Q3 2022 Equinox Gold Corp Earnings Call
[music].
Thank you for standing by this is the conference operator, welcome to the Equinox Gold third quarter 2022 results and corporate update.
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I would now like to turn the conference So Richard Willis Bailey, Vice President Investor Relations for Equinox. Please go ahead.
Thank you operator, and thank you everybody for joining us. This morning, we will of course be making a number of forward looking statements. Today. So please visit our website and our other continuous disclosure documents on SEDAR and on our guard to read all of those cautionary notes I will now turn the call over to our CEO and President Greg Smith.
Thanks for laying and thanks, everyone for joining us today.
With me is our C O O Doug ready, our CFO , Peter Hardie, and our EVP of exploration, Scott Heffernan and of course, our VP of Investor Relations ruin Bailey.
I know most of you on the call are familiar with the company, but for those that arent equinox is a diversified Americas focused gold producer and with our fans to lose my now in commercial production, we have seven producing mines in for growth projects, including our large scale greenstone joint venture projects in Ontario, which is in construction now.
Just a reminder, we announced the CEO change in August and so this is my first quarterly call since taking on the role in early September .
I'll start with a broad overview for the quarter, and then turn the call over to Pete and Doug for more details.
We expect an increase in gold production through the year and during the third quarter, we did see a meaningful increase with production of over 143000 ounces of gold, which is a 19% increase from Q2 and a 22% increase from Q1.
That said, we also experienced some operating challenges that are the clo's and horizontal mines and a slow start at our Santa Luiza <unk>.
It impacted production.
This in addition to inflationary cost pressures and an inventory write down at those fellows resulted in lower production and higher costs than we had planned.
With consolidated cash costs in the third quarter of $1400 per ounce and all in sustaining costs of $17 49 per ounce.
We are addressing the operating challenges that Arizona animals bureaus, and we are making progress.
However production in Q4 will also be affected and looking forward. We now expect oil production for the year to be approximately 540000 ounces.
We are seeing inflation start to ease, particularly in Brazil, where we also see inflationary cost pressures persisting through Q4 this year.
As a result, we expect our all in sustaining costs to exceed the upper end of our guidance of 15 30 per ounce by about 5%.
Doug will provide more information on our Q3 operating results and financial results shortly.
Onto our projects during the third quarter, we continued with commissioning of our new stand to lose mine in Brazil, and we announced commercial production commencing on October one this makes sense to lose our seventh producing mine.
We also advanced an updated feasibility study for the last few wells mined during the third quarter.
And in October we filed the technical report outlining the potential expansion of those fields through the construction of a 10000 ton per day, CIL plant, which would complement the existing heap leach infrastructure. The study confirms that last few those could grow to be a large scale long life mine with peak average annual production of over 360000 ounces of gold per year.
However, we have no immediate plans to proceed with the expansion in part this is due to the capital means at our other projects in primarily greenstone, but also due to the continued risk of community blockades. The most recent recent awards occurred in September .
Onto greenstone. The team has made significant progress during the quarter and construction continues to go very well I was on site with our analysts and other stakeholders in September and the site is very impressive I encourage everyone on the call to go to our website and you can check out the photo gallery there.
Overall overall, we're now over 57% complete.
And Eric and his team has successfully executed on the critical path with major components being shipped on time, including from China in October and the building and closures are progressing well for the year end and for the winter work.
Very pleased to confirm that project continues to be on schedule and on budget.
Finally as was discussed on the Q2 call. We did amend our credit facility during the third quarter, which termed out our debt increased our total available credit and reduced our overall interest rates.
With that I'd like to hand over the call to peak to run through our financial results great.
I'll start with our operating results.
We continue with our strong safety and environmental practices in Q3 with no lost time injuries for the quarter. Our total recordable injury frequency rate of 1.10, and a significant environmental frequency rate of <unk> 71, a we're obviously proud of of of those figures.
Being able to continue to operate safely.
Yeah.
During the quarter, we sold 143000 ounces of gold at an average realized price of $1711 per ounce for revenues of $245 million. Our mine operating costs were $189 million, which translates into cash costs as Greg mentioned of 1400, an ounce and all in sustaining cost of 1700 and above 50.
An ounce.
We continue investing in our operations.
We spent $41 million of sustaining capital, that's primarily waste stripping it always on in Las villas, and 132 million in non sustaining capital, that's primarily spending our greenstone construction of $111 million as well as Santa lose the mine. We just brought into commercial production, we spent 10 million there.
And our next slide you'll see our consolidated financial results.
Compared with Q3 2021.
The decrease in average gold price that I mentioned combined with higher costs compressed our margins on the revenue side, we're down $70, an ounce compared to Q3 last year on the cost side examples of the inflationary pressures driving up our consumables costs compared to Q3 last year included in the USA fuels up 60%.
Cyanide is up 40% alignment is up 27%.
And Mexico, Cyanides up, 36% and empower and Lyme are up between 15 and 20% in.
In Brazil, all of those items are up about an average of 40% with the exception of power, which decreased a little all of that said we are quite happily seeing signs early signs of inflation, having peaked or even starting to reduce a little bit in Brazil are we obviously hope that that continues and we hope it spreads to all.
The other regions, where we operate.
The compression in margin as demonstrated by.
The decrease in income from mine operations that we had for the quarter of $7 million from the 54 million we had in Q3 last year.
EBITDA was $30 million, that's 26 million on an adjusted basis and the company had a net loss of 30 million or 10 cents a share for the quarter on an adjusted basis. It was similar at 26 million and nine cents a share.
Cash flow from operations before changes in noncash working capital was $15 million or five cents a share.
Our liquidity and capital position at the end of the quarter, we actually have a $142 million or net debt was 584 million I'll note that we drew an additional 100 million from our revolving credit facility in October and that leaves us with 127 million Undrawn and the 100 million accordion feature still in place.
So our investments are we heard about they were worried about the market value was about $220 million at the end of October .
On the next slide what does that mean for overall funding status.
We have about 435 million left to fund at greenstone, that's our share of the remaining construction and.
And we expect to fund that using a future cash flow along with the sources I just outlined.
Yeah.
We always continue to try and optimize our capital structure, we demonstrated that earlier this year by refinancing our revolving credit facility.
I'll note that in late October we filed a preliminary base shelf prospectus with the exchange that when finalized will be effective for 25 months and allow for raising up to 500 million through various sources of capital. We see this is very normal course for a company of the size of equinox years ago. When asked what ox was a single asset developer, we did have a base shelf in place.
Since then the company embarked on a rapid growth strategy, we completed three acquisition and merger transactions and now that we've had a period of relative calm from that activity. We've had time to put a base shelf prospectus back in place, we see that as again as being normal course, and especially prudent given our current economic environment.
As part of that perspective, we're also assessing the implementation of it at the share Oh pardon me out the market share facility, we hope to finalize the prospectus in November I will turn the presentation over to Doug for a discussion of our operations.
Thanks Pete.
On the operations for the quarter Muskie performed well in Q3 as we finished mining of phase two of the Brownie pit and we benefited from a large amount of ore that was stacked in Q2 and came under leach in Q3.
Mining at mosquitoes now transitioned to stripping in brownie phase III and the Avista East, which will provide award as we go into 2023.
The mine celebrated coring, it's 5 million pounds and over $4 three years with no lost time incidents in the quarter.
As of the quarter.
Our castle mountain crushing and agglomeration has been providing better percolation and better recovery, but we needed to increase the crushing capacity. So that all of the order can be crushed and agglomerated.
In Q2, we had lower tonnes being stacked and there were mainly run of mine.
Or no crushing therefore, we had lower ounces coming out in Q3.
So the transition as we move from leaching of run of mine ore to putting all or through crushing and agglomeration will take several months.
As we gradually bring on new cells that are crushed and agglomerated.
And eventually turn off the run of mine cells, and we'll begin to see the overall results as that happens.
Unless fellows, both Guadalupe and Las villas open pits, we're underwrote consulting on grades in part they have a.
Gains in more tonnes of low grade, but overall lower average grade overall and they fell behind against the mine plan. So we're currently working on revisions to the mine plan to to adjust for that.
Hum wildly.
While Lupe, we also had some high sulfur and copper content ore, which has a lower recovery.
That has been.
Essentially slow down the recovery that we can get from that material.
We are drilling at the moment to look ahead to see how to localize. This is Ben.
And to anticipate how we have to adjust the mine plan to compensate for areas, where we will need to mine through a high sulfur copper content.
Yeah.
Excuse me in Burma Hall underground, we had slow development and slower mining rates than anticipated in the quarter. We did have an improvement during Q2, but it slowed back down again in Q3.
Essentially providing fewer tons than expected and so we are doing an operational review on Burma Hall underground.
Overall, we will expect the Las villas will be below the lower end of production guidance for the year.
Edward Resona, we hadn't extended rainy season, but made it difficult to access higher grade areas of the bottom of the open pit.
And this meant that the.
The operation relied on processing of lower grade stockpiles for longer than usual.
Typically two thirds of our mining is done in the second half of the year as we come out of the rainy season go into the dry season.
So we are doing some catch up now the contractor has brought an additional excavator and five more triple seven trucks.
We're also looking at bolstering the fleet of articulated trucks that are on site with an additional.
Set of trucks.
So we can continue mining into the rainy season, and get caught up on on well as a slower overall ore and waste movement in the second half of the year than originally intended.
So we are doing catch up but we do expect that or Resona, we'll be below on production guidance for the year.
Okay.
Our presenter of the mining by open pit and underground so the increase in the open pit mining. This year is given a chance for the underground to catch up so we've been able to do additional development and bring more stopes online. So that's worked out well.
Throughput and recovery has been increased to over over prior quarters and overall presented is on track to achieve the upper end of production guidance for the year.
Excuse me I know that they've achieved one long one year with no lost time incidents. So a good result presenter.
But RDM.
We continue processing low grade stockpiles, but we've also started work in the open pit this quarter.
Gradually we rules, we will restart in situ mining in the open pit as we go into 2023.
Mine is on track to achieve the upper end of production guidance and the T. S. A phrase is scheduled for completion this month.
But Sam to lose we declared commercial production effective October one.
The resin has been working well, but we continue working on optimizing recoveries and on increasing throughput. So for the quarter for Q3, we had an overall recovery of 70% and throughput was 85% of the design capacity of 7400 tons a day.
We still do have challenges on maintaining the blend of total organic carbon.
At the same time on increasing the throughput.
And also working on increasing the recoveries over where we currently are.
Moving onto greenstone. The Greenfield project is tracking on time and on budget as noted overall project is 57% complete.
And that compares to 30, sorry, 35% complete at the end of Q2, so really good progress during the summer months.
The team has completed over $1 8 million hours with no lost time incidents.
And during the quarter, we had four 793 trucks and the PC 5500 excavator they were assembled in the quarter and mining commenced ahead of plan and the team has moved over 550000 tonnes. So far.
I'm just going through the next two photos are all of the buildings are to being closed in Q4 with the exception of the eastern plant.
The east end of the plant building, which is scheduled to being closed in Q1. So they are doing really well that is on schedule that is as planned.
All of the major items are arriving in the next two quarters.
And I note that the natural gas pipeline is now complete.
The MTO relocation is now complete and we're on schedule with the tailing storage facility and ahead of schedule on the high Road highway relocation work.
Those as per our schedule the work on those will be suspended during the winter months, and we will pick them up again in the spring and there'll be carried to completion.
So the site photos they show great progress by the construction team and as Greg noted you can see up to date photos on our website and also on the greenstone project website.
So back to Greg.
Thanks, Doug.
I'll just make a few quick.
Quick concluding remarks.
Yeah just.
Going back in time, a little bit here Equinox is still a young company. We launched this company in 2018 with two development projects.
No production.
But we did have an ambitious goal and that was to build a gold company of scale with significant leverage to the gold price, which we believed was going to do well over the coming years.
Our strategy at the time included both acquisitions and internal development. We executed on this first through our acquisition of Mesquite and then the development of horse owner and then the acquisition of legal and the development of the first phase of our Castle Mountain mine.
And the strategy worked very well in 2020, our shares significantly outperformed as the gold price rose to over $2000 an ounce.
At that time, we were then able to buy Premier gold, which of course delivered us the large scale greenstone gold project, which were building now.
But leverage works both ways and in these current inflationary conditions in with this sort of decreasing and stagnant gold price.
Challenging for all gold companies, but particularly for higher cost high growth companies like equinox that are spending capital to grow and build our mines.
So in this macro environment our strategy Underperforms.
Now we got to live with this to some extent and stay focused on the task at hand, which for US is delivering on construction at greenstone on time and on budget and also performance at our existing operations.
We did plan to do better at our operations than we did in Q3, and we intend to do better we have a dedicated team at equinox supportive shareholders a world class project at Greenstone with Orion Mine Finance is a great joint venture partner.
And we've got a portfolio of assets, they're going to support a much higher production profile as we continue to expand and develop them.
So I'm very confident in our future and we're going to continue working very hard to build a great company here at equinox.
I think with that I'll conclude and pass it back over to Lynn for Q&A. Thanks, Craig Operator can you. Please remind people how to ask a question.
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Well pause for a moment as callers join the queue.
Thank you the way that people think he Wap I'll take a question from online when you announced the Steelers update it made it quite clear that you weren't going to tell the expansion right now and that you were prioritizing Castle mountain how are the expansions going at castle Mountain in Arizona.
Well why don't I take the Castle Mountain question first.
Castle Mountain, we did develop a phase one operation there, which is a fairly small scale operation primarily.
In place in order to advance the phase two expansion, which would take production to over 220000 ounces per year. So earlier. This year I believe in March we did file our plan amendment or let's just call that our permit application to.
To the regulators and since that time, we have received.
A notice of a completion of that plan amendment from both the state and the county regulators. We're just waiting on the BLM and we expect to have their conclusion by the end of this year, then that will set the stage for a determination of whether we're doing.
And environmental assessment or full environ.
Environmental impact statement, we should know that early next year and then the timeframe to complete that would have us.
Ideally permitted sometime in mid 2024 with an outside date of mid 2025 and at that point, we would we would hope we look to start that expansion of castle mountain and increase production there.
And that's.
I'll take horizontal so on autozone.
We finished the.
The PFS.
We had been drilling during 2021, so we have continued working towards a feasibility study.
While we are also putting in permit applications for three portal locations. So.
We are working towards a mineral resource and mineral reserve update for our horizontal underground.
We have received permits for the three areas, where we want to do the portals are we are.
Did a trade off that confirmed our selection of the west end portal location SM.
Essentially our mining will have is that that area is available at the end of Q3. This year. So we will have the ability to be able to start with.
<unk> developed a portal in Q4 of this year.
Our next year, sorry, Thanks Bart.
Jumping to handle.
So it is progressing really well we're seeing we're seeing overall a good result, and at the same time, we continue exploration and the area around our Resona.
Perfect. Thank you operator. Please go ahead with the questions on the phone.
Kelly.
The first question is from Dalton <unk> with Canaccord Genuity. Please go ahead.
Thanks, Hey, good morning, guys that.
Greg or maybe Peter I want to start kind of with the elephant in the room here on my numbers. It is.
It looks like at spot prices, they still are a reasonable funding gap even after considering your.
Snakes, naive and Soliris and you guys mentioned the shelf you mentioned the ATM and I'm just wondering what other options are available to you and kind of how would you rank all these options in terms of deploying them.
Oh excuse me I'll start and Greg can excuse me can feel free to jump in any time.
Option number one is cash flow.
Now when we did our guidance for the year cash flow and its part driven by seasonality is weighted into the second half of the year and we.
We underperformed for the quarter end and as Greg mentioned, we expect to come in below our guidance for the year. Our expectation is that that cash flow will push into next year, we're going through our budgeting now.
And obviously well will confirm all of that when we do our guidance for next year.
So auction number one is cash flow, we generated lots of it last year.
We expect to return to profitable.
And you know good margin production going forward.
We have our existing treasury of $142 million at the end of the year obviously.
That that is immediately available.
And we have our undrawn revolver portion of 127 million.
Following that our next most liquid source of capital or investments.
Sure.
We're strong in support of shareholders of those companies and have been for some time that said that is a lever we can pull.
Following that with respect most available or immediate available we have the accordion feature on our revolving credit facility, that's an additional $100 million.
That requires an additional approval by our lenders.
But it is set and ready to go.
And those approvals.
Assuming everything is in order with the company can be done quite quickly.
And so those are our most ready and immediate sources of capital.
Okay.
Okay, Great and just maybe switching gears to greenstone and I'm looking back at the notes from high up on the September stay busy but I took so first on the schedule at the end of Q2, you were 35% versus target of 40.
And at September 30, if he was supposed to be at 60, but on October 20th ratio at 57, and I'm. Just wondering if you're still kind of lagging behind but you keep saying that you're on schedule I am just wondering when that delta is going to be made up.
I mean I can jump in your adult Mike I don't think our numbers agree with your numbers I think we are we did the re.
The re baseline and.
This summer.
And I think we're tracking very closely to that pizza waved me down here. Yeah. Adult now is at site with our guard down as a percent of your ventures, our SVP projects a week before last what we saw was that we are at most a half percent behind currently.
The schedule.
If you want we can follow up try to reconcile to see where the misunderstanding me Peter but we don't believe that that those numbers John .
John .
What you've mentioned.
Fair enough I mean, we're only halfway through so there that's probably somehow some give and take that but just kind of in that same vein, but on the capex side of things also on the site visit or at that point in time, you had 55% of the Capex contracted like you only had to sort of give contingency left and now you've got 67% committed in them.
Just wondering how much of the contingency you still left.
I mean again I think we talked about this on the site visit.
When we were showing consumption of contingency on the site visit forecasting to the end of the year that was us taking our forecast allocating contingency to the various buckets assuming.
Full construction complete cash out the door so to be clear, we have not consumed that much of our contingency at that time.
The.
And the forecast at the time is also based on trends that the team at greenstone and in our advisors.
Chairman, you know where prices are going in those trends can change over time and I think in some cases, we have seen some easing which is which is obviously a good thing.
But.
Again, our our capex, including our contingency is tracking very well against what we've publicly reported we're going to spend and we.
We don't see any issues again on making budget at this time.
Yeah, and I'll I'll I'll add one final point to that which is when we report our expected spend than budget at greenstone. That's a gross cost. It does include a what you might call typical offsets such as gold produced during the preproduction period, our pre commercial production period and other similar.
Items. So we we track against gross gold gross a budget and then if we have pickups along the way those are those are obviously pluses to help reduce the budget.
Great. Thanks for clarifying happy Thanks, guys. That's all for me.
Thanks, Tom.
The next question is from Wayne Lam with RBC. Please go ahead.
Hi, Thanks, Good morning, guys.
Just wondering Atlas feel us.
Or the update fees can you comment on what was driving the lower reserve grade there and then.
I'm just wondering in terms of potential optimization on costs.
And you outlined some of the things that Youre looking at and is there a potential scenario, where you might be able to.
We might evaluate the potential to put the mine on care and maintenance during the greenstone construction period.
So in regards to the lower average grade.
At Las <unk>.
You'll note that the reserve gold price is lower than it was beforehand. So that brings in more material and a philosophy of those open pit.
You rapidly add a lot of additional lower grade material, which ultimately becomes.
The ROM or Uncorrupt store, the goods to the Leach pad.
We also did.
Resource model reviews would have.
We've taken a more conservative approach in some of the deposits to be able to account for.
Some reconciliation issues that we've had in the past. So we believe that those are prudent measures in it brings down the average grade overall.
Hum.
He did three questions in there was cost.
Amortization and then.
Care and maintenance of possibilities.
Yeah, so on on cost optimization.
That's a two part.
Question for.
Obviously, we.
<unk> been working hard to see how they can use less consumables wherever possible to have some.
Approaches that have been taking in regards to.
Pumping and managing the large leach pads.
Obviously cyanide costs being up as one of the Hugest impact for us.
But <unk> been going through and trying to work on the essentially the reduction in the consumables that we use.
On I think the big impact we've had is.
Going for them in Q3, having less ounces than we anticipated the overall cost per ounce basis, it's hit us hard.
Some of those.
Ounces that were supposed to come in Q3, they are still going to come there's just going to come in Q3, and Q4 and then into Q1 of next year. Yeah. Another item, Greg mentioned that where we are in relative terms still a young company and other initiatives that we have in place as a global procurement strategy.
We have a new executive that economics, you started over the summer was in charge of supply chain and he has started visiting those opportunities to.
Use the you know the the economies of scale and the larger purchasing profile that the company has to help bring down those costs.
Yeah on your third question regarding care maintenance I mean, we have no current plans to put any of our operations on care and maintenance obviously with.
Fields has been a challenge for us in terms of.
Production and operations over the last couple of years.
And we've continued to invest in Las villas and both in the Guadalupe open pit and in the Burma Hall underground.
We are you know we're in our 2023 budgeting process right. Now we are looking at mine plans Atlas fuels that could see us deferring some of that capital into the future, particularly given we're not going to be building that CIL plant anytime soon and.
And so that I can take some of the edge off the capital investment Atlas fuels over the next year or two.
But as of now no intention to go on care and maintenance now.
Okay perfect. Thanks, and then maybe just on the updated revolver.
Can you help us understand any of the covenants in terms of net debt or interest coverage and what.
What are the conditions to drawing on the accordion feature.
So with respect to covenants. They are typical of a company. Our size that is is growing and maturing we're well on side with our covenants for Q3, we expect to be a well onside for Q4.
With respect to the and onward.
With respect to the accordion that there is nothing else that's required for the company other than to make a request for it.
And assuming that Robert worst we remain in compliance with obviously the agreements the credit facilities.
Our facility pardon me.
Yeah.
Okay, great. Thanks, and then maybe just last one that central is kinchen comment on the performance and the recoveries are.
As you ramp up and scale there and then how much more improvement should we expect to see over the coming quarters.
Yeah.
So yes, obviously, we would hope that going from a pilot plant through to industrial scale would be a lot smoother both resin there's not.
I think we're the only resin.
Operation and all of the Americans, who were dealing with a oh core with the organic carbon in it.
And as we started up.
Have you found that.
Maintaining a consistent blend is critical but we have variable or so we have been trying different feed to see what works better.
It is the time to be working it through so 70%.
Sent in Q3 was.
What we achieved were essentially looking at Q4 and I'm just.
Planning on 70% we.
We do see that we should be around 70, 475% overall target.
Yeah.
Saying that if we can get up to 80% that would be good I have a tough time seeing getting to 84%. It's just.
Very difficult to get there with the overall.
Ore body, we have.
Total organic carbon is the key item.
There are a few other elements that are core issues for us, but it's really.
The carbon that causes the issue.
Okay, great. Thank you. Thanks for thanks for answering my questions.
The next question is from Mike Parkin with National Bank. Please go ahead.
Hi, guys.
One question on Greenstone, you mentioned on the site to or are the milling closure was a little delayed you've got kind of a good chunk of it and closed it looks like the pictures continue to show progress there.
What's the latest in terms of expectations of having the full mill in close.
Okay.
The west end of the mill building is done the grinding area will be the structural steel while we just put it in the room then.
Structural steel will be going up.
The mill building will be enclosed in Q1 of next year, so essentially the east.
And remains open and into Q1, and then it becomes and close.
All the rest of the HP Jr. The crushers.
The there'll be there'll be enclosed.
Prior to two Q1 of next year.
And Mike we had always intended and I think we did talk about was on the site you were that the grinding and the mill building would be in closed in Q1 next year it will be the last piece.
As the last pieces of the ball mill.
Arrive on site.
Right Okay.
And then on the the crushing you're adding in that Castle mountain is.
Does that equipment, you're purchasing are you using like a contractor for that.
We have a contractor.
We're actually reassessing our arrangement at the moment and because we know that we need.
Mortgage balances than we currently have we've increased the capacity, but to be able to achieve full throughput.
You need to do a bit more so that's going through a review at the moment, but first thing was to see if the crushing and agglomeration was a good improvement in its faster and it gives us an overall recovery improvement because our lead cycle is actually getting being achieved whereas with the run of mine Leach cycle is so long that you had to have huge.
Areas under Leach. So it is an overall improvement, but we're still working on it and it will take time to transition everything over but it's a small operation. We saw this as being a valuable way to start with phase one while we're also doing the permitting of phase II. So it gives us a good opportunity to learn and to also.
Do some.
As you are aware, we're processing dumped material at the moment, we will also be shifting towards processing. Some in situ ore. So we can do tests with that as well.
So is that something you're looking to add to a contractor or actually purchase the crushing equipment yourself.
We're looking at both at the moment.
We're doing the tradeoff currently contractor, but we may just a switch.
Okay.
Do you guys have a sense of like.
I don't have the numbers right in front of me, but if.
If you want 100 per cent crush where your expected recoveries from ship to.
We do intend on shifting a 100% crushing and agglomeration overall.
Overall, I'll just talk what drove that everything.
Dissipation is.
Hum.
Total recovery would be in the low seventies.
But we consider that we have an operational recovery that would be around 67% of that.
You get the last 7%.
The residual leach as youre, reaching the lists that are above those initial lifts and during the full life of the mine so.
The way I'd think about it is 67% plus the 7% comes out overtime.
Okay.
And you'd be looking to carve that out at 100% crushed back see sometime in 2023.
Yes.
Okay.
And then I noticed the accounts payable is up about 24 million quarter over quarter or is that primarily tied to green stones construction or.
Other factors.
Yeah.
Primarily.
And then just following up on the RCI, but I'm just wondering why the accordion option would be kind of a last resort in that order of priority given.
Ah the interest you expressed in maintaining our equity holdings in the past.
Is it carries a different interest rate.
No I was speaking more in terms of immediately available capital like with respect to liquidity and just trying to I think the question was you know what order in liquidity what do we do it that's that's the order that I.
Hence the order I mentioned.
Okay.
Thank you for that and that's it for me guys. Thanks, so much.
Thanks, Mike Thanks, Mike.
The next question is from Anita Soni from CIBC World markets. Please go ahead.
Alright.
Couple of questions Firstly on greenstone and the Capex when we were on the tour on September .
Kevin I guess, a lesser inc, and kind of well into the quarter at that point.
You had said that you would spend about $210 million, let's look at the mine.
The mine tour.
It's just that you had given us for capital upfront and then only ended up spending we're hiring.
Is there a reason for the differential and why there was a tabasco print.
Brendan.
I think this mainly relates to the lifetime that we have in Spain.
Okay. So as you look at the.
Okay. So as we look at these bar charts that show a drop off 115 in Q4, we should assume.
That there are certain deferential or cascade.
Waterfall there like that there was a 30 million dollar difference that's been go or how does how should we think about the rate of spending.
Yes Anita.
That that is the case that.
Okay, and then secondly, I wanted to ask for next year as.
As we think about them.
But yet when you talk about the 12 12 months forward and your liquidity.
And what your projections are.
When you're doing that forecast.
Can you give us an idea of what costs, you're using I mean, obviously at the 1600 dollar a thick and the current spot price we set out.
Yeah, unless theres a reduction in that the cash cost for that.
The eighth going forward, it's going to be it's going to put you in a fairly tight position.
From a liquidity scenario under my estimates so I'm just trying to understand what you guys are forecasting and what levers you could call it.
In order to improve upon you are right cost structure I'm, assuming law scheme of things.
You know trying to improve greater or the way your mind, there would be one of them.
Yeah Neal this is Greg speaking.
As I kind of mentioned in my comments when you have this the increase in costs in the sort of decreasing and stagnant gold price. It does result in some margin compression and we are in right in the middle of our 2023 budgeting process and I think it's fair to say, we're looking at scenarios as I mentioned earlier on the call where we.
Can maximize cash flow from our assets and that could be that could include.
Deferring some capital and then also is that both Pete and Doug mentioned.
Looking for cost optimization that we can do across our sites. Obviously, it's a it's a it's a huge focus for us.
As part of our funding plan and so that's you know we're in the right in the mix of that right now.
Yeah.
Okay. That's it that's all for me.
Okay. We've got about 20 questions I mean, I'm, sorry, you're done Anita.
I think that's okay. We got about 20 questions come in from online thing you didn't try to group them together and something that makes sense. So we'll start with placebo.
Obviously, you've been underperforming when do you think youre getting it into better grades and see it either cash flow neutral or positive and if you can't increase performance sorry would you consider an outright sale of that asset.
I'll talk about the first part.
And in Guadalupe and loves fuel is up a bit.
<unk> was going through a big stripping campaign in the first part of the year and as we came out of Q2 and into Q3, we started to see the ore coming out of <unk>. We also can fit on average is a lower grade open pit, but very reliable.
Recoveries for that.
So we benefit.
Most of it comes online Guadeloupe Guadalupe open pit was the hiccup where.
We got it.
A reduction in the ounces of recoverable ounces coming out of quad, losing because of a slug of high sulfur and copper content.
That's the one that causes the stubble on on what is higher grade ore that comes out of a portion of the clubs, we open pit and.
And with Burma Hall underground.
The slower development it is a very.
Vertical deposit.
Zone, five which is a higher grade deposit in Burma Hall underground, we just tapped into the top end of it we need a lot more development to be able to be mining on multiple levels to have the mining tons per day that we need to really make burman.
Burma Hall underground work.
So we are getting higher grade material from Burma Hall underground, but not at the rate that we needed to be coming from in that mine. So it's a challenge to both developed and habits of tons that we need.
Yeah basically the.
The higher grade material.
As Phil has been coming in Burma Hall underground, but not at the rate we want our agreement turtle from Guadalupe open pit, we got hit.
So I would say, we should be looking for that to come in Q4 and Q1.
We are drilling ahead to make sure we're not going to have any other areas with the highest sulfur high copper that we did not pick up in our in our long term model.
Okay.
On the question of this is Greg speaking here on the question of whether we would sell those for US I mean, it's kind of a tough one we've sold mines in the past and I like to consider as a commercial company and if there's opportunities that we think makes sense, we're always going to consider them, but you know.
<unk> is a is a you know a very large gold system lots of growth potential lots of expansion potential in.
Pretty large production profile, a long mine life and as the technical report notes. It's a it's a good long term all in sustaining costs as well so.
With an asset like that would be very painful for us I think.
It certainly is not something that we're considering at the moment.
And so I think I think that's that's what I would say to that.
You know a big part of our portfolio right now and you know my strong preference would be support the asset.
And kind of get through this macro environment to be able to expand it in.
And really surface value. There obviously, we've had challenges to date, but that's an area. We're also focused on.
Okay. Thank you and so in terms of sort of the order in which you live.
Do your funding if you need to circling back to what Pete said would you consider a sale of the other assets or it seems like your equity investments before you would get an equity raise.
Okay.
I mean I think it's.
And equity raise at this valuation would obviously be very painful is not our first choice its not something we intend to do or want to do we do have the preliminary preliminary base shelf filed we will finalize that as a base shelf and we are assessing.
The.
An ATM facility in place, which would give us some optionality and flexibility if we needed. It obviously at these prices is not something we prefer to do there are other levers we can pull that Pete went through we've got obviously other assets in the portfolio that arent necessarily core, but ideally our first choice of course is our credit facilities and.
Cash flow and cash on hand, yeah, I'll I'll I'll, just add to that that we're I'll say you know everyone in the room as a as a shareholder I can speak personally that is a substantial part my holdings in the company are a substantial part of my own personal portfolio.
So I guess from on behalf of myself off for myself on behalf of everyone in the room.
Shareholders and our largest shareholder I will note as Ross Beaty, our chairman and on behalf of everybody. It's very much the last lever we ever like to poll, our equity raising equity is expensive form of capital and so it's it's it's the last lever that we would ever want to have to call.
Thank you.
When you started the company you had the newly announced target is that still a target and is that from a capital allocation perspective are you better focused on the expansion versus optimizing your assets.
Yeah, I mean, I think we had a million ounce target and I would say that target is and has always been really just an indicator of scale. There's nothing magic about the number of itself I think Ross has said that in the past as well.
But.
But we do still have a plan to to grow this company too.
Company of scale and if a million ounces is the right number then that's the number we use.
With Green zone.
Fossil mountain expansion and most viewers by themselves fully producing that's over 700000 ounces a year.
And then that's before we actually would do well those clo's expansion. If you were to do that that's 800000, plus your Brazilian business. So our current portfolio can support.
Support a million ounces a year, we are working towards that we're building greenstone now we're permitting castle mountain we've done the technical report feasibility study on <unk>, we're working on the Arizona Gold underground. So none of that has changed I think the current environment means we have to be.
Very careful in where we allocate our capital and focus on those areas that are most important right now that is getting greenstone through its construction period.
It may take a little longer.
We still have that portfolio that can get us to that scale I think there's I think there's just a tremendous amount of value sitting in these assets and it's it's a situation.
A situation, where we've just got to focus on servicing that value over time tough market doesn't change what we need to do. Thank you do you have any intention to hedge against rising diesel prices are falling gold prices.
Okay.
Oh I'll deal with that on the ladder in relation to gold hedging.
We finally are off the gold hedge program that we inherited as part of one of our mergers that ended in September and very happily.
We very much believe in keeping the company fully exposed to gold price. So we will not be hedging goals going forward.
And then with respect to diesel price hedging.
We do but we have no hedges in place against diesel currently.
We see diesel is decreasing a little going forward.
So we were we're not keen on hedging it.
Really what are have been very close to peak diesel prices at least we think they are.
If there are very difficult to make effective and put in place.
We focus instead on hedging of the currencies, where we operate are the real the peso and in the case of greenstone.
The Canadian dollar.
The gold price has obviously been weak recently, which causes a squeeze on the margin what is your view on the long term gold price.
Well I think I think the gold price is actually doing pretty well given the strength of the U S dollar and I think as long as rates keep going up here and or indication of rates going up the U S. Dollar will stay strong and that's going to put pressure on gold I don't think that's a.
Rising opinion to anybody, but I also know that at some point.
The rates will get too high and then we're going to be back in a situation, where they're going to have to start using again the yields will come down dollar will come down that will be positive for gold. So I I think.
I think yeah right now we're in a situation that is as headwinds on gold, but I also see it as a situation that will reverse and historically has reversed and that should be very good for golden So long term, we're bullish on gold.
Thank you and one wrap up question, Brazil, Washington D C.
Impact on mining in Brazil.
Yeah.
The short answer is no I mean, nothing right now.
Indicates that that we would expect substantial changes.
You know the previous Alibaba administration.
Wasn't unfriendly to mining and you know I don't think it'll be unfriendly to mining this time either.
At the moment there are no further questions online or on the phone so Greg I'll turn it over to you for closing remarks.
I think that's all I have ruined I guess I'll just say, thanks again to everyone for attending the call today and you can always reach out to myself or Peter dog or Lynn if you have any other questions.
And I will talk to you next quarter.
Thank you everybody for joining us today, operator, you can now conclude the call.
Thank you. This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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