
They got taken out and they left and somebody else somehow appointing it and who else with it I can't remember now, but there is all kinds of examples.
That's local interest may be interested in that.
There are possibilities to do something that would be great and.
Anything is possible Terry.
Okay, Okay, but I guess somebody initiate that trial I guess they have to.
Yes.
We're not going to initiate anything like that yeah I understand.
Thanks, very much looking forward. Thank you.
Thank you.
Again, Please press star one if you have a question and the next question is from Dalton <unk> from Canaccord Genuity. Please go ahead.
Thanks, operator, and good morning, everybody.
Most of my questions have been answered but there.
There are a couple of aspects of the island gold expansion that I'd like to explore if I may.
I thought I heard in response to one of the other caller's questions that one of the scenarios that's being looked at as part of the new study as a potential expansion I thought I heard 2400 tons per day.
Correct me, if I'm wrong, but the shaft. Besides 2000 tonnes per day right and so are you also contemplating expansion and the shaft.
No. The shaft is not sized for where 2000 tonnes a day its size for 3500 tons per day of oil of ore and waste that goes yeah.
And I throw out the number 2400 tons a day because that happens to referred to the.
The the number we're permitted to so.
And that's fairly commonly known so I mean, we will determine that number that's why we're doing this study and we will have.
We'll have that study completed towards the end of June so so it'll be a matter of fact very shortly but that's that's what we're working towards permitting to 24 months to play out or not.
Okay.
Perfect. That's clarifies that and then John I also thought I heard you say when you were talking about capital allocation and island gold versus Lynn Lake.
I thought I heard you say island gold faithfully and beyond and I'm. Just wondering what are you contemplating beyond faithfully yeah that that was a that was Jamie who actually made that statement and beyond and I guess, what are you referring to there as well.
Island Gold Phase III has been published what 18th almost two years ago, now and we're updating it and that would be as reference to beyond that we'll come up with an updated.
Plan, one way or the other towards the end of June .
That mean may or may not reflect the change in scope, depending on what the results of that study turned out to be.
Got it but.
As you just said if the shaft size for 3500 tonnes per day and given the exploration optionality at the property is it inconceivable that we could see further expansion.
It's highly unlikely that we would change.
The shaft in terms of its.
It's capacity, we were more than likely to deepen the shaft.
Something that are that we're looking at but.
Given the grades that we're mining just for example, if we were if we were to push it to 'twenty 400 tons, a day that would take us closer to 300000 ounces of gold a year from the current 236000 ounce rate that we're contemplating so that's already.
It's already a very significant bump in production you consider 300000 ounces of gold a year at the bottom end of the first quartile in costs.
It becomes one of the most profitable mines in the world at that point.
That's great guys. Thank you for clarifying that's all for me.
Thank you.
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