Q1 2022 Equinox Gold Corp Earnings Call
Thank you for standing by this is the conference operator.
Welcome to the Equinox gold first quarter 2022 results and corporate update.
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I would now like to turn the conference over to Relent Bailie, Vice President Investor Relations for Equinox gold.
Please go ahead.
Thank you Shari and thank you everybody for joining us. This morning, we will of course be making a number of forward looking statements. Today. So please do take the time to visit our website SEDAR and Edgar to read the rest of our continuous disclosure documents I will now turn the conference call over to our CEO Christian MELA.
Thanks, Lynn and welcome everyone, Doug Peter and I'll walk you through the first quarter results here and take questions, but just as a reminder, on the first slide three.
We're an Americas focus group, that's really building a sizable platform in the Americas, We've started out with six producing mines at the moment, we've got the one in commissioning in Brazil, and it's ramping up towards commercial production at the moment and we've got four large growth projects. So this year, we'll be producing six to 700000 ounces with a clear path to a 1 million ounce.
Over the next couple of years as our growth projects coming on stream.
We've also got a strong balance sheet to fund that and just leading into this quarter. You know as expected. We said the first half of the year would be a bit slower than first quarter, particularly and you know we expect cost will continue to reduce over the year and as we move through the year production will ramp up as we bring new mines online.
And we hit into the higher periods of production starting in Q2 Q3 period. This year. So pleased with the first quarter's costs are roughly in line with expectations. We set those are with our guidance early in the year production was a little bit light will walk you through a why that happened and how we see production moving up over the year.
And definitely it's hard to compare to Q4 2021 as we were very back ended last year. So we'll walk you through the quarterly production here.
Looking at slide number four in terms of our recent highlights.
Standalone lose poured its first gold on time recoveries have been good. It was in the end of March. So we're really pleased with that and at the moment, we're wrapping it up.
Greenstone is tracking well, we had a chance to visit site last week and really pleased with the progress there.
Coming out of the winter season, so real hive of activity out there and Doug will walk you through all the good stuff that's going on on the ground really pleased to see the team coming together and they've managed obviously these recent waves of COVID-19 as well very well on site.
Present, a Santa Luis had some drilling that we put out into the press are not too long ago here, so showing new significant gold mineralization in that nice Big district and belt.
More targets identified so we're excited about that whole district and Corporately. We also had a few events happened just after the quarter end, we sold Mercedes that actually closed in April that was announced at the end of last year, but now we have a $75 million and 100 million of cash has come in with that just after quarter end. We also received four.
Million of proceeds from the Soliris warrant that we sold about a year ago to some purchases of our Solaris share. So we brought in another 40 million. So after quarter end, we brought in approximately $110 million.
And I'll pass it over to Peter to walk you through the actual operating and financial results here.
Thanks.
With respect to responsible mining we had five lost time incidents during the quarter for a total recordable injury frequency rate.
Of $3 76 per million hours worked the 12 month Rolling average remained lower at 3.01.
So very pleased of course that we had no significant environmental incidents to report during the quarter.
The operations, we produced 117000 ounces of gold as Christian said that was a little lower than expectation.
We did sell a 119000 ounces of gold.
We had lower production at the.
The production was primarily affected by already M in Brazil, which experienced.
Rain events.
In Q4 that affected or access heading into the quarter and in addition to that we had a 10 day suspension of plant operations.
Arizona, we had.
A little more reliance on our lower grade stockpiled unexpected.
An example, and so the grade was lower for the quarter at 94 grams per tonne for reference in Q1 of last year, we had one three grams per ton during the quarter.
And mesquite the production was lower but that was expected due to waste stripping that's happening there during the quarter.
Our all in sustaining cost of $1578 per ounce as Christian mentioned is close to expectations for the quarter and we remain on track for the year for our guidance range.
We expect to increase our and.
That's due to increased production cash flow and lower costs that we're going to see in the second half of the year.
The increase in ASC for this quarter versus the same quarter in the primary and the prior year is primarily due to the cost escalation you see across the board.
And across the industry.
And also in part by the slightly lower volume than we had than we were expecting for the quarter.
With respect to our financial results. The 119000 ounces that we sold drove revenue of $223 million. Our mine operating earnings were 28, and a half million dollars and our adjusted EBITDA was $43 million, we had a loss of about $20 million in the quarter for them.
Seven a share and on an adjusted basis that was a loss of 24 million or about eight cents a share.
We had cash flow from operations before changes in noncash changes in working capital of $33 million.
And.
For the end of the quarter, we finished with $150 million in cash.
Sure.
The reason that the cash decrease from our year end cash position is primarily due to the $125 million that we spent on capex as we outlined in our guidance our capex, it's a capex heavy year with close to $700 million in sustaining and non sustaining capital that we expect to spend.
After the end of the quarter during the month of April we did take in $115 million from the sale of Mercedes and also from the sale of $5 million of our shares of Soliris.
Yeah.
With respect to our liquidity remains good our net debt was.
It was $385 million, so our leverage remains reasonable.
And we.
We of course also have our investments, though actives leavers to help with our overall strong balance sheet as we head into the remainder of the year.
And with that I will turn it over to Doug ready, our CFO to discuss the operations.
Thanks Peter.
So as noted several of our mines were focused on stripping in Q1, we will be benefiting from that as we move into subsequent quarters. This is similar to how it worked in 2020, one where we had stripping earlier in the year and stronger subsequent quarters, especially the second half of the year.
Mosquitoes, particularly one of the these cases they had a low first quarter as we focused on waste stripping in the pit.
Production has picked up in this quarter already and we should have good production through both Q2 and Q3, I think Q3 will be our strongest quarter of escape this year.
We are now working on.
Permitting for additional pad space Leach pad space at mesquite.
And we're filing for permitting for drilling across the highway.
That will be for longer term opportunities our mosquito.
Exploration drilling has been focused on developing additional a minable reserves adjacent to the current act of mining areas.
And this this month, we are starting an injection leaching program, which is.
Drilling into our existing leach pad.
To enhance overall recoveries in areas that have not been fully leased in the past. So we should be benefiting from the additional opportunity.
At Castle Mountain.
Previously discussed the issue that we've had with run of mine ore having slow percolation. So we have established a crushing and agglomeration circuit for the ore.
That will provide a better percolation overall and that will lead to shorter with each times and improved overall recoveries.
Yeah.
Pad one b as it has been in construction is nearing completion now and it should be ready for use in Q2.
And we are drilling in areas of dumped material, so which will bring an additional feed for the phase one that allows us more flexibility in our feed going to the leach pad for phase one operations.
Our plan Amendment was submitted in mid March for Phase two.
It's currently under review with the BLM Bureau of land management in San Bernardino County.
Looking at Las villas.
Guadalupe open pit has been a very good contributor in the quarter with additional ore than expected.
That resulted in lower strip ratio overall, reducing from anticipated 12 to one in the quarter down to seven to one.
At the same time, our underground mines were behind on grade. So that means overall, we had more lower group lower grade material going to leach pads, they carry with it.
Lower recovery a longer recovery period, plus we were also in the stocking sequence that meant that the ore was going onto the higher lifts on the pad, which takes longer for it to come through so.
Some of that gold will come through in this quarter. So production is catching up in April and it looks good for Q2.
The in Burma Hall underground, we did have a slow start in development in the latter half of 2021.
And it's now the development rates are now improving as we go forward.
We are looking at various mine plan alternatives. We continue to look at how we can bring forward production and overall cash flow, we hope to be able to implement implement some changes late this year.
At Autozone up.
So on the next page on Autozone are we had a very high rainfall essentially about 1.2 meters of rain in the quarter was the slight team are dealing with it we.
Our.
Restricted on some of the access to ore in the pit, but we had built up a oh.
Low grade stockpiles. So we are feeding low grade stockpile. In addition to the ore that's coming from the open pit ideally what we would've liked to have a larger stockpile given that we are operating.
Highest throughput in our plants that we've seen in the life of the mine for the last several quarters.
But we do have a production plan overall that will see us through.
Our work does continue on advancing the underground activities in preparation for ultimately being able to establish what.
What will be an exploration portal and lead to.
Eventual development of the underground below the open pit.
The work will include the addition of drilling that was completed in 2021. So based on our prior work. We believe that we will end up with additions to resources and reserves in the underground that will complement the studies that are ongoing at the moment.
Yeah.
As the Zenda, we had a solid quarter and good grades production was mostly coming from two open pits and this is given the underground mine and opportunity to be able to catch up on much needed development and open up some new stopes.
At the same time, we brought into mobile crusher during the quarter, while the primary crusher was was down unexpectedly.
That has been.
Fixed and now has returned back to full operation at the start of April .
But we've had good drilling being reported.
News release that went out last week.
The drilling was reported for the cancer to pit area, which is very close to the all the infrastructure presenter and also in numerous other targets in the <unk> district.
These targets may ultimately benefit either defensive presenter mine ore sent to lose mind, depending on the proximity and the characteristics of the ore.
At RDM, we had a weak quarter due to the initial suspension related to the free board on the TSS and that was in response to a new regulation that was brought in with immediate effect, which subsequently was changed and the timing, but nonetheless, we reduced our free board of the TSS.
Tailings storage facility.
And as noted in our disclosure for the quarter permitting for the next ESF raise at RDM is delayed due to a reversal of previous decisions by the state Environmental agency.
We are in discussion with the regulatory authorities.
And if we are not able to achieve a satisfactory resolution prior to the need for us to start the next raise which would be in this quarter than the mine may need to be temporarily suspended and that could happen in Q2 or Q3.
Oh I will note that the RDM TSS has been raised on intermittently during the mine life to store additional tailings and those were in.
In the overall design.
And the.
The Psf has been designed and has operated to industry best practices. It is regularly inspected and audited by independent parties.
A design alteration was filed with the environmental.
Environmental agency in 2017 to change from centerline to downstream design, which is considered the safest method.
And since 2018, each method sorta each raise has been completed using a downstream design.
So I would encourage you if you want more details we provide that in the news release and in the MD&A and we can discuss more during the Q&A.
At <unk>, we have the first gold pour in March 30th this came from the elution and gravity circuits.
<unk> and recoveries are looking good and the resin is performing as anticipated and test work.
And also in our pilot plant work that was done in advance of.
Of the construction that sad to lose.
We are still ramping up and will be doing that through may and June .
And we're using a temporary crusher at the moment, while we finalize work on the primary crusher that should come online later this month.
As you can see there are a few slides on Santa lose showing the crushing area.
The open pit as well as the process plant area as a refurbishment of a previously operated mines.
Overall budget was $103 million and we essentially are just wrapping up doing the wrapping up and commissioning at the moment.
Yeah.
Looking at greenstone on page 11, we just did a visit.
As part of our quarterly review.
We do reviews, while we have a reporting on weekly monthly and quarterly basis.
It was a this project is being developed by Equinox and Orion at.
But ultimately he has more than will contribute 5 million ounces of gold over 14 year life.
During our visit I'll say, we were impressed with all the activity that's been happening through the winter.
We can clearly see everything has been geared up for a very busy summer.
Engineering is nearing over 90% complete now that is an important factor in ensuring that the project is appropriately cost with being able to do all the material take offs and <unk>.
Proper engineering leads to a good cost basis. So that has been part of this project all the way along is a very good diligence by the team that's been with this project for.
Probably around 10 years, the core group has been with the project.
They're they've been doing a great job in bringing a capex to completion for the technical report that was delivered just before we became a partner in the project and then doing subsequent Capex reviews, and then monitoring.
Any trends and changes on Capex the project is 50% contracted.
Already 31% of those are fixed contracts.
And overall, 20% complete.
TSMC is ahead of schedule and there's been lots of <unk> investigations that were done prior to the design as well as additional work that was done in 2021 on on the Psf design. So were we've looked at many times, we're very happy with the progress on the TSS.
Plant site earthworks are 75% complete.
And essentially concrete placement is catching up now that the weather has been improving and it's one of the foundations are going in so the building construction can advance quickly during the summer.
Overall, its tracking on schedule and on budget and I encourage you to have a look at the photos on the subsequent pages, where you can see on page 12, the area, where the power plant and.
Treatment plant and the admin buildings will be.
And the batch plant as well and on page 13, you can see progress. So the administration building second floor was on when we were at the site. Most of the snow is gone when we were at the site as well, but you can see foundations going in for work for four foundations going in for the truck shop and the power plant.
The concrete batch plant is there as well.
And on page 14 east end of the mill.
Power plant.
Foundations going in and then the work on the tailings storage facility starter dam construction, which as I said is ahead of schedule.
So with that I'm going to hand, it back to Kristen.
Thanks, Doug that's a good review of the operations.
To conclude things I've got a few slides here in ESG, obviously is a critical topic that do want to touch on here. We just published our second full ESG report for 2021 used available now online you can access that we do publish quarterly data as well in our website. So we don't wait till the year end to publish it all at once in a report.
But really pleased with that report taken steps forward in terms of our disclosure and pulling together our data which is only our second year of doing this so kudos to the team for pulling that together and making that progress in terms of a few other areas that maybe highlight that come out of that we started and initiated a very serious.
Safety program that.
Applaud for good record that we have on various sites and we now give out awards for our St. The site, which was mosquito last year for our most improved which was Ars one of last year and we also give out individual awards for extreme sort of our dedication to the safety part of our business or for coming up with unique ideas for improving the safety at our mines.
Right. So if you want to get a bit more on that it'll be in our full report.
We are working on our energy and Ghd plans. So we're working on the long term plan. There. This year is really focused on coming together and bringing the data together. So that we can set intermediate midterm targets as well as our long term targets for reduction of G. H G gases.
We continue to focus on communities the horizontal water treatment plant now is fully operational.
Greg Bush and his team down in Mexico will continue to work on various partnerships with the communities that loss Philo is to bring that forward.
In terms of health and we're very pleased with the Covid.
Covid reactions from the sites. They were very quick to adopt good protocols. We've had no production days lost during COVID-19 and it seems to be that the latest wave is dissipating at the moment so.
We'll also be putting out and we put out our regulators sort of tailings management report that was issued last year as well. So that's something that'll be supplemental to our full ESG report if you want more information on our tailings dams and.
And as well on the human rights, we've completed human rights assessments that a couple of our sites and we will periodically do that kind of assessment, so that we're sort of managing our commitments to.
It's a good practice.
Looking at slide number 16 in terms of investing for growth and just to again back looking at the Big picture here you know, we've got an unparallel unparalleled growth profile of about 600000 ounces and incremental growth coming in.
As this growth sequences in which is Santa lose which is just ramping up greenstone over the next two years will be finished construction and into production, whilst fellows will be ready to advance into higher production levels Castle mountain is going through permitting right now and we're pretty pleased with the timing outlook on that to sequence after greenstone and the Arizona underground will come in and do.
Of course as well so we've got nicely sequence projects strong balance sheet to fund them.
Unparalleled growth in the sector versus peers, and we own all of that growth. Currently so we're focused on executing and delivering right now not in M&A at the moment.
And when you look at that in terms of valuation, we're still trading at a bit of a discount to our peers. So we're really keen to see as we knock off various milestones.
We continue to Derisk greenstone, we'd ramp up Santa lose we bring our cost down with these newer newer longer life mines that will get into rewriting towards our intermediate producer peers, which is closer to that one times multiple so we're excited for that to happen over the next sort of six to 18 months.
Looking at the next slide in terms of our balance sheet again, not a big change from prior quarters.
Overall sort of unrestricted cash as that but 265 million. When you include those April receipts for Mercedes and the Soliris warrants total liquidity of about $465 million, we still have a couple of hundred million dollars on the Rcs the revolving credit facility. This.
This year, we will review our overall banking facilities to see if theres a way to extend.
Extend that and sort of mature it with the company doubling in size over the last couple of years and we continue to have cash flow that will just continue to increase quarter on quarter over this year, so still with about $850 million liquidity. When you include our market value of investments as Pete alluded to earlier, which is comprising mostly solares niet gold shares.
And just in summary on slide number 18.
The diversified portfolio of assets now and we've really been focused on making sure. We got the diversity, we've got growth in each of these in each of these countries.
Focus on internal growth and execution right now and.
Our goal really this year is to execute on these construction plans to hit our guidance, which you reiterated this quarter and also to showcase all the great work that's going on the ground. So we're planning visits to greenstone in saddle lose in September October and will be the first time in a couple of years, we able to get analyst and a few investors out to site and I think it would be an exciting time to show the great progress at both of those <unk>.
Which are gonna be cornerstones of our future production base and with that I think I'll conclude and open it up to Q&A. Thank you Christian operator can you. Please remind people had asked the question.
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Thank you everybody for people to join up I'll take a few questions from online. So we also I am Gold's announcement this morning, and I Wonder if that's affecting your share price today, how do you feel confident that you'll be able to stay on budget at gamescom.
Yes, we do keep an eye on the market and all the other projects going on in Ontario currently at the moment of course and.
It's always disappointing to see a cost overrun but.
We do think it has probably had some impact on the share price because I think people do watch those projects.
Greenstone is probably the third than in the actual sequence of new projects coming on stream there in Ontario over the next year or two.
Like as Doug said earlier, we just had to visit the site and we keep very close attention to all the issues that we've seen out in the sector with building projects in Ontario, but also in other projects around the world.
We built the mine per year over the last few years.
Right now we're really pleased with the team that's in place there and the progress we're really pleased with the actual preparation and readiness and that was something that was critical to us. When we started this project asset Orion spent a lot of time with the team there which.
The team there was primarily led from the Agnico Eagle team that built a few of their northern mines that.
I've been on this project for a number of years and we're really pleased with the readiness the engineering as Doug alluded to the team in place. We did an external review of that and so we felt going into that we were able to number one observe the market look at the cost escalation contingencies make sure. We're planning ahead and anticipating some of the challenges that we're going to see as we build the.
Project I don't know, Doug if you have anything else to add to that just that as we looked at.
Getting involved with greenstone, our due diligence was an extensive review of the Capex on the project and then.
After we took over <unk>.
60%, we continued to do our review on the engineering and the Capex.
And then green.
Greenstone initiated an independent review Q, a QRA review of the Capex as well so it's been gone through many times.
And we put an appropriate what we believe to be an appropriate overall contingency.
All the bidding is done accounting for anticipated escalations. So.
By doing all of that we think that everything is being mitigated and theres a constant monitoring process as well as tracking of trends. So it's a good.
Team on site good level of project readiness before we announced construction.
And now we're just working through the engineering.
Essentially 91% completion, which means that we've got a good firm basis for all of the materials and everything that are related to the site and we've been doing our engineering reviews ultimately through so.
I think the level of which the project was that before we even announced construction is one of the pivotal factors that help us to be where we are right, where we're at right now of being able to follow through with as many.
Contracts and fixed contracts as possible at this stage is critical.
Thank you staying on that cost trend.
Given all the inflation that we're seeing in other companies again do you feel like you've adequately digest that and then do you think youre going to be able to achieve your all in sustaining cost guidance for the year.
Yeah, I think I'll start with Pete if you have any comments, please jump in as well but.
We did anticipate some of that when we did our budgeting and our guidance review early in the year end.
As I said for the first half of the year, we anticipate about $15 40 and costs I think we're within 20 or $30 of that basically in the first quarter, which is meant to be our weakest. So I think we're tracking nicely and we've.
We've done our best to anticipate that because we did have some visibility, particularly in Brazil and <unk>.
California, and Mexico, as we were coming into this year.
Pete I don't know if theres anything.
No. We're we are tracking very close to what we expected with for cost escalation and that's all factored into our guidance.
Operator, we'll take a note.
Questions from the call now please.
Absolutely. The first question comes from Mike Parkin with National Bank financial.
Please go ahead.
Hi, guys. Thanks for taking the question.
Can you just remind us what your budget for diesel or oil is for greenstone.
On your base case for <unk>.
And if you have any hedges in place.
And is that.
That in reference to your construction versus operations.
Yeah, just in terms of like do you.
Are you exposed to that with.
I imagine it's a contractor doing your Earth works is there a locked in price there per tonne moved or you use.
Is there an inflationary factor component to it.
Contract.
Yes, the contracts allow for escalation for the earthworks is.
Pretty much set overall approach to it and we have been working on the long term pricing for consumables.
Specific number.
Give me a minute to sift through pile of paper and dig that out so I'll come back to you or will email you afterwards, yeah, and I'll add Mike Yeah, We don't have any none of it is hedged.
Okay Riley.
E Mail to me afterwards, that's fine.
And then with respect to the Castle Mountain Phase two.
You gave that update good color in the press release, there are around in terms of surface disturbance what that is.
Chile going to trigger in terms of your closure plan is there.
That new or is that potentially going to defer the potential of starting that phase two expansion.
So we think we've already taken into account.
We're staying within the overall footprint, that's always been the mandate for us, but we do anticipate that we will end up going through.
I don't know what the acronym stands for Idose equals the overall, one but we will be doing in the impact assessment and so we anticipate that in our overall timing.
But we think we've been very careful to.
To consider various.
Bring in the mitigating factors to make sure that it will be.
As smooth as possible given that it will be a several year process to work through it yeah. We've taken a conservative approach to you assuming an environmental impact a new environmental impact statement is required here rather than just an amendment to the plan of operation So Cup.
A couple of years to do that.
Okay, and then just circling back to greenstone in terms of like your large steel equip me in this world steel framing up the mill as all of that been ordered and if so.
Are you seeing are there.
Those kind of prices protected or are you exposed to the elevated steel prices.
Major pieces have already been contracted.
But as I've mentioned earlier escalation was accounted for when we did that we do know that.
We had early warning on trends, which was.
Essentially both.
Equinox Orion.
We're meeting with greenstone on a frequent basis to see how that would play out for steel prices and what the mitigating actions would be of the team on site took it to hurt too.
Worked through and find ways to be able to reduce what they saw.
Potential cost escalation.
Beyond what the original budget was they did a very good job, bringing it closer to be online, but they did consume a bit of their overall contingency to be able to account for that.
But we have I would say.
A reasonable contingency overall and.
They are looking for.
The remainder of the project to see all the opportunities where they can can make further cost savings and that includes things such as financing some of the.
Equipment that we'd be doing for site. So it's not all one way.
I think just to get a little more color we've got <unk>.
Most of those big contracted ordered items are in the track now the timelines are set.
A few of the big trucks arrived this month's interest the onsite steel was actually being shipped in the date, we are watching it through the window come through the gate.
So a lot of those things are fixed in price and they have a set timeline.
Theres still some smaller contracts that I'd say, it's still have to be finalized in that but the big things are actually in the pipeline. So we're feeling pretty good about that actually.
Okay.
Function of having a greater percent of your engineering complete versus.
Co date, when they kicked off yeah, you're you're within 5% of their projects yet your.
Months behind in terms of when the project kicked off.
Quarter, yellow and Green Green stones team had had.
<unk> been through a stage prior to us getting involved where they had been through vendor drawings and advanced engineering prior to us coming in and then.
As we move forward and they started to build up their team.
There were certain vendor drawings that needed to be.
<unk> changed our updated in the engineering, but it was managed very well brought up to a point, where we were doing engineering reviews on on.
All the activities that they've been doing.
It was targeted that we would be finishing the 90%.
Engineering in April so, it's just a little bit behind because its just been.
Coming to completion.
Sorry in March and it got completed in April So we're very much on track with achieving that and that means that.
All of the material take costs, which are critical to make sure.
I'm not going to have a below on the actual materials that go into building the process plant and facilities are accurate.
Okay. So I'll just I'll add that the procurement function was a key focus for us from that but as soon as we could close the transaction through the fall and for the greenstone team who was proactive in getting those large equipment orders and in fixed as Christian and Doug have already described.
To help with cost containment and what was already down a rising price environment.
So theres a lot of focus on that through the summer and fall of last year.
Okay. Thanks, very much guys for the color.
Thanks, Mike Thanks, Mike Operator, we'll take the next question from the phone please absolutely.
Absolutely.
Our next question comes from Spencer Layman, a private investor please.
Please go ahead.
Yes, good morning.
I'm, a little confused on the balance sheet and.
When I do the math I don't quite.
I understand.
How you lost that much cash.
It seemed like at the end of December you had.
Around $550 million in there that was about five eight so plenty which were like.
Zero.
Net debt.
And yeah, and now you're at 385 net debt.
The casually I guess, the cashless from 546 down to $1 51.
Which was about 395.
See what where you lost that much harder.
Did you pay down the debt some water.
What are the what does all of that cash go.
Let me just start I mean, our cash at the end of the year is $300 million. It's now just over $150 million plus.
Oh I'm, sorry, I saw the cash was 546 at the end of the year.
Maybe I'm getting that from Yahoo finance it is that incorrect.
Yeah. So it must be check that I've got Peter nodding his head here he's CFO .
Yes, it's gone from 300 to 150 ish then you add another 115, we received within days of the quarter and so we're not much below the 300.
Approximately at quarter end and the big thing to remember for this year I think it's about $700 million of total capital, which is a lot of greenstone is almost half of that and then the other projects that we have on the go and we're spending that on a quarterly basis. So a quarter that's over $150 million a quarter and we said in the first half of the year we're not.
Generating a lot of cash we said, 85% of our free cash flows in the second half of the year. So.
We are going through as we did probably last year as well first quarter is definitely weaker starts ramping up in Q2, and then the second half of the year strong.
But the balance sheets in good shape and please reach out to US offline. If you want to we can walk you through Pete will walk you through the the balance sheet.
Explain if if if if my figures and correct me if I'm going to say, it's at Yahoo Finance.
I saw cash at $5 46.
If it was.
300, and that that explains it okay is your long term debt still around $5 80.
I think its about that level, if I remember correctly, yeah, yeah. Okay. So that hasn't Mitch do you see that Oh are you comfortable with that amount or do you see that being reduced now over the coming months.
Yeah, It's Peter it's Peter here, we don't see that reducing over the coming months, we're in a capex intensive period as Christian and I alluded to earlier on the call.
We're about that point in a cycle of our credit facilities, where we'll look to refinance that.
And that might include an expansion of the credit facility. I think you can see that deleveraging occurring around when greenstone comes online. So we're comfortable with the level of leverage we have we definitely have room for more.
And so we're going to maintain these levels maybe go up a little as we move forward and then as we move into 2024, you'll see the deleveraging.
Okay, well my apologies, Mike My mistake was Uh huh.
The Yahoo Finance statement I guess.
So I'm glad you flagged it I'll say it may get in touch and have that number corrected. Thank you Pere financially I can't say.
Okay. Thank you thanks.
Thanks, Patrick.
I will now take some questions from my mind, and we have quite a few today. So the first question is interesting and probably worth clarifying so.
Well politics, Brazil, permitting so birla Sun had a setback with air permitting is that any way related to R&D and issue and where do you feel about the upcoming October election will that change that <unk> binding and breakdown, yes, I'll take that it's Christian here.
I can't speak for Birla Sun for sure I'm not familiar with all the intimate details.
I do believe there is an increase.
Permitting related issue, there, which is indigenous communities and we don't have that around our minds. What is different I think it's difficult to compare the apples and oranges in that sense.
Brazil permitting generally it's quite a I'm going to use the word bureaucratic procedural process for permitting tailings dam raises or getting your mine permits in place and it takes time and you have to walk through the steps in the paperwork on that.
And it's probably improved a little bit over the last few years with the current government.
But it's still quite a process and that you can see we still sometimes get challenged with timelines on that the one thing I can say is we do have a top notch team there that.
It has helped us through and navigate all of this because we've got three different states that we work within in the permitting is quite state oriented in certain aspects, particularly around the environmental agencies.
But we do feel good about.
Permitting all of our operations our tailings dam raises you've had good success in the past we're using the best methodologies for things like tailings dams downstream for RDM is the safest and best possible and we're confident we'll get through that it's just sometimes.
Sometimes the timing is a little bit uncertain there in Brazil in terms of elections boy I'm not sure I'm totally qualified to comment on that but I'll I'll.
I'll make a general comment.
Boston Arrows government over the last few years has been I'd say mildly positive towards foreign investment in the country and that's what I've heard from a lot of people, certainly regulations, and permitting and labor relations and laws and rules have been.
Slightly more streamlined I would say that allow things to happen more quickly you saw with us getting new permits in Bahia.
Probably reduced a lot of the nuisance lawsuits and things that are sometimes historically seen in Brazil. So I would say a positive step forward in that sense.
I don't think youre going to see a shift change at the moment, even if the government does change in October and I don't want to predict who's going to win that.
I'm not close enough to say that but I don't think youre going to see a shift change even if the government changes because I think it's been a pretty positive environment in Brazil, and we've certainly felt that doing business in Brazil over the last five years has been overall positive and swinging in the right direction, where you.
You do see certain countries around the world right now where it swing a little bit to the little bit more negative towards foreign investment and mining, where I'd say, Brazil has been slightly more positive in that aspect and I would just add if I can even prior to Boston hours term, we saw labor and mining legislation reforms.
Coming on even prior to his term so it's been it's been of mining and foreign investment friendly jurisdiction for some time now and we would hope of course that would continue regardless of who is in power when in terms of president.
Thank you very much back to cost question. So what percentage of your costs are related to diesel are you considering hedging or possibly even stockpiling detail Jimmy D. C J, yes.
It depends on the individual side, Pete add anything if I missed something but.
Diesel heavy truck heavy sites like mesquite will be.
Closer to 15% to 20% of our cost would be diesel oriented where I'd say sites that are.
Moving less tonnes on a daily basis, or probably closer to the 10% 12% basis. So it's probably in the 10% to 20% overall.
So when you factor that in and you look at diesel prices that is a step change in some of these diesel prices but.
I'll, let number of the countries work within its not completely market oriented the U S. Obviously, when the price of oil goes up the price of fuel usually on the ground moves pretty similarly, but in Brazil, and Mexico, it's slightly more I would call it a subdued through government.
Troll to a certain degree where you'd see it doesn't go up quite as much as the fuel prices the oil price and it doesn't go down as much and sometimes the oil price so.
Slightly more stable.
And you know.
It's only our attempts to a fifth of our overall all in sustaining costs. So you know an increase of 20 or 30% there isn't a massive increase but it does add onto things like labor and consumables, yes.
Yes, we do explore opportunities to hedge we haven't done any as of yet but that doesn't mean, we won't do any going forward.
Thank you I've got about six questions related to growing production and long term Allen sustaining cost I'm going to try to combine them into one that makes sense.
So you talk about 600000 ounces of incremental production growth when can we sort of expect to see that and how will that affect your long term all sustaining costs as you ultimately move towards that target.
Yeah. So in terms of the sequencing you know we had that information on 16, maybe not in the timeline there. So it's a little bit fluid, but santa lose that incremental production is coming on today essentially so that's kind of done we'll put a ticking that box Greens.
Greenstone in that 240000 ounces will start in the first half of 'twenty four so from that onwards, you'll see that run rate improve while Sheila so it'll be a little more gradual as we get through higher grade ores over the next sort of 12 months youll see that gradually move up give or take 50000 ounces in total and then when we build a new CIL plant Youll see it go up another 75000 ounces and that will likely.
Happen after greenstone is done so call. It from 2025 onwards at some point there.
Castle Mountain Youll be adding 180000 ounces from the incremental increase in production.
We plan to build that and get that permitted dealt with while we're actually building greenstone. So you'd get your permit greenstone will be finished you start building Castle mountain phase III. So call. It 2026, when you start to see the 180000 ounces extra there and again horizontal underground will be kind of a gradual thing as we get into underground ores over the next few years, you'll see it in margin.
All are incremental improvements there.
Part of that question was just a longer term sustainable longer term all of the standards. Yes, a good question. So yeah as I said, we have an elevated cost in the first half of this year the second half of the year dip.
Depending on inflation of course or any changes anticipated to be below $300. So.
Big step change Theyre already.
Part of that is from just improving the current operations, adding the lower and lower cost mines as we move forward and in the long term I think I'd say, a very rough estimate of 11% to $200 type all in sustaining costs.
Before I, probably wouldn't say closer to 1000, but with current inflation I don't want to say 1000 of today.
So youll see that gradually come down and it will be more in line with industry peers and norms.
So project specific castle mountain and low power are we getting the cost down there.
Well Castle Mountain has been a change in the way we treat the ore. It was originally a run of mine, but the percolation issues with this particular ore is such that the recovery. It takes too long so switching to crushing and agglomeration will provide.
<unk> Leach time gives us the ability to get the full recovery in a shorter period of time. It does a whole bunch of other things in regards to reducing the amount of area that we have to carry under leach.
And it just improves our overall.
Operation for Phase one phase two of course is a different story, it's a much bigger project it has much more.
Scale. So it provides a better overall.
Cost per ounce.
When we move to the phase II. So phase one is a step towards phase III.
Just can I add on phase one right now you have to remember we're doing that pad, one b, which will cover the rest of phase one basically leach pad space. So that capital is concentrated into two or three quarters. So if you look at the 'twenty 300 last quarter I mean, a lot of that cost is just in this one off.
Leach pad expansion, then you'll get the benefit of that for the next number of years. So remainder of phase one of the remainder of phase one for.
Doug said, it's it's really going to come down just because you've got lumpy capital into all in sustaining costs and I guess, that's one of the disadvantage of all in sustaining cost versus cash cost. It. If you have a heavy capital short term period. It does.
Reflect an all in cost.
And with less fellows in many ways, it's the backing up of several development projects.
Should have been happening in 2000 22021, which.
We've gotten through most of the stripping in Guadeloupe, a there's still some more to be done during the.
Next phase of that particular pit, but it's fully producing now and contributing as I mentioned earlier.
We are doing the stripping for the expansion on the Las villas open pit.
And when it comes to Burma Hall underground it got so delayed by.
2020 that got pushed into 2021 and now we're still doing the development that should have happened previously on Burma Hall underground so its catch up.
Those all contribute more or higher grade ore to las villas, and ultimately our preference would be to have a CIL plant it would've been nice to have that.
Yesterday as opposed to in the future.
Because it gives a better recovery and ultimately as a far more efficient a better cost per ounce structure than putting a higher grade ore onto a leach pad. So we look to that for the future but.
It's been as we've said repeatedly we want to see.
Stable.
Operations stable relationship with the communities before we make a commitment to that capex, but ultimately it would be a bigger better overall.
Cost per ounce and were encouraged by that progress to date. The last couple of quarters have been sort of steady we've been able to get back into focusing on producing gold and.
Having community relations issues and that's what we're pleased to see that progress at the moment and the team at site has actually now focused on how do we improve the mine plan and get those costs down in the call. It the shorter term here.
Thank you question for Pierre are you sufficiently funded to achieve all of your expansion projects and will there be any equity financing required.
We are sufficiently funded we're comfortable with the strength of our balance sheet and we have no intention of any equity funding. Thank you.
Im going to take a question that's been coming into me. So as some of you may have noticed our main website has been down since Thursday of last week. So our website vendor had a technical issue all of their clients right down to it certainly was not isolated to equinox called it did not affect any of our computer systems that was completely separate from equinox gold because the website has hosted by a third party vendor.
So we've put up as short term interim website. It has hopefully most of the information you need but it is certainly conducting what we normally have online.
Some of the web site functionality that is Baxter that vendors. So we are considering transitioning back to that than anybody want to wait till we know that they've got 100% fidelity and self help it will be back with that big website. This week or next week, but for now we're going to stick with our answer my site, because we know at least consistent disclosure. So you can always reach us by phone.
By email so thank you for your patience in that regard we.
We have no further questions online so I will turn it back over to Christian for closing remarks. Thanks.
Thanks, Lynn and thanks, everyone for joining.
Good progress great to see things happening on the ground and as we execute this year, we will keep you up to date, particularly on greenstone in our important projects and really looking forward to site visits in the second half of this year get people to come out put boots on the ground at each of our sites in Ontario in Brazil that are brand new mines.
We'll keep you up to date during the year and thanks for joining.
Thank you very much operator, you may now close the conference call.
Thank you.
This concludes today's conference call you.
You may disconnect your lines.
Thank you for participating and have a pleasant day.
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