Q1 2022 Centerra Gold Inc Earnings Call
Operator: Greetings and welcome to the Q1 2022 results conference call.
Greetings and welcome to the Q1 2022 results conference call.
Operator: During the presentation, all participants will be in a listen-only mode. Afterward, we will conduct a question-and-answer session. At that time, if you have a question, please press the one followed by the four on your telephone.
If at any time during the conference you need to reach an operator, please press star zero.
As a reminder, this conference is being recorded Wednesday, May 4th, 2022.
Operator: I would now let's turn the conference over to Toby Caron, Treasurer, and Director of Investor Relations. Please go ahead.
Toby Caron: Thank you operator. Welcome to Centerra Gold's first quarter 2022 results conference call. Please note that presentation slides are available on Centerra's website to accompany each speaker's remarks.
Please note that presentation slides are available on <unk> website to accompany each speaker's remarks.
Toby Caron: Today's call is open to all members of the investment community and media in a listen-only mode. Following the formal remarks, the operator will give the instructions for asking a question, and then we will open the phone lines to questions.
Following the formal remarks, the operator will give the instructions for asking a question and then we will open the phone lines to questions. Please.
Toby Caron: Please note that all figures are in US dollars unless otherwise noted. Joining me on the call today are Scott Perry, President and Chief Executive Officer, and Darren Millman, Chief Financial Officer.
Toby Caron: I would like to caution everyone that certain statements made today maybe forward-looking statements and as such are subject to known and unknown risks, which may cause our actual results to differ from those expressed or implied.
Toby Caron: Also, certain of the measures we will discuss today are non-GAAP measures. Please refer to the description of non-GAAP measures in our news release and MD&A issued this morning.
Toby Caron: For a more detailed discussion of material assumptions, risks, and uncertainties, please refer to our news release and MD&A, along with the unaudited financial statements and notes and all of our other filings, which can be found on SEDAR, Edgar, and on the company's website at centerragold.com. And now, I'll turn the call over to Scott. Scott?
And now I'll turn the call over to Scott.
Scott Graeme Perry: Thank you Toby, and a very good day to everyone. Thank you for joining us for our Q1 earnings conference call.
Good day to everyone and thank you for joining us for our Q1 earnings conference call.
Scott Graeme Perry: Just referencing slide four of the accompanying presentation deck, just referencing the bullet points in the top left, I think we had another good quarter in terms of the metal production. You can see during the Q1 period, we produced just under 94,000 ounces of gold and copper production of some 20.6 million pounds. This is a good level of metal output and you see that in the third bullet point just in terms of our corresponding all-in sustaining costs. For the quarter, we're producing our gold at a very competitive, very low, $395 per ounce. And again for emphasis, as you can see the individual contributions at the individual mine sites Mount Milligan, producing its gold as well at $15 per ounce and Oksut producing its gold as low as $451 per ounce in terms of the all-in sustaining cost metrics. Mount Milligan is really benefiting from the strong copper price environment, whereby we take those corporate revenues as a byproduct and that's what's resulting in those very low all-in sustaining costs per ounce.
A presentation deck, just referencing the bullet points in the top left I think we had another good quarter in terms of the metal production you can see during the Q1 period, we produced just under 94000 ounces of gold.
Copper production of some 20.6 million pounds.
This is a good level of metal output and you see that in the third bullet point just in terms without corresponding all in sustaining costs for the quarter producing a gold at a very competitive very low $395 per ounce and again for emphasis as you can see the individual contributions at the.
At the individual mine sites.
Mount Milligan, producing its gold as well at $15 per ounce and Oksut producing its gold as low as $451 per ounce in terms of the all-in sustaining cost metrics. Mount Milligan is really benefiting from the strong copper price environment, whereby we take those corporate revenues as a byproduct and that's what's resulting in those very low all-in sustaining costs per ounce.
Staining cost per ounce.
Scott Graeme Perry: Just in terms of some key developments during the quarter, first of all, just referencing the fourth bullet point, back in February we announced the acquisition of the go-to district project in Nevada. We think this is a very exciting addition to our portfolio and our project pipeline moving forward and we think that's going to be a key source of organic growth [inaudible] moving forward, and most likely will be a proverbial third leg to our stool.
Third leg to our stool.
Scott Graeme Perry: This year the plan is really focusing on drilling and exploration. As we make our way into 2023, we want to be in a position to publishing renewable resource on the property as well as a feasibility study, which will be looking to underpin a potential future construction decision.
Scott Graeme Perry: The fifth bullet point here, just in terms of Oxford, and the identification of Mercury within the mineralogy, we're continuing to conduct several studies in terms of identifying potential technical solutions to remediate this challenge. They are under evaluation as we speak in addition to alternative means of monetizing a loaded golden carbon and I'll talk to this more in a future slide.
<unk> to conduct several studies in terms of identifying potential technical solutions to remediate. This challenge they are under evaluation as we speak in addition to alternative means of monetizing a loaded golden carbon and I'll talk to this more in a future slide and then just lastly on the last bullet point here in the bottom left.
Scott Graeme Perry: And then just lastly on the last bullet point here in the bottom left, obviously, during the quarter another key development on April 4th was when we entered into the global arrangement agreement which resulted in the government of the [inaudible] republic and this has been a very important development in terms of resolving the commentary issue and I think this will be a good development just in tariffs in terms of us putting in place a clean exit and moving forward in that business.
Cause resulting in the government of the cookies republics and this has been a very important development in terms of resolving the commentary issue and I think this will be a a good development just in tariffs in terms of us putting in place a clean exit and moving forward in that business.
Scott Graeme Perry: On the next slide on slide five, the number of highlights here, I want to speak on more. So just the first bullet point, from a safety perspective, we had a very good quarter in terms of our all injury frequency rate. We're actually operating below target and we also had a number of milestones during the quarter, which gives us confidence that we can operate in an environment of zero harm.
So just the first bullet point is from a safety perspective, we had a very good quarter in terms of our all injury frequency rate, we're actually operating below target and we also had a number of milestones during the quarter, which you know.
It gives us confidence that we can operate in an environment.
Zero harm.
Scott Graeme Perry: Now, one of the particular milestones at Oksut where we achieved 1 million hours of lost time incident-free operations, I definitely want to commend our leadership team at Oksut. Again, a number of highlights here again I'll just reiterate the third last bullet point, we're seeing very good levels of productivity and unit cost efficiency and again, just given the strong metal output, you can see in terms of the result and all-in sustaining cost per ounce, we're operating at a very low, very competitive $395 per ounce.
You can see in terms of the result, and all in sustaining cost per ounce were operating at a very low very competitive $395 per ounce.
Scott Graeme Perry: Just moving onto the next slide on slide six, just in terms of our environmental social governance profile, again, a number of bullet points here, just providing updates on some of the key initiatives during the quarter. Again, the first bullet point in terms of safety, obviously, this is absolutely paramount and that key milestone that we achieved at Oksut, I think is indicative of our focus on obtaining a zero-harm environment.
Just in terms of our environmental social governance profile again, a number of bullet points here, just providing updates in some of the key initiatives during the quarter again, the first bullet point in terms of safety. Obviously this is absolutely Paramount and then.
A key milestone that we achieved that all said I think is indicative of our focus on obtaining a zero harm environment.
Scott Graeme Perry: I do want to touch on the third last bullet point. So Centerra Gold is a member of the World Gold Council, and some two to three years ago the World Gold Council rolled out its responsible gold mining principles, which as I said, is essentially a set of 52 environmental social governance principles. And we as an association, we as an industry are looking to demonstrate full compliance with these principles by 2023. So as part of this program, we did our year two assurance at our site and I'm pleased to report that we are in excellent stead and establishing compliance with these principles. So you know in very good stead for achieving the targeted deadline.
So <unk> is a member of the World Gold Council and some two to three years ago. They will go Council wrote at its responsible gold mining principles, which as I said, it which is essentially a set of 52.
Rental social governance principles and we as an association we as an industry are looking to demonstrate full compliance with these principles.
In 2000 by 2023, so as part of this program, we did a year or two assurance I'd ask but and I'm pleased to report that we are in excellent stead and establishing compliance with these principles. So you know in very good stead for achieving the targeted deadline.
Scott Graeme Perry: Just moving on to slide seven and just looking at Mount Milligan in a little bit more detail. First of all, the point as I mentioned earlier, Mount Milligan had a very good quarter in regards to metal output, especially so in terms of copper production, which was fatuitous just given the strong prevailing copper price environment. But this strong level of the metal production you see that in terms of the corresponding all-in sustaining cost per ounce. So again, producing our gold as low as $15 per ounce and again really benefiting from the strong copper price environment is strong and the quantum of the copper byproduct revenues that we're recognizing.
First of all the point as I mentioned earlier at Mount Milligan had a very good quarter in regards to metal output, especially so in terms of copper production, which was fatuitous just given the strong prevailing copper price environment.
But this strong level of the metal production you see that in terms of the corresponding all in sustaining cost per ounce. So again, producing a gold as low as $15 per ounce and again really benefiting from the strong copper price environment is strong.
And in the quantum of the copper byproduct revenues that were recognizing.
Bullet 0.1 of the key capital projects, we have been working on at Mount Milligan is installing a new circuit of staged flotation reactors.
Scott Graeme Perry: The third bullet point, one of the key capital projects, we have been working on at Mount Milligan is installing a new circuit of staged flotation reactors. The rationale here is we think this can add one to two additional percentage points of recovery on our gold and copper. Construction of the circuit has been underway for some time now and we're now actually in the commissioning phase, and we expect to have this circuit commission here in Q2 of this year, so that should be beneficial just in terms of underpinning stronger gold and copper recovery efficiency rates moving forward.
Our strongest gold and copper recovery efficiency rates and moving forward.
Scott Graeme Perry: The fourth bullet point, the team continues to work on the new 43-101 life of mine plan or the technical study for Mount Milligan. [inaudible] may recall that we had a lot of success at Mount Milligan last year in terms of growing our gold resources and our copper resources and what we're focusing on now with this new study is we're looking to convert as much of that new mineralization into reserve category, and we think that's going to underpin a a meaningful extension and Mount Milligan is doing added reserve asset lives. So that study is on track and we expect to be publishing that here in the Q2 reporting period.
<unk> may recall that we had a lot of success at Mount Milligan last year in terms of growing.
Gold resources are now copper resources and what we're focusing on now with this new study has been working to convert as much of that new mineral mineralization into reserve category, and we think that's going to underpin a a meaningful extension and Mount Milligan is doing added reserve asset lives. So that study is on track and we expect to be publishing that here in Q2.
<unk> reporting period.
Scott Graeme Perry: Just onto the next slide, on slide eight, just the first bullet point. I touched on this at the outset, at Oksut right now we are operating at full capacity. So be it our mining activities, stockpiling activities, crushing, stacking, irrigation, and leaching activities, all of that is continuing at full capacity and we are continuing to convert our ore into loaded golden carbon form, which we are currently storing and stockpiling in a securitized manner.
Slide eight.
Just the first bullet point I touched on this at the at the outset at.
Oxide right now we are operating at full capacity. So did our mining activities stockpiling activities crushing stacking irrigation and leaching activities all of that is continuing.
Full capacity and we are continuing to convert our ore into loaded golden carbon for them, which we are currently storing and stockpiling and securitize manner.
Scott Graeme Perry: In the interim, what the team here is working on is several potential sort of engineering technical solutions in terms of how we can upgrade the ADR facility, where we drew our gold processing. So we're looking at now remediating some of these challenges to make sure that we can remove the mercury and continue to pour gold on site. But in parallel, we are also in discussions looking at alternative means of monetizing our golden carbon and we are in discussions with some upside sort of treatment facilities looking at is that a potential solution here in the short term. I think we're going to have a more meaningful update on this during the quarter and we'll look forward to reporting back on that shortly.
The ADR facility, where we drew our gold processing. So we're looking at now Remediated. Some of these challenges to make sure that we can remove the mercury and continue to pour gold on site, but in parallel we are also in discussions looking.
Looking at alternative means of monetizing our golden carbon and even dish.
Discussions with some upside sort of treatment facilities looking at is that a potential solution here in the short term.
I think we're going to have a more meaningful update on this during the quarter and we'll look forward to reporting.
Back on that shortly.
Scott Graeme Perry: Just the last bullet point here, the fourth bullet point, we continue to focus on out all of our productivity and unit cost efficiencies, big focus on trying to lower our cost even further at Oksut. As you would've seen Oxsut did have a very strong quarter during the Q1 period, they produce 54,000 ounces of gold and that's what results in the competitive all-in sustaining cost of $451 per ounce.
And again, the competitive all in sustaining cost of $451 per ounce the.
Scott Graeme Perry: The mine continues to perform really well as we speak. Here in early Q2, our productivity in unit cost efficiencies et cetera absorbed gold, we're operating in line with target, if not ahead of target.
Our productivity is unit cost efficiencies et cetera absorbed gold.
Waiting in line with target if not ahead of target.
Scott Graeme Perry: With that, I'm now going to pass the call over to Darren Millman, our Chief Financial Officer, and Darren will drill down into some of the financial highlights a little bit more.
Darren J. Millman: For those following on the slide deck, we're on slide nine. Centerra recorded $295 million in revenue during the quarter, consisting of the Mount Milligan mine, the Oksut mine, and our Molybdenum business unit. Revenue consisted of $156 million gold sells, $68 million in copper sales, and $58 million from the Molybdenum business unit. In the quarter, our continued operations sold 94,908 ounces of gold, 40,204 ounces from Mount Milligan mine, and 54,704 gold ounces attributed to the Oxsut mine. We also sold $19.4 million pounds of copper in the quarter.
<unk> recorded 295 media revenue during the quarter, consisting of them that really goodbye theocracy, Mont and epilepsy business unit.
Revenue consisted of 156 Canadian gold sells 68, <unk> <unk> $58 million.
Molybdenum business unit.
It's a quarter of continued operations, so 94908 ounces of gold.
40240 ounces from that really goodbye and 54704 gold ounces attributed to the Oxford Lane.
We also sold $19 4 million pounds of copper in the quarter.
Darren J. Millman: During the quarter, the company's operations average gold price realized was $1687 per ounce and $3.77 per pound of copper. This incorporates the existing streaming arrangements over the Mount Milligan mine.
Darren J. Millman: Cash provided by operating activities from continuing operations was $28 3 million for the quarter. And as noted in the MD&A, the Mount Milligan mine recognized four copper-gold shipment sales in the quarter but only received three provisional cash payments. In the second quarter, we will receive the full shipment provisional cash payment of $42 million.
Noted in the MD&A that really goodbye and recognized for copper gold shipment sales in the quarter was R&D, receiving three provisional cash payments and the <unk>.
Second quarter, we will receive the full shipment provisional cash payback of $42 million.
Darren J. Millman: Free cash flow from continued operations for the quarter was $9.1 million, once again impacted by the timing of Mount Milligan's full shipment cash receipt, together with the negative free cash flow of $20.1 million in the Molybdenum business unity. We forecast positive free cash flow in the Molybdenum business unit for the remainder of the year with the release of working capital and reduce costs.
Together with the negative free cash flow of $20 1 million.
Shoot it.
We forecast positive free cash flow.
A link to that business unit for the remainder of the year with the release of working capital and reduce costs.
Darren J. Millman: At an operational level, the Mount Milligan mine generated $6.4 million of free cash flow for the quarter. The Oksut mine in the quarter generated $61.4 million in free cash flow. The Oksut mine is continuing operating activities in mining, stockpiling, crushing, stacking, and leaching activities in accordance with our 2022 plans up until [inaudible]. The adjusted net earnings per share was 19 cents for the quarter.
In the quarter generating $61 4 billion in free cash flow.
<unk> continuing operation upward operating activities, a bonding stockpiling crushing stacking and leaching activities.
Quarters without 22 plants opt to go to comparable.
The adjusted net earnings per share was <unk> 19 for the quarter.
I'll just move on to slide 10. The net earnings from continued operations was $89.4 million in the quarter, with $56.4 million and adjusted net earnings recorded.
The net earnings from continued operations was $89 4 billion in the quarter with $56 4 million and adjusted net earnings recorded.
The earnings in the quarter attributable to operations were $45.6 million contributed from the Mount Milligan mine, $67.4 million contributed from the Oxsut mine, and $6.4 million loss from the Molybdenum business unit.
$45 $6 million contributed from the <unk> $67 four being contributed from the Oxford by $6 4 million to a loss from molybdenum business unit.
For the quarter there were several adjusting items of significance that are noted on this slide in particular, the [inaudible] and other related costs of $6.5 million and the reclamation provision adjustment on care and maintenance side of $42 million, primarily a result of the risk-free interest rates applied to our underline liabilities.
The reclamation provision adjustment on care and maintenance sorts of $42 million, primarily a result of the risk free interest rates applied to underline liabilities.
Just moving on to slide 11. From a cost perspective, Centerra's continued operations in the quarter recorded a production cost of $497 per ounce. All-in sustaining cost on a by-product basis of $395 per ounce.
From a cost perspective, <unk> continued operations in the quarter over quarter production cost of $40 $497 per ounce all in sustaining cost on a byproduct basis of $395 per ounce.
At an asset level for Mount Milligan, we recorded all-in sustaining cost on a by-product basis of $58 per ounce. $75.5 million in copper credit was a significant contributor for this very low cost performance.
Bill again, we recorded all in sustaining cost on a byproduct basis of $58 per ounce.
$75 five lead and copper credits was a significant contributor for this very low cost performance.
The Mount Milligan guidance remains unchanged at $575 to $625 per ounce for the year with a targeted gold production of between 190,000 to 210,000 ounces of gold and 70 to 80 million pounds of copper. Oxsut recorded all-in sustaining costs of $451 per ounce for the quarter.
Oxy recorded OLED sustaining cost of 451 dose per ounce for the year for the quarter.
As noted in the MD&A, the Oxsut guidance is currently under review with several technical options being evaluated together with the monetization options reviewed both on the short term that potentially [inaudible].
The company exited Q1 with a cash balance of $768 million, a reduction in cash amounts compared to Q4. This is attributable to that $176 million acquisition of the [inaudible] projects in Nevada.
A reduction in cash amounts compared to Q4, this attributable to that $176 million acquisition of the Gulf with projects in Nevada.
Given our strong financial performance together with our free cash flow expectations, the board declared a quarterly dividend of 7 cents per share.
Finally, I draw your attention to the middle table of this slide. The company expects gold production at these levels in the form of gold in concentrate at the Mount Milligan mine and gold in carbon at the Oksut mine. The company is planning to announce operational plans to adjust mercury issues experienced together with updated guidance in Q2 reporting. With that, I'll pass it back to Scott.
The company expects gold production at these levels in the form of gold in concentrate at the Mount Milligan mine at goaded carbon at the oxide mine.
The company is planning to announce operational plans to adjust mercury issues experience together with updated guidance in Q2 reporting.
With that I'll pass it back to Scott.
Scott Graeme Perry: Thank you, Darren. So, just on the last slide here on slide 12. So again, as I spoke to earlier just looking at the bullet points on the top left. I think it was a good quarter in terms of metal output and I think in the third bullet point, you can see the business is performing really well from a fiscal perspective, again very low competitive all-in sustaining cost of $395 per ounce and that's obviously, what's really underpinning the strong profitability that we reported during the quarter. And then also, as we've highlighted, I think we've got a very strong financial foundation here in terms of the balance sheet, we finished the quarter with net cash of some $768 million US and with the addition of our undrawn revolving line of credit facility, we had some liquidity of approximately $1.17 billion. So I think that certainly allows us to advocate and continue to operate an internally fully funded business model moving forward.
Slide 12.
So again as I spoke to earlier just looking at the bullet points on the top left.
I think it was a good quarter in terms of metal output I think in the third bullet point you can see the business is performing really well from a fiscal perspective again very low competitive all in sustaining cost of $395 per ounce and that's obviously, what's really underpinning the strong profitability that we reported during the quarter and then also as we've highlighted I think we've got it.
Strong.
Financial Foundation here.
the balance sheet, we finished the quarter with net cash of some $768 million US and with the addition of our undrawn revolving line of credit facility, we had some liquidity of approximately $1.17 billion. So I think that certainly allows us to advocate and continue to operate an internally fully funded business model moving forward.
Yes.
The last two bullet points here in this table here in the bottom left, I think they also just speak to news developments that will be expected to report on here in Q2. Firstly, in terms of Oksut and what is the solution here that we're going to be embarking on. As we've mentioned, I think we'll have news flow on that shortly here in the Q2 period with the resolution agreement with the [inaudible] Republic, as we've mentioned and now disclosed today, we expect to be closing that here in the Q2 period. And I think the other thing I'll just draw on as well is the 43-101 study that is underway at Mount Milligan. Again, we expect to be finalizing that and publishing that in the Q2 reporting.
Firstly in terms of offsets and what is the solution here that we're going to be embarking on as we've mentioned I think we'll have news flow on that shortly here in the Q2 period.
The agreement resolution agreement with the cookies Republic, as we've mentioned and now disclosure to say, we expect to be closing that here in the Q2 period and I think the other thing I'll just draw on as well as the 43 101 study that is underway at Mount Milligan again, we expect to be finalizing that and publishing that year and the Q2 reporting.
<unk>.
Lastly, just from a management update perspective, you would've seen in today's release, we announced that Dan Desjardins has retired as the company's Vice President and Chief Operating Officer. Obviously, the company we certainly offer our sincere thanks and gratitude to Dan for his dedication, leadership, and contributions to the strategic direction of Centerra during his many years of service since Dan joined the company in 2015.
You would've seen in today's release, we announced that <unk> has retired as the Companys, Vice President and Chief operating officer.
The company.
We certainly offer a sincere thanks and gratitude to them for his dedication leadership and contributions to the strategic direction of some tariff during his many years of service since Dan joined the company in 2015.
Under Dan's leadership, first as President of [inaudible] Gold company, and subsequently as Vice President and Chief Operating Officer, he really curated enduring passion for continuous improvement. The [inaudible] mine was certainly elevated to world-class status and then more recently with the construction of the Oksut mine, this was delivered on time and under budget and has since fully repaid its upfront investment we've been assessed two years of commercial production.
So a mine was certainly elevated to world class status and then more recently with the construction of the oxide mine.
This was delivered on time and under budget and has since fully repaid its upfront investment we've been assessed two years of commercial production.
Again, I want to go on the record and say the company thanks Dan for his contributions to Centerra over the many years and we certainly wish Dan all the best in his retirement. And lastly, I'll just note an international search firm has been engaged to identify Dan's successor.
So with that, that really concludes our sort of prepared remarks and Beatrice, our operator, I can pass the call back over to you for the Q&A session, please.
Beatrice our operator, if I can pass the call back over to you for the Q&A session. Please.
Operator: Thank you. If you would like to register a question, please press the one followed by the four on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the one followed by the three. One moment please for the first question.
My question has been answered and he would like to withdraw your registration. Please press the one followed by the three.
One moment please for the first question.
Our first question comes from the line of Trevor Turnbull with Scotiabank. Please proceed with your question.
Trevor Turnbull: Thank you and thank you, Scott. Congratulations on the EA Amendment update on Mount Milligan. With respect to that EA, you mentioned that long-term water is now secured for the life of the deposit or for the project, and I just wonder, does that statement include any potential changes that might come with the new mine plan?
Congratulations on the EIA Amendment update Mount Milligan.
With respect to that you mentioned that long term waters now secured for the life of the deposit or for the project and I. Just wondered does that statement include any potential changes that might come with the new mine plan.
Scott Graeme Perry: Yes, Trevor thanks for that question. And yes, I think that statement does allow for any additional mine life that is going to be delineated here with the new 43-101. So yes, the answer is yes.
Yes, Trevor Thanks for that question and yes, I think that statement does allow for any additional mine life that is going to be delineated here with the new 43 101. So yes. The answer is yes.
Trevor Turnbull: Okay great. And then a question on Oksut, as you kind of work out a solution for the Mercury there, I wondered how we should think about how you will account for costs in Q2. I just wondered are you going to be able to defer like some of the costs entailed with gold production and sales take place or will the costs really be tied to kind of lower sales and therefore potentially abnormally high for Q2?
And then a question on Oct suite as you kind of work out a solution for the Mercury there I wondered how we should think about how you will account for costs in Q2, I. Just wondered are you going to be able to defer or like some of the costs Intel the gold production and sales take place or will the costs really be tied.
Two to kind of lower sales and therefore potentially abnormally high for Q2.
Scott Graeme Perry: I'm looking at Darren. Darren, do you want to respond to that?
Darren J. Millman: Yeah, Trevor, so we envisaged just really a buildup of inventory, so golden carbon inventory on our balance sheet, we don't imagine too much flowing through our profit and also income statement. There might be some auto costs associated with the gold room but we don't feel that will be material so that's sort of how you will see the flow-through in hopefully just Q2.
Envisaged just really a buildup of inventory so golden carbon inventory on our balance sheet, we don't imagine too much flowing through how profitable also income statement. That might be some auto costs associated with the gold room that we feel that will be material. So thats sort of how you will see the flow through. Just Q2.
That might be some auto costs associated with the gold room that we feel that will be material. So thats sort of how you will see the flow through. Just Q2.
Just Q2.
Trevor Turnbull: Okay, that's fine. And then maybe kind of a bigger picture question with respect to Oksut, I noticed in the forward-looking statements you talked about the deposit and in support of an updated resource and new life of mine plan and I just wondered-- I didn't know if that was kind of boilerplate forward-looking statements or if we should be watching for an updated mine plan and resource sometime in the near-term.
And then maybe kind of a bigger picture question with respect to talk suite I noticed in the forward looking statements.
You talked about the deposit and in support of an updated resource and new life of mine plan and I. Just wondered is I didn't know if that was kind of boilerplate forward looking statements or if we should be watching for an updated mine plan and resource sometime in the near in the near term.
Scott Graeme Perry: Yes, Trevor it's Scott. No, I don't think we will be providing or publishing any new resource or life of mine plan in the short-term.
Trevor Turnbull: Okay. And then my very last question is about the Moly business and again kind of pointing to those forward-looking statements. There was a reference to potentially restarting or divesting of the mining operations and I was wondering if you could just maybe share your thoughts on the potential for a restart of mining maybe with respect to what kind of timing it would need or what type of investments might be required if you went that route.
And then my very last question is about the malt business and again kind of pointing to those forward looking statements. There was a reference to potentially restarting or divesting of all of the mining operations and I was wondering if you could just maybe share your thoughts on the potential for a restart of mining.
Maybe with respect to what kind of timing it would need or what type of investments might be required if.
If you if you went that route.
Scott Graeme Perry: Yes Trevor, it's very preliminary right now, but myself and the team and our technical team, what we are working on is looking at new feasibility studies or I'm going to use the terminology reactivation studies for both the Thompson Creek mine in the [inaudible] mine. We're really just trying to ascertain, trying to understand what is the potential economic benefits here, what would be the value proposition, what would be the required upfront capital cost as you mentioned. We just want to make sure we have a really good understanding of that. What's really generating these studies is you look at the prevailing moly prices and they've been quite consistently now trading at sort of 19% to $20 per pound.
It's very preliminary right now, but myself and the team and our technical team. What we are working on is looking at new feasibility studies or I'm going to use the terminology reactivation studies for both the Thompson Creek mine in the <unk> mine.
Really just trying to ascertain trying to trying to understand what is the potential economic benefits here, what would be the value proposition what.
What would be the required upfront capital cost as you mentioned.
To make sure we have a really good understanding of that.
What's really generating.
<unk>.
These studies as you look at the prevailing moly prices and they've been quite consistently now trading at sort of 19% to $20 per pound.
In addition, we are seeing more and more sort of an external supply and demand sort of analysis that's suggesting that this level of moly pricing could continue. So if you accept that sort of prevailing moly price environment, it could suggest that there is some deep value here within our molybdenum business unit. So we want to make sure that we understand that and so that's why we're doing those studies. Once those studies are complete and kind of more finalized that's something that we'll then need to kind of discuss with the board.
Supply demand sort of analysis that suggesting that. This level of multi pricing could continue. If you accept that sort of prevailing multi price environment. It could suggest that there is some deep value here.
This level of multi pricing could continue. If you accept that sort of prevailing multi price environment. It could suggest that there is some deep value here.
If you accept that sort of prevailing multi price environment. It could suggest that there is some deep value here.
We've been our molybdenum business unit. So we want to make sure that we understand that and so thats why were doing those studies.
Once those studies are complete.
Kind of more finalized that's something that will then need to kind of discuss.
But again, you mentioned potentially divesting the molybdenum business unit likewise, the strong prevailing moly price, we have seen interest from third parties as well. So again, it's important that we understand and we have a view on what is the value here if we do find ourselves engaging in any discussions with third parties. I think I'm giving you a long answer Trevor but that's why we need to have those studies in hand. We really need to understand what is the value proposition here before we can embark on any next steps.
You mentioned potentially divesting the molybdenum business unit likewise, the strong prevailing multi priced we have seen interest from third parties as well so again it's important.
We understand and we have a view on what is the value here, if we do find ourselves engaging in any discussions with third parties.
I think I'm, giving you a long answer Trevor but that's why we need to have those studies in hand, we really need to understand what is the value proposition here before we can embark on any next steps.
Trevor Turnbull: Yes, that makes sense. Do you have a sense of timing for how long until the studies would be available?
Scott Graeme Perry: It's not something that we've committed to publishing externally. This is more so something that we're focused on internally as an organization but I would like to think that myself and the broader management team will have sort of a final product that we can be discussing with our board in the next sort of three to four months hopefully.
It's not it's not something that we've committed to publishing externally. This is this is more so something that we're focused on internally as an organization but.
I would like to think that myself and the broader management team will have sort of a final product that we can be discussing with our board in the next sort of three to four months hopefully.
Trevor Turnbull: Okay, and just one quick follow-up on that. Because you continue to process some product through Thompson Creek, does that potentially give it a bit of an edge in terms of being a low closer or simpler in terms of reactivating compared to [inaudible].
Because you continue to.
Process, some product through Thompson Creek.
That potentially give it a bit of an edge in terms of being a low closer or or simpler in terms of reactivating compared to see endako.
Darren J. Millman: Yes, both concentrates that were historically produced from the [inaudible] mine and the Thompson Creek mine, where we have high product and that enables additional margins to be recognized in the [inaudible] metallurgical facility in Pittsburgh, so there are benefits of either mine. So I think we would do in those studies as Scott mentioned, the expectations, if we were to make that decision to reset either mine that we would still continue with our existing business model of purchasing third party concentrates and elevating or bettering those for selling in the steel industry, chemical industry. So the more throughput we can get through the [inaudible] facility, the higher margins we can overall achieve as a business unit. So it's an important add-on Trevor and that's how we look at it.
And that enables additional margins to be recognized in the lifeboat metallurgical facilities Pittsburgh. So so there is benefits of <unk>.
Yes, So I think we would do in those studies as Scott mentioned.
The expectations, if we were to make that decision to reset our demand that we would still continue with our existing business model of purchasing third party concentrates.
Elevated bile.
Right now as for selling in the steel industry chemical industry. So before at the pool of throughput we can get through the <unk> facility. The higher margins, we can overachieve as the business unit. So it's a.
Adam Trevor as Helen said, we look at it.
Trevor Turnbull: Okay, I really appreciate the color and look forward to hearing what you come up with. Thank you.
Operator: Our next question comes from the line of Michael Siperco with RBC Capital Markets. Please proceed with your question.
Michael Siperco: Thanks very much Scott and team for taking my questions. A couple of follow-ups, but maybe first just on the free cash flow number this quarter, I just wanted to be clear. This is an understated number correct, on the timing of that cash received at Mount Milligan? In other words, we should be expecting a reversal of that increase in Q2, and assuming it had been received in Q1, the free cash flow number would be something closer to $60 million, is that correct? Is that in the ballpark?
This is an understated number correct on the timing of that cash and seed.
At Mount Milligan in other words, we should be expecting a reversal of that increase in Q2 and assuming it had been received in Q1, the free cash flow number would be something closer to $60 million is that is that correct is that in the ballpark.
Darren J. Millman: Yeah, that's in the ballpark.
Michael Siperco: Okay, very good. And then following up on the question on Oksut, so am I understanding this right in terms of production in Q2, basically, we shouldn't be expecting any any gold pour just the buildup of inventory of gold in carbon for Q2, is that correct where we stand today?
And then following up on the question on Oct suite. So am I understanding this right in terms of production in Q2, basically we shouldn't be expecting any any gold pour just the buildup of inventory of Golden carbon for Q2 is that is that correct, where we stand today.
So am I understanding this right in terms of production in Q2, basically we shouldn't be expecting any any gold pour just the buildup of inventory of Golden carbon for Q2 is that is that correct, where we stand today.
Scott Graeme Perry: Michael, it's Scott here, that's a difficult question for me to answer right now. I think Darren said it in his prepared remarks, we do shortly expect within the quarter to be providing a further operational update on Oksut. But listen, the reason why I find it difficult to answer your question is one option we are looking at is monetizing our loaded gold in carbon at an offsite treatment facility. We're in discussions right now with the principals there. We've certainly been reassured that they build the infrastructure, installations, technology, and the capacity to deal with our loaded gold in carbon. And really what we're doing right now is we're sort of in the final stages of those discussions and negotiations about what that would look like. If that should all come to fruition here then we would be actually producing gold during the quarter. We're not there yet but we're close, so that's why I'm struggling to answer your question, Michael. I'm just going to pause and see if I've articulated myself well, if you know what I mean.
I think Darren said it in his prepared remarks, we do shortly expect within the quarter to be providing a further operational update on <unk> listen the reason why I find it difficult to answer. Your question is one option. We are looking at is monetizing our loaded golden carbon at a offsite.
Treatment facility.
We're in discussions right now with the principals there.
We've certainly got we've certainly been reassured that they build the infrastructure installations technology and the capacity to do without loaded Golden Cub and really what we're doing right. Now is there is sort of in the final stages of those discussions negotiations about what that would look like.
If that should all come to fruition here.
Then we would be actually.
<unk> gold during the quarter.
We're not there yet but they closed so that's why I'm struggling to answer your question, Michael I'm going to pause and say the articulated myself well if you know what I mean.
Michael Siperco: Yeah, I think that makes sense. I suppose the question then is, is this something that can be initiated within the quarter or is there something that you can start doing tomorrow if everything works out, shipping the gold in carbon I mean?
I think that makes sense.
I suppose the question that is this something that can be initiated.
Within the quarter or is there something that you can start doing tomorrow, if everything works out shipping the Golden Carbonite.
Scott Graeme Perry: Yes, the answer is yes, it can be initiated within the Q2 period. And again, they have the capacity, but again it's going to come down to what are the economics associated with that option and obviously, doing a tradeoff study how does that compare with fully remediated our ADR facility and treating it onsite and what's the tradeoff there time value of money et cetera. That's what we're looking at right now. Yes, I think this could be a potential solution in the Q2 period but you have to wait until we come back and report on the market on where we've landed on them.
And again, they have the capacity, but again its going to come down to what are the.
The economics associated with that option and obviously, how does that compare doing a tradeoff study how does that compare with.
Fully remediated our ADR.
Adi facility in treating it onsite with what's the tradeoff there time value of money et cetera.
That's what we're looking at right now.
Yes, I think this could be a potential solution or in the Q2 period.
You have to wait until we come back and reports in the market on where we've landed on them.
Michael Siperco: Okay, fair enough. And I guess, one more on Oksut, you referenced the potential solution of shipping gold in carbon over the life of mine, I mean, either way depending on what comes out of this and I realize you are in the middle of these studies, does anything change in your thinking about the deposit longer term in terms of capital allocation, exploration, mine life extension, those sorts of things that you were talking about last year or is it sort of too early to tell?
You referenced the potential solution.
Shipping Golden carbon over the life of mine.
I mean, either way depending on what comes out of this and I realize you are in the middle of these studies does anything change in your thinking about the deposit longer term in terms of capital allocation exploration.
Mine life extension those sorts of things that you were talking about last year or is it sort of too early to tell.
Scott Graeme Perry: If I'm understanding the context of your question, I don't think anything changes with regard to our view of the results, the reserve, the life of mine profile, how are we going to save sequence develop the deposit, I think everything remains the same.
So our view of the results the reserve life of mine profile, how are we going to save sequence develop the deposit I think everything remains the same.
Michael Siperco: Okay, got it. If I can just ask one more question, I suppose Trevor covered the moly business, maybe I'll ask about Kemess. Any update on thinking about Kemess in terms of a project for you or a potential divestment, anything along those lines?
Got it.
If I can just.
Ask one more question I suppose that Trevor cover the moly business, maybe I'll ask about <unk> any updated thinking about cannot see there in terms of our projects for you or a potential divestment anything along those lines.
Scott Graeme Perry: No, we've got no update, Michael.
Michael Siperco: Copy. Got it, thanks very much. Those are my questions.
Operator: Our next question comes from the line of Anita Soni with CIBC. Please proceed with your question.
Our next question comes from the line of Anita Soni with CIBC. Please proceed with your question.
Anita Soni: Good morning. Thanks, Scott for taking my question. [inaudible]
Thank you Mike.
Okay. Okay. Okay. We continue. Okay. Okay. Okay. Okay.
Okay. Okay. We continue. Okay. Okay. Okay. Okay.
Okay. We continue. Okay. Okay. Okay. Okay.
We continue. Okay. Okay. Okay. Okay.
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Multiple speakers: Anita, I apologize, you're really breaking up at our end. Operator, was that breaking up at your end as well? Yes, it was.
Anita Soni: Ok, I'll start over. Can you hear me?
Scott Graeme Perry: Yes, much better now Anita I think.
Anita Soni: So I was just asking whether [inaudible] is there a limit there?
Okay.
Hi.
Is there a limit.
Scott Graeme Perry: Anita, I'm sorry, I'm going to frustrate you. You started breaking up again.
Operator: It's okay, we'll take it offline.
Multiple speakers: Okay, sorry, Anita. No problem.
Operator: Our next question comes from the line of Brian Macarthur with Raymond James. Please proceed with your question.
Brian MacArthur: Good morning again, most of my questions have been answered, but can I just follow up on the moly business. There was a statement made it's going to be positive free cash flow for the rest of the year. It was sort of negative 20 if I calculated this right in the first quarter and your guidance originally was consuming 15, I think for the year. So when you're saying it's going to be positive for the rest of the year that means positive on a quarterly basis, you haven't changed your forecast that you are actually going to be positive cash flow for the whole year out of the business i.e. you're going to recover that full $20 million, has something changed or is it still the same?
There was a statement made it's going to be positive free cash flow for the rest of the year.
It was sort of negative 20, if I calculate this rate in the first quarter and your guidance. Originally was consuming 15, I think for the year. So when you're saying, it's going to be positive for the rest of the year that means.
Positive on a quarterly basis, you haven't changed your forecast that you are actually be positive cash flow for the whole year out of the business I E. You're going to recover that full $20 million has something changed or is it still the same.
Darren J. Millman: So we don't anticipate changing our guidance. The only real change we're anticipating now is the release of additional working capital. You would have noted Brian in the quarterly analysis we made reference to working capital and it's in excess of $100 million. So we're really just using a lot more of that [inaudible] for the 2022 year. So that's when I talk about free cash flow generation, a lot of it is just looking to release working capital. So we do anticipate to be pretty close to breakeven cash flow, that's sort of what we're referencing there.
You bought a noted.
Brian in the.
The quarterly now.
Just as we might refers to working capital it's in excess of $100 million. So we're really just using a lot more of that that flat for the 2022 year. So that's when I talk about free cash flow generation is a lot of it is just looking to release working capital. So.
We do anticipate to be.
Pretty close to breakeven cash flow so.
Sort of what we're referencing there.
Brian MacArthur: Great, that's what I was trying to get at--the actual cash. And I assume that all assumes no money being spent on restarts or anything that's just the current ongoing business covering the care and maintenance costs plus the release of working capital, right?
No money being spent on restarts or anything that's just the current <unk>.
Ongoing business covering the care and maintenance costs plus release of working capital right.
Darren J. Millman: That's right.
Brian MacArthur: Thank you very much.
Operator: Mr. Perry, there are no further questions at this time, I'll turn the call back to you. Please continue with your presentation or closing remarks.
Scott Graeme Perry: Okay, thank you Operator, and thank you everyone for joining us for the call. We'll conclude it there and I wish everyone a very good day. I look forward to catching up soon, thank you.
We'll concluded there and I wish everyone. A very good day look forward to catching up soon thank you.
Operator: That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.
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