Q4 2022 Equinox Gold Corp Earnings Call
Thank you for standing by this is the conference operator.
Welcome to the Equinox gold fourth quarter, 2022 results and corporate update.
As a reminder, all participants are in listen only mode and the conference is being recorded after the presentation there'll be an opportunity to ask questions to join the question queue. You May Press Star then one on your telephone keypad should you need assistance during the conference call you May signal, an operator by pressing Star then zero.
If you are participating through the webcast you can submit a question in writing by using the text box in the lower left corner of the webcast frame I would now like to turn the conference over to Relent Bailey Vice President of Investor Relations for Equinox Gold. Please go ahead.
Thank you Alan Thank you everybody for joining us today for our Q4 call. We will of course be making a number of forward looking statements. Today. So please do take the time to visit our continuous disclosure documents on SEDAR and Edgar and on our website I will now turn the call over to our CEO Greg Smith.
Thanks for Lynn and thanks, everyone for joining us today.
On the call with me is our C O O Doug ready, our CFO , Peter Hardie, our EVP of exploration, Scott Heffernan and of course, our VP of Investor Relations ruined Bailey.
As you all know we're here to discuss our 2022 fourth quarter and full year financial and operating results.
And as a reminder, equinox is a diversified Americas focused gold producer, we've got seven producing mines across Brazil, Mexico, and the United States. We also have several growth projects, including our large scale greenstone gold mine in Ontario that we're constructing now along with our 40% joint venture partner Orion Mine finance.
I'll start with a broad overview for the quarter and the year and then turn the call over to Pete and Doug for more details.
Q4 is our highest quarterly production for the year of just over 150000 ounces.
In fact this is the second highest quarterly production in the company's history.
And while inflationary pressures persisted through the fourth quarter. We also achieved our lowest cost for the year with cash costs of $12 93 per ounce and all in sustaining costs of 15 23 per ounce.
Finished the year with total production of just over 532000 ounces at total cash cost per ounce of $13 28 per ounce and all in sustaining cost of <unk> 22 per ounce.
We also advanced a number of our assets over the course of the year.
We submitted our permit application for the expansion of our Castle Mountain mine and that is in process now.
We also received permits for three portal locations for exploration ramps at Orange zone. So we can start to advance our underground development potentially later this year. Once we've completed a feasibility study that we're currently working on.
We completed construction and achieve commercial production at our San to lose mine in Brazil, and we're now starting to see some improvements in the recoveries and Doug can provide some more details on that.
We published a feasibility study on the expansion of our Las villas mine to a long life large scale mine with peak annual production of 360000 ounces per year.
And probably most significantly Eric and his team at greenstone have continued to advance construction of the mine on budget as of year end. The overall project was 65% complete and today the projects over 70% complete.
And I am pleased to report we remain on track for first gold in the first half of 2024 again, Doug will provide more details on the current status of greenstone later in the call.
On the corporate development side, we completed the sale of the Mercedes mine to Bear Creek mining and we've watched launched sandbox royalties, which is a new diversified metals royalty company sandbox as private right now, but it is working on going public sometime in the next few quarters.
I'm very pleased to say we finished the year with an excellent safety and environmental record that has continued to improve year over year.
We also recently announced our greenhouse gas emissions reduction target of 25% by 2030 as compared to our business as usual case.
Details of how we plan to accomplish this target are laid out in our first climate action report, which is available on our website and I encourage everyone. On this call to take a look at that report when they can.
Looking toward 2023, we expect an increase in production to between 555000 ounces at 625000 ounces with cash cost of between $13 55 in 2014 60 per ounce and all in sustaining costs of between $15 75, and $6 95 per ounce.
These costs remain somewhat elevated as they reflect a full year of the increasing input costs that we saw over the course of 2022.
That being said we are working to mitigate this cost pressure through optimization opportunities at all of our sites.
Looking beyond 2023, we also expect to see the benefit of lower costs and the overall increase in production from the Greensville in mind in the Castle Mountain Phase II expansion as those projects enter production.
With that I'd like to hand, the call over to Peter Hardie to run through our financial results.
Thanks, Craig we're on slide five.
Safety and environmental practices continue to improve over 2022, we ended the year with a 12 months rolling total recordable injury frequency rate of 2.12 and at 12 months significant environmental frequency rate of <unk> 63, I also want to add we had no LTE is in Q4. These are just a great result.
<unk>.
And we really wanted it and it takes an effort by everybody the whole company and so we just wanted to say congratulations to all of our employees for making equinox, a safe place to work, it's really a great achievement for the year on safety.
For the year, we sold 532000 ounces. It was really an investment year, we invested 456 million and gross development a $328 million of that was at greenstone a $49 million of that was at Santa Luis to complete construction there and we also spent $43 million loss fee loss that was primarily.
On Burma Hall underground developments and are preparing to launch <unk> open pit for its next phase.
The.
139 million was spent on sustaining items was primarily deferred stripping at Arizona mesquite and Las villas.
On slide six as Greg mentioned, we had a good quarter, we had our second highest output for the company to date.
We sold 149000 ounces for revenues of $260 million.
And an average realized price of $1733 an ounce.
As Greg mentioned cash costs for the quarter were 1223 in one our all in sustaining costs were 1523 per ounce.
Interesting thing we saw during the quarter in relation to cost as well our costs are up significantly if you look at it on an annual basis.
<unk> 2022 versus 2021 or on a quarter on quarter basis I E Q4, 2022 versus Q4 2021 costs are up significantly.
The interesting thing that happened in the second half of the year going from Q3 to Q4 as we actually did not see much by way of cost increases in fact cost stayed overall relatively flat.
We saw some increases.
In consumables, such as reagents and grinding media.
In Brazil, and the U S, which were offset by decreases in fuel. So we're quite pleased to see that it looks like cost of Pete.
Sometime in Q3 and at least remained steady for Q4.
With respect to what that means for our financial metrics.
We saw improvements in Q4, which were of course happy about EBITDA was 65 million $75 million on an adjusted basis net income of $23 million for earnings per share of <unk>.
Seven 5 million of income on an adjusted basis, our two cents a share cash flow from operations also improved.
For changes in noncash working capital, we had cash flow of $80 million or 26 cents a share so happy with the quarter.
With respect to liquidity and capital position. We ended the year with just over 200 million. We have 127 undrawn on our credit facility for total liquidity of 327 million, we did draw an additional $100 million on the revolving credit facility during Q4.
The market value of our investments at February 17th was about $220 million and I'll note that we realized proceeds during Q4 52 million on Solaris share sales and an additional $20 million in the new year.
Net debt increased due to that that dropped to about $630 million.
And.
Just want to note a few other things or at least during Q4, we did other things to add.
Improve our balance sheet resilience, we filed a base shelf prospectus with the ATM supplement.
I should say the at the market supplement.
I will note, we have used $25 million of that aftermarket supplement and through the end of January and we paused that program since.
Also something we did in the new year to help with balance sheet resilience and cash flow funding.
We did put in place a strip of hedge callers for 20% of our production through the end of Q1 2024 that represents about 150000 ounces.
Floor of those colors is 90 to $100, an ounce and they have significant upside opportunity up to a ceiling of 2000 and about $2065 an ounce.
Another thing we did in the new year as we worked with our lenders and.
Just completed late last week to retool our covenants.
On our revolving credit facility, which will take us for greenstone startup and we of course want to thank our leads to Scotia BMO in IAG for working really constructively with us on that.
On our next slide page seven what does that all mean for greenstone funding. We think we've got about $340 million or is there a mt.
Our share to fund the remaining budget and that's going to be done through our existing cash of 200 million a revolving credit facility of $127 million. There is a $100 million accordion feature also in place.
On the revolving credit facility.
We of course are using operating cash flows we are about to help fund greenstone, we have about a $200 all in sustaining contribution margin per ounce on that.
And of course, as we've shown with our Solaris share ourselves since Q4, we have our investments of $220 million is a lever that we can pull to.
To help with funding so we deem ourselves well funded to complete.
Construction at greenstone.
Okay.
On to page eight we have our guidance for the year, Greg has already touched on it. So I'll just highlight a couple of things.
First of all.
The midpoint of guidance represents about a 70000 ounce increase over 2022 production when you pull out the 14000 ounces attributable to Mercedes that we sold.
Last year.
Hum.
On costs, our view is that inflation has peaked but.
But the costs will stay elevated through the year.
And you can see that reflected in both our cash and sustaining cost.
Our view is also that the Brazilian real and Mexican peso, which are two of the better performing currencies against the U S. Dollar will continue to.
Hold.
Their current exchange rates against the U S. Dollar so that's factored in season.
Seasonality will continue to wait production and cash flows into the second half of the year.
And we will just make a couple of final notes on sustaining expenditures C. 137 million. We have there includes really only a central zone tailings facility raises.
First stripping and equipment refurbishment, so we need to do and of course, the growth capital of $324 million, primarily greenstone at about $275 million of it.
And with that I will turn it over to Doug to kind of run through what what we're expecting for the upcoming year.
Okay.
In addition to the.
Production guidance that we have also mentioned that the all of our mines are up and working on a program that involves continuous improvement is.
As well as consumable reduction.
And group purchasing initiatives all of that is above and beyond what we put forward for our production and cost guidance.
We have also doubled down on our adherence and a reconciliation of mine plans bench.
Benchmarking and productivity improvement work, which is all geared towards achieving.
Achieving and beating.
What we've put forward.
Looking at the individual mines mesquite in Q4, we were mainly in a stripping phase for Brownian Vista East.
That will ultimately contribute to the we're going to the pads in 2023.
Due to the emphasis on stripping in Q4 that means we had a relatively low number of new ounces can weigh under leach in that period.
And for 2023, we have adopted a new mine plan that will see that we will see less stripping and smaller pits in order to reduce cost at mesquite.
We continue with exploration and permitting work at Mesquite for mine life extensions.
And Castle Mountain in Q4, we were running with both run of mine and crushing and agglomeration of the material going through the heap Leach pad.
The plan is that we should be all going through crushing and agglomeration silver continue we're working on increasing our crushing and agglomeration throughput.
At the same time is working on the phase one we have been.
Advancing our permitting on phase III.
The met test work in support of the Phase two work and I'll come back to that later on.
Hello Fellows in Q4, we had a production impact related to a shortage of explosives that was caused by a strike at our explosives supplier.
We also had some of the ore that was coming from the Guadalupe open pit.
It had a higher copper content, which meant that it had a reduced recovery over the leach cycle.
So we're now separating that to be able to leach that separately from the rest of the ore feeds.
Excuse me.
As we look at 2023, we continue mining in Guadeloupe, the open pit and Las villas open pit as well as the last few months underground with 20% of the AR.
The tons coming from the open pits.
We will be suspending Burma Hall underground, that's given the prolonged development periods in the lower productivity than anticipated.
Just to put it in context, we have developed down to the central zone to zone five of Burma Hall underground, we've accessed into it and we've been mining from it but we need to do significant additional development in order to have enough stopes and production at the same time to be able to achieve the 500 to 2000 tonnes per day.
So in the meantime, we will be looking at plans to be able to improve overall productivity and reduce the costs.
We will also look at the timing for this higher grade ore to eventually be fed into the CIL plant.
And or Resona.
We had a longer than normal rainy season in 2022, and we relied on stockpile material more than usual, which meant lower grades go into the plant over an extended period.
By the end of the year in Q4, we had an increase by our contractor of their mining fleet with an addition of nine triple Sevens and an additional six.
Articulated dump trucks.
And so we had a higher total tons being moved as we worked towards removing.
Turning back to our mine plan.
In addition to the expanded mining fleet. We're also bringing in a second contractor who will come with 14 articulated dump trucks. So that we continue mining at a higher level through the rainy season and have a stronger start once we.
Come out of the rainy season, this year and we want to build up our stockpile significantly during the course of 2023.
In <unk>.
The mine did very well in Q4 and for the year.
Open pit mining contributed higher grades and tonnes overall and offset the lower production that came from the underground mine this year.
Throughput and plant recoveries for zehnder were both above the overall plan.
And our exploration work presented continues to work on resource and reserve replacement. We also continue the exploration program in the greenstone built between presenter and sad to lose.
At our D. M. We were processing low grade dump material in Q4, while we suspended processing in mid December as we waited for permitting of the additional material.
For dump material.
Jim.
And in January we've restarted the in situ mining and we're using owner operated equipment.
We also completed the T O separates.
We've begun permitting for a filter tailings storage facility at RDM.
Looking at our Santa lose Q4 was difficult we had lower throughput to the hardness of the ore.
We also had a higher sulfur content in some of the ore that impeded our recoveries.
And we also had to deal with the CIO cyanide impact on the resin, which related to overdosing with cyanide.
Every each time that happened it happened twice it takes the system several days to be able to recover from that and we have to regenerate the resin activity. So it can perform properly again.
So I will note the resin and Leach plant is achieving higher recoveries. Overall, then then where possible by previous operators using carbon in leach processing. So it is working but we still are working through some of the issues by December we had changed our blending strategy and we also adopted a new fragmentation planned in the <unk>.
<unk> pit.
And that's enabled us to achieve a higher throughput and also since our year end, we've seen an increase in stabilization of recoveries.
As we've come through.
<unk> in February .
Moving onto greenstone Ulta.
Ultimately greenstone going to become the cornerstone for equinox.
One of the largest gold projects and in Canada, It's got a $5 5 million ounce reserve.
Production of 400000 ounces and first production coming in the first half of 2024.
Onto the next slide we are on budget and on track. The project is 70% complete at the moment.
And the team is just past two and a half million hours with no lost time injuries. So good a good record.
They've also had great progress as you can see on the slide.
With several of the buildings being fully enclosed.
Our mining started in Q3 with four trucks on one shovel and we now have four additional trucks coming.
And getting ready for use in the second shovel will be added in the second half of this year.
We're 54% complete on the capital spend at the end of the year.
And if you move to the next slide.
Oh, you can see several more of the buildings for the buildings are in closed end heated and next week, we expect the last two buildings to be enclosed.
The <unk> building.
As one of the two buildings or it was just being finished off this coming week and as well as the eastern Mill building, which I'll note already has the roof on and the.
A lot of the cladding was already done in the photos I saw as of yesterday, so it's progressing really well.
Yes.
So just moving on to the next page upcoming milestones for greenstone. The main ones are the buildings being closed this quarter commencement of the ball mill installation will start.
In Q2, mechanical piping and electrical installation will will be happening.
As we move inside the buildings and all the equipment will be onsite in Q2.
In Q3, we're looking at pre commissioning of the power plant and the crushing circuit.
And by Q4, we're completing the T. S F. In the highway relocation will be completed.
In the first half of 'twenty 'twenty four will be in commissioning and first gulfport.
Okay.
And moving on to the next page our other expansion projects include Castle Mountain, where were we will see an increase in stocking to over 45000 tonnes per day go onto the leach pads and production of around 218000 ounces a year over a 14 year life.
We submitted the permit application in March we continue working through the process of <unk>.
Permitting will see environmental review and public scoping scope happening in the first half of 2023.
For Autozone are but were working on the feasibility study, which involves mining from both CPI. The underground at the same time as we're mining from open pits.
The feasibility study will be wrapped up in Q2.
As Greg noted we have received permits for three portal locations. We have selected one for the initial ramp location and we would look at establishing a exploration ramp that ultimately will allow us to touch into and mine on or at the same time, we would also be able to.
Establish a series of exploration cut out so that we can do a drilling program from underground.
They would be dimensions, so that it ultimately could also serve for as a production decline.
Almost feels we delivered the updated feasibility study for the construction of a 10000 ton per day CIL plant.
Reserves in that study were increased to 44% after depletion was taken into account.
But as we've noted previously we will make a way of making a construction decision while we're in a high capex period for greenstone and also while we work on our operational efficiencies and having stability with local communities.
So I'm going to pass it back to Greg.
Thanks, Doug.
I'd like to briefly acknowledge the equinox team.
We had some challenges in 2022, but the team has been doing a great job at navigating those challenges.
So we're in solid shape to fund the completion of construction at greenstone on budget on schedule and a year from now we expect to be commissioning one of the largest gold mines in Canada.
We're also working hard to progress our growth projects as Doug mentioned manage our costs and improve our operations and we're looking forward to continuing that through 2023.
I'll conclude there and pass it back to <unk> for Q&A.
Operator can you please remind people how to ask a question.
Certainly once again to join the question queue. You May Press Star then one on your telephone keypad, you'll hear a tone acknowledging your request. If you are using a speakerphone. Please pick up your handset before pressing any keys to withdraw. Your question. Please press Star then two if you are participating through the webcast you can submit a question.
<unk> in writing by using the text box in the lower left corner of the webcast frame, we'll pause for a moment as colleagues join the queue.
Thank you Robert.
Is that an exploration question for you I can see from the MD&A that you drilled about 30000 meters of horizontal.
It looks like you're going to start the underground in Q4, why don't we see those results.
The 2022 program or Zona had three components, we did drill just under 30000 meters. The first component was a few deep holes on cabo itself to.
To support the feasibility study that's been mentioned a couple of times on the call so far.
Those holzworth looking at converting big areas of inferred resources to indicated to support the reserve growth and also to address some geotechnical questions.
And the deeper portions of the mine. So those results will funnel into the feasibility study that will Uh huh.
You released a mid year Q3.
The other two components are included a regional program proxy.
Approximately 7000 meters on a number of targets across the thousands of kilometers square land package, but the majority of the effort was focused near mine looking to hit.
It targets, both east and west of the Cabot itself within the main trends to support mine life extension targeting the shallow open pit targets. The multiple targets that we have there. So those results we will look to.
Please here probably in Q2 early Q2.
Perfect. Thank you I forget we'll take questions from the phone please.
Thank you. Our first question comes from Wayne Lam of RBC. Please go ahead.
Oh, Hey morning, guys.
Just wondering at greenstone.
Can you give a bit more detail on.
What you see is the bottleneck items are and the large items left to spend.
And wherever you seen some of the savings optimizations and I'm just curious given the independent assessment completed last year, how is that reconciled to date and how much of the contingency has been utilized.
So far.
So in regards to bottleneck items.
I'd say, we always knew what our critical path. It was going to be it's getting through to building and closure and then and then starting in on on the Houston plant East end of the process plant building.
For ball mill installation.
We're four buildings done last two buildings finished off this week and then we're starting in on.
I would say going forward that remains our critical path.
For.
Most of this year.
Obviously, our productivity is going to be the issues are moved to the more detailed the piping and electrical inside the buildings.
But the team has been very good at being able to adapt and competency for where we have a delay.
Delays in one area, they'll they'll turn around and work out how to.
Adjust the program to be able to compensate for it.
Really where we're pushing through this spring.
We'd be able to.
Maintain our schedule as we come into the summer Meru, most productive and then we get back into areas such as the T O stuff and some of the other earthworks projects.
We don't progress as much during the winter months.
So.
Overall, I'd say very good against our overall schedule with.
Minor things that they've been adopting in and compensating for elsewhere within the overall construction.
Yes, it's probably worth mentioning are we expect to do another quantitative risk assessment.
Currently scheduled I believe Doug fir around April .
So we're looking forward to doing that I'm getting an update from an independent party on.
Schedule and budget.
With respect to your other two questions Wayne savings optimization is one of the bigger ones frankly is foreign exchange.
Nadine, Unlike the peso and the Brazilian.
The Mexican peso answers on real the Canadian dollar has been a little weaker against the USD. That's helping is probably one of our main areas.
With respect to contingency through the end of last year, we've used about $120 million of it.
That'd be great. Thank you.
And then maybe at mesquite.
I'm just curious how should we think about the mine beyond this year is it kind of a case of a mature asset approaching depletion given the short reserve life or how should we think about the future potential for reserve additions.
Once you have greater capability to reinvesting the capital stripping there.
So for mesquite, essentially yes quite right. It is a mature asset.
Every year, you'll hear us talk about our stripping program and then we get into the ore. So it's essentially a diving down into particular areas, where we have.
Have to strip to get down to be able to mine the ore and thats been cyclical and this year is no different where we were doing our stripping in the latter part of two.
2022, and then we'll benefit from that order in this year.
We continuously are doing drill programs and looking at our revised malls to be able to improve the mine plan just.
Just happens that this year, we have a lower number of ounces being produced while we worked through.
Revisions to the mine plan to see what we can do to be able to put more on the table as we go forward.
Yes.
In the U S. We had a a.
Like everybody is pretty significant increase in cost and so when we looked at the mine plants are risky in 2023, it made sense to go with that smaller pit scenario.
To maximize cash flow over that period of time.
And so you know as we progress through 2023 will have drill programs on mesquite.
Then working to extend that mine life, you know 2024 and beyond but that requires some additional drilling.
And the other thing is obviously permitting is always something that we're doing at our mesquite and we're currently.
Two.
To heap Leach pad expansion permits that we're working through which we expect to get them in the next couple of months.
So those obviously gives us the opportunity to be able to continue to stack more so it's always add more pad space. While at the same time develop and permit additional resources. So we can be able to convert them to reserves. So it's not it's a never ending process.
Okay, great. Thanks, and then maybe just last one you know just looking at the upper end of cost guidance across the operations it.
It seems like a few of the mindset relatively elevated costs near breakeven, especially in the first half of the year.
As part of that.
Amortization review is there any scenario, where you might see improved economics per se, putting castle mountain on pause in reopening that with phase two or maybe putting less feel it's on care and maintenance and reopening that with the CLO CIL construction, just given the higher cost of those mines.
So.
It's something we discuss but theres more than one reason why we do phase one at Castle Mountain obviously.
Coming into operation, while we're in the permitting process is.
A good thing for US we wanted to be back into production during that process. So we.
We are present and working through everything that.
Those are operational needs. It also means that aside from having our footprint there.
We're also able to move the essentially.
Essentially dumped material from previous operators and to be able to leach the gold out of that so it actually works as a pre stripping for us for the phase II. So it's a good outcome.
Get that moved during this process.
And then the third one is we did want to get in and try the run of mine versus crushing and agglomeration. So we get an opportunity to be able to do a larger scale test by by virtue of doing the phase one operations at Castle Mountain.
Yeah, I think you also asked about those.
Both fuels waning and.
He also has a large buying.
Very expensive.
Now shut down a mine restart a mine like that I think it's fair to say our focus right now is trying to improve that operation and we're working hard to do so you know we've reduced some of the capex that few of us in the near term with the suspension of Burma Hall underground.
But that doesn't mean, we're not very focused on the Guadalupe open pit and Oh, most People's underground mine. So I I don't think that that's on the table at all.
And that's not something we're considering at this time.
Okay. Great. Thanks, that's all for me congrats on the quarter and it makes it see things go another greenstone.
If you're talking about the last thing I was jumping quickly and ask the question from the line would you consider selling those Taylor. Thank you need so much capital.
I mean, the quick answers now.
Yeah, you know I don't I don't want to speculate on any individual mine, we've got no plans and process it.
Obviously in the past we've been commercial on on certain assets in the portfolio, we have salt mines in the past, but you know the challenge with few of them. So I think we addressed this in Q3, it's a huge deposit you know a huge reserve resource lots of exploration potential permitted infrastructure I mean that type of a deposits.
Credibly rare and and so you know.
Now parting with something like that would be would be pretty challenging I think again, our focus is working to improve that operation and optimize that operation.
Turning it into a long wife's very valuable operation for the company.
Thank you operator, we'll take one more call from the phone line.
Our next question comes from Anita Soni of CIBC World markets. Please go ahead.
Good morning, and thanks for taking my question. So I just wanted to I guess first you mentioned that you had retooled your covenants for the revolving credit facility could you give us an idea of what what changes were made.
Yeah, Anita its Peter.
The covenants reflect more I guess, what you would call a company in development phase. So we effectively took a very conservative case scenario.
A full turn.
And adjusted Accordingly, we're not going to disclose exactly what they are but we're quite comfortable that there is plenty of room and covenants disease through greenstone construction.
Okay.
So you mentioned some of the deferrals that you've had in your I think Greg mentioned that the you know the sustaining capital that you are doing in 2023 is the essentials only tailings lifts et cetera. So would we expect to see a catch up in sustaining capital in 2024, and 2025 is that a.
Fair to say.
I think I mean, the big some of the bigger chunkier areas, where we've deferred capital is Burma Hall underground at placebo. So that's a big one and then to a lesser extent stripping at mesquite.
And those are probably the two largest areas, where we've retooled the mine plans to reduce near term.
Capital.
So with <unk>, yes, I mean, eventually our intention is to get back into the verbal underground. We obviously wanted to develop that as a big part of the future. While she also that is capital we will eventually spend in the meantime, we're going to work to to retool that program and increase the productivity and reduce costs. So we will be back in Burma Hall underground you know exact timing.
That is to be determined but definitely at some point.
Mesquite.
Same thing I mean, we've got drills going and.
And you know continuing to operate that mine.
<unk> involve stripping I don't think we're working toward a giant catch up in 2024, that's going to be crazy or anything we're trying to smooth that out over time, but yeah.
You're always going to have that atmosphere.
Dripping as Doug mentioned to get down to the to the ore, but otherwise I otherwise I don't think that we've carved out anything critical that we're gonna have to be spending a whole bunch of money in 2024.
Always looking at capital allocation decisions with greenstone coming online next year that obviously frees up.
Some funds for additional additional Capex I think.
Personally I want to see US go underground in Arizona and that would be another area, where we haven't budgeted in 2023 for any sort of a portal.
<unk> decline, but.
On the basis of the feasibility study and as we move into Q4. This year once the pit reaches that the appropriate level in the west and that's an area I think we'd like to start spending money on next year and even later this year. So you know there's stuff that will come but it's not a situation where we were.
We've carved out a bunch of necessary stuff and it takes it down the road.
Sure. So in Burma Hall underground that was was that was in development capital rate notwithstanding.
Okay.
It was a mix primary development.
Okay, So I guess, I'm, saying, I'm, saying capital capital generally.
Yeah capital generally yeah I was just wondering if there was anything sustaining that I shouldn't that should be thinking about that might need to get done in the next two years, if you're not doing it this year and then just in terms of.
Essentially is what kind of recovery rates are you assuming when you when you guided for this year I just want to understand where you think that recoveries that going over the course there.
So for the budget, we backed it off to focus on getting stability, we were looking at achieving a minimum of 65% in the first half of the year of 70% in the second half of the year.
As we came through December and changed the blend where 62% in January and we're over 70% in February so we're but the key is the stability and a.
A big.
Key thing to that was ensuring our.
Makeup of water coming back in from a water storage dam was.
Zero or less than <unk>, five ppm, cyanide, which is a real hindrance to activity of the resin.
Now our our system's working property with all the <unk> talks and so we saw that that was some really helping to be able to establish.
Good activity on the resin.
Okay and then just a last question was on <unk>.
Servicing resources did I missed that last night did you guys update it.
This yesterday or where is that kind of later on.
No we did not update our global resource reserve statement yesterday, and looking forward throughout the course of the year there won't be a single consolidated update there'll be updated as as available and as.
Studies are complete and most of our projects in a steady state versus a steady state.
Consistent with what we've been doing over the last number of years Anita I think at some point in the future, we do want to get to a.
One time annual global update, but what we've been doing as you know.
As and when those updates become available we reported we integrated into our consolidated.
Reserve and resource summary on the website.
That's what we've been doing and probably will be continuing to do for another year or so until we get to the point, where we've harmonized everything and do an annual update.
Okay. Thanks, I was just I'm, calling from the context of you know a lot of people are updating their gold price assumptions and then also cost assumption. So it's it would be good to have a sort of reset on that and then can you just let me know what the interest rate right now is on your floating rate debt.
Okay.
Combined it's about seven 5%.
Is that fixed and floating or just a funny.
Sorry, that's the just the floating pardon me okay.
Okay.
Alright, Thank you very much.
Our next question comes from Kerry Smith of Haywood Securities. Please go ahead.
Thanks, operator.
Scott just a follow up on <unk> question about the utilization of Josh is would you just generally.
Ballpark would you expect that you replace depletion yard.
As usual resources overall for the company.
Year over year basis or kind of unchanged.
Gonna be down a bit or up a bit like how would you how would you generally point us directionally.
Yes, [laughter] primary goals with the exploration and drilling has been to replenish reserves as it again primary goal secondarily.
A lot of our assets have been undercapitalized over the last three five years, so there's a real need real pushed to <unk>.
The resource space exploration.
Has been pretty aggressive in that respect and Santa lose by strict agenda.
And so forth so there'll be a lag before we're kind of <unk>.
Getting beyond replacing reserves resources on an annualized basis, but the hope is that with the significant exploration expenditures that we.
Put into the ground for the last three years now that the two three years from now that will be paying off with substantive resource and reserve growth.
Okay. Okay.
Okay.
Just on the.
This is for Doug Ashley.
On the castle mountain change to them.
Primary application given that you're now switching over 200% crushing and agglomeration for for phase one.
Are you is there any thought that you need to revisit the assumption in the phase two seizure burden.
Or like are we.
And that at some point, maybe you may have to add some crushing and agglomeration or are you pretty confident.
And phase two will just be around the mine operation.
No Kerry we were quite confident that we get better performance overall through the crushing and agglomeration for the material that we're currently processing, but.
Remember, we're dealing with dump material and we're.
We're doing a lot of work to metallurgical modeling on Castle Mountain.
And look and then lots of additional met test work.
For the institute of material so.
If if it were all the same material, we would be doing crushed and agglomerated ore phase II, but that's why we're doing the additional network. The geo metallurgical modeling because we want to make sure that as we look at instituting materials that we're treating it the right way. So it is it is part of the work we're doing in the background.
We don't anticipate it will change anything in regards to our footprint overall, but we're looking at all opportunities to be able to see whether we can optimize and also.
Prove out everything that we've done in previous test work and concepts.
Carrier recall that in that feasibility study you do have a portion of the material reporting to a small mill.
Highest grade material and so we are looking at a potential scenarios, where you would dish that mill not not be required to triage the different.
Ore grades and just put it through one circuit and so that is something that we are kind of looking at and doing some tradeoffs studies on if theres an opportunity to simplify the overall.
Operation and flow sheet reduce some capital now that's something that's pretty interesting to us. So there is some work being done on that nothing confirmed and that will progress over the course of the year I can confirm that our permit application does contemplate pretty much any sort of modifications, we want to make to that flow sheet, we would not have to go back.
Andrew any re permitting compared to what we've already submitted.
Okay. Okay. So thats all covered off in that application there.
Yes.
Gotcha, Okay, Okay and.
The other question I had was at mesquite.
Hugh you reduced the strip ratio in 2023 to lower the cost is to helping free cash flow in the short term here does that impact 2024 month plans are.
What's sort of.
In House Mine plan do you currently have for the life of mine Szymanowski like do you guys model three years or two years like how do you actually modeling internally.
We continuously remodel at the.
The mine plan that we have in the budget authority theirs.
We're already working on the revision to that.
What can I say, it's building and the latest information as it as it comes in from exploration and as we get permitting so.
I know it will change from the budget mine plant.
I think it's a weird to say what.
We're working on the mine plan for next year that that would bring production back up to the level of previous levels, but.
There's work to be done on that Gary we had to adjust the mine plan this year.
In the United States, especially we saw really significant increases in diesel cyanide explosives.
All of the major input costs at mesquite right that have an effect on on production there in cost of production there and so this year kind of take that into account and internally here. We're working on what can 2024 look like.
Given the current cost structure and again this year's mine plan without undue for next year. So we don't have guidance on that yet that'll per that will progress over the course of the year and later this year, we should have some more information.
Okay, Okay, and but would it be fair to say that.
The operating team at the site. It must have a 13 year mine plan that they're working again sure. You said you had one year that like just 2020 I mean, if you. If you didn't have any if you didnt have any permitting timeline constraints, then it's very easy to malls.
To model out our multi year mine plan.
Officer, all five years plus out there, but there is timing differences in terms of reach.
<unk> expansion eventually a proceeding to the west right Theres a highway there that we'd want to move to the east.
And then in other areas of the site that would need some permitting in order to continue on a plan that would utilize all of the resources that we currently have so I.
Our constraint is.
Is is not really the deposit itself, it's actually the permitting timelines around some of that expansion opportunity at Atmos ski So you know.
When you model that out you can you can kind of play and the goal for US is continuing with that that the permitting that we need to do and want to do while filling in those gaps with vessels. We can so it's as Doug said, it's kind of a continuous process and has been since we bought it I mean <unk> been a great mine for us since we've since we've.
Wired it in 2018, it's made us money every single quarter I think except one.
We've recovered our acquisition costs.
Well above our acquisition cost I mean, it was a great. It's been a great mine for us and continues to be so.
It's important for us to see it continue in <unk> and <unk>.
And that's kind of been our process all along just sort of a mature asset like mosquitoes that requires additional permitting.
Okay. Okay. That's helpful and then in the kind of the same question I had less seamless with the deferral of the Burma Hall, a shutdown of the underground in Burma Hall.
Does that impact the long term plan there.
Fashion.
Well it doesn't actually mean, essentially because Burma hall would've been a pure.
Net investment for this year it actually it alleviates.
Some of the cash cash drain that for us.
Most people would have this year.
Deferring it gives us a couple of opportunities one we need to change our productivity are there to be able to make it. So we can get to the 1500 to 2000 tonnes per day that we need.
It's just prolonging the the pain by doing the development of touch.
Low low productivity rate and the.
Cost per tonne, we're just coming in coming into high as we were mining in the initial initial stopes.
So it also gives an opportunity for that higher grade material to be able to go to a CIO, we know that by sending it to a heap leach. It means that certain material you you have to leave behind because it is not suitable for going to a heap leach, but you can produce it process it in the CIO.
So the.
That approach for US just means that we will we will push it off and in meantime, we will look to restructure how we'll deal with Burma Hall underground.
We have a near term effect as you had a bit of lower production because we're not we're not mining those ounces, but we actually.
Save on free cash flow at <unk> because of the deferral of capital longer term as I said, we were going to go back into her underground eventually.
The long term.
Plans for the mine of course include Burma Hall underground and as Doug said, if that material is going through.
Alpine and Youre, obviously getting higher recovery than you would just on the heap leach itself and so there isn't an economic tradeoff study to deferring it where youre going to get those higher recoveries. Once you put that all in place.
Right. Okay, Okay, and just last question for me then quickly. The this explosive strike that you that your supplier has it seamless I assume that's behind you now and I'm just wondering if you could maybe give.
A little bit of an update on the pulse of the.
Of the three communities and how that's been going great.
Yeah that exposed to strikes.
It was long long past I mean, it was earlier affected the earlier part of Q4, So that's done.
Pulse in the communities.
Where we're doubling down on our efforts to be in dialogue with the communities.
Obviously, Burma Hall underground will be another <unk> <unk>.
Where we will be talking to all of the communities I mean.
We've tried to make it clear that there is a it is a partnership it's a dialogue that we need to have we need to be able to.
Work collectively on a relationship and be able to.
See.
What can be a bright future for <unk>, but it involves everybody working together.
We've increased our strength.
Strengthened I would say our community relations team at those fuels, including.
The last few months.
The informal feedback we're getting is that communication has improved quite a bit.
Coming from from the communities. So it's.
Ben It's Ben.
Been a good what five five or six months so far.
We're putting a lot of effort into.
That relationship that communication.
And as Doug said, making sure that everyone acknowledges and recognizes that we're partners in this project.
So it's been good so far carry but you know we've had those challenges in the past.
And you know I can't.
Necessarily say if they want.
Manifests in the future, but we're certainly working hard with.
With the communities to mitigate that.
Okay, and then I'm, assuming Greg that the the communities. We're told a while ago that Burma Hall underground is going to be shut down. So there are some jobs that we're gonna skiers. So that's not new news today for that right.
It's officially news today, I, suppose, but theres been no more informal conversations around around that.
The cost profile, a few olson that it can persist.
Indefinitely under this basis and there's some changes are going to need to be made and so.
And so action is going to need to be taken.
Okay. Okay I got you. Okay. Thanks, guys appreciate it great quarter.
Our next question comes from John Skolnick of Chardan. Please go ahead.
Hey, Thanks, guys and that most of them have been answered.
A couple from me impressed.
Impressive Gould collared contracts and just wondering what changed your stance on gold hedging and if there's maybe a push from the lenders and finding if move a dollar when it was good with that.
It's Peter.
Good question John .
<unk>.
At the end of October and October goal is below 1700. It had as we all saw a very rapid rise right through the end of January .
We have a capital intensive year again, this year, especially to fund construction at greenstone.
And with the way gold had continued to rise through January .
As a management team, we just wanted to take an opportunity to lock in some cash flow.
So that was the change in the thinking and particularly given.
On the floor and the quite high ceiling and then that was just kind of a function of the curve as a result of three months of steady uptick in gold I suppose.
So given that large spreads that allowed us to or will allow us to enjoy.
A higher gold price through the end of Q1 next year with those colors.
Just thought it was a really prudent thing to do and the fiduciary really responsible thing to do.
With respect to lenders.
And with effective a bottle and they of course.
We're quite supportive.
Generally speaking they like to see our hedges in place.
During capital intensive period.
I think John if you kind of look back.
Over the last you know.
Four months or so.
Just one more action we've taken have many maybe incrementally smaller actions by proactively.
Designed to ensure that we've got enough resiliency in our in our cash flow profile our balance sheet.
To absolutely ensure we get across the line on greenstone and get to commercial production next year or so.
We've done a number of different things Thats, one more part of it in.
You know it wasn't without consideration we have just rolled off all of our hedges from from the legal transaction and were kind of high fiving on the back of that and gold was going up in and then.
When we when we looked at what that collar and looked like.
Yeah.
And rationalizing it were like well listen if we put this in place in gold runs that hurrah anyways right.
Great and if it doesn't and leases this introduces.
Some risk mitigation and cash flow and EBITDA protection over the next year and a half while we complete this builds so that was that was kind of how we rationalize it. It was it was opportunistic we had waited one day later, we would have got maybe a slightly higher color, but since that day, we kind of printed the top of that recent bump in <unk>.
And.
And we're sitting here pretty happy that we put those in place.
And it will make sense great levels to go down that path that was impressive.
Risk mitigation there.
Last one from me just.
At Castle now I'm, just curious how long kind of a status from the phase one operation could continue for additional permits that are required.
I mean, probably 10 years plus like you because you can just keep you get once you get through the dump material you can get into <unk>, you know, it's a pretty small operation given the size of the overall resource there so.
We've got plenty of headroom I think in the past, we've communicated around nine years or so but.
We have no intention of riding it out that long I think I like.
Again, it's impossible to pin down exactly the timing of receiving that permit.
I like to say mid next year, plus or minus six months, maybe it's maybe it's more class six to eight months then than the minus but we're certainly pushing and trying to target having that permit sometime in 2024. So that we can get busy on expanding that mine.
Right. Okay. Okay. That's great I appreciate you taking my questions.
Our last question is from Mike Parkin of National Bank. Please go ahead.
Hi, guys.
That actually brings up a bit of a.
A good question is how would you rank order your project pipeline in terms of.
I'm, assuming this kind of gold price environment, where would you look to deploy capital. After greenstone first visit castle mountain phase two or something else.
Yeah, I mean, it does come down to two capital allocation decisions and so in the context of the gold price and cost environment.
Future, we'd make those decisions, but it's pretty fair to say you look at our portfolio you've got some smaller assets and then we've got some bigger longer life Chunkier assets and that would include greenstone, Obviously castle mountain phase two or Zona, especially with the addition of the underground and of course, we will see loss and so as <unk>.
And earlier, we are very keen to get underground ore zone and start to build out that mine and that's something I think we're we're we're actively working on being in a position to start after greenstone is back up and running or is up and running.
Castle Mountain absolutely is one we want to we want to get into the expansion of the only one that that is probably ranked lower right. Now is <unk> and that's that's a it's a big nut to crack it's at a higher risk profile and.
And we've got to do more work there.
As we've continued to say before we're ready to start investing heavily if you will so.
Green zones happening Castle Mountain I think will happen as soon as we get the permit and ore zone is subject to results of the feasibility study and where we stand in terms of available capital by the end of this year is something I think we'd like to get into as quick as we can.
Okay.
Maybe just one last question back to losses, the loss with the Burma Hall underground suspension.
That impact any of the three communities far more than the others.
Yes, we do.
The effect carries a little more than the other two communities.
Okay. Thank you that's it for me.
Okay. Thank you everybody.
At a time and didn't have a chance to get to any of the online questions. Unfortunately, so we will get back to you later today by email my apologies for that.
Greg do you have any closing remarks.
No I think just thanks again, everyone for attending the call and for the well considered questions and again, you can always reach out to any of us.
By email or by phone and you have additional questions or comments to make thank you very much everybody for joining us today operator, you can now close the call.
Thank you. This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
Okay.
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