New Gold Inc. Q1 2023 Earnings Call

Good morning, My name is Michelle and I will be your conference operator today.

Welcome to the new Gold's first quarter 20 twenty-three earnings conference call.

All lines of being placed on youth to prevent any background noise.

Please be advised that today's conference call and webcast is being recorded.

After the speaker's remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press start then the number one on your telephone keypad.

If you would like to withdraw your question. Please press Star T I.

I would now like to hand, the conference over two and Kit Shah Executive Vice President strategy and business development. Please go ahead.

Thank you Michelle and good morning, everyone. We appreciate you joining us today for new Gold's first quarter of 2023 earnings conference call and webcast.

On the line today, we have Patrick Rodin, President and CEO and rocks Jose are CFO .

Did you wish to follow along with the webcast police side in from our homepage at <unk> Dot com.

Before the team begin to the presentation I would like to direct your attention to our cautionary language related to forward looking statements bound on slides two and three of the presentation.

Today's commentary includes forward looking statements relating to new God.

In this respect we refer you to our detailed kosher note regarding forward looking statements in the presentation.

You are caution that actual results in future events could differ materially from those expressed or implied and forward looking statements.

Slides, two and three provide additional information and should be reviewed.

We also refer you to the section risk factors in new goes latest.

MBNA and other filings available on SEDAR, which setup certain material factors that could cause actual results to differ.

In addition at the conclusion of the presentation. There are a number of M notes that provide important information and should be reviewed in conjunction with the material presented at.

Now turn the call over to Pat.

Thanks, and good and.

Good morning, everyone.

Before I turn the call over a drug to discuss a quarter.

To provide some brief opening remarks.

Almost four years since I joined gold.

I saw a lot of potential for vision.

For our company.

You work hard 320, 22, and this woman was carried into 2023.

And crawled up our team's performance.

First quarter of this year.

As I know to know April production released the first quarter of 2023 was our strongest starved.

Four years.

I cannot say enough or important <unk> is to our success.

This wall decor aspect of the <unk> first quarter results.

Two one so no lost time injuries.

Injuries <unk>.

<unk>.

You often reach a big milestone.

<unk> 1 million hours, we followed close by.

<unk> continued to brood safety.

Reached 1.6 million hours with all his last name.

I strongly believe safety and promotions are currently too.

First quarter performance.

As a result, we are closest to me.

And go ahead and set out earlier in the year.

During the quarter. We also continue to focus on the longterm strategy of gold.

You can't bleed multiple steps <unk> balance sheet, which rug will talk to shortly.

Then we come to your to advance on the ground future production Ah, both really river and you have to.

Lastly, I would like to talk about other people.

Specifically the appointment a few one <unk>.

Yep, two executive Vice President and Keith to V P finance.

As well as you are really short <unk> to V P geology, and Lou to repeat technical services.

These executive will all be great asset to our team as we come to new <unk> and <unk>.

<unk> M C function.

<unk>.

I would also like to add knowledge rubs retirement at the end of this year.

Rug as being crucial.

The total of all of you go over the past five years.

Over my career.

Long sidewalk several times and it has been an excellent business Barbara for me.

We are grateful.

To be staying until the end of this year to ensure a seamless transition and support Keith Bullshitting new goals for success.

<unk>.

That that will turn it all to you will.

And I'll start with a slide seven which provides our operational highlights but production details on that slide a consistent with our production press release from April 10th.

Q on the company produced approximately 105000 golf announces the amount consisted of 10.3 million pounds of copper and 66200 gold ounces.

Many forever and <unk> excuse me 16300 gold ounces from new asking totaling approximately 82500 gold ounces.

20 per cent higher equivalent gold production as compared to the prior year quarter, and it's primarily due to higher golden copper grades and recoveries.

Partially offset by lower tons process that rainy River R.

Are operating expense parkfield announcements slightly higher than the prior year quarter, primarily due to production from the underground Tropic zone and timing of mail maintenance performed in the quarter at rainy River as well as our purchase cost in association with our or purchase agreements at new aspirin.

Consolidated all in sustaining cost for the corner, where 14 86 pre COVID-19 announce lower than the prior year quarter, primarily to the lower sustaining capital spend in higher sales.

Turning to our financial results in <unk>, our first quarter revenue is approximately 201 million driven by sales of 87200 gold ounces at an average realized price of 18 90 per ounce and sales of nine and a half million pounds of copper at.

$4.10 per pound or chew on revenue goes higher than the prior core primarily due to a higher gold and copper sales volumes, partially offset by lower prices. The first quarter revenue split saw gold contribute 81 per cent to our quarterly revenue and copper 18%.

Operating cash flow before working capital judgements was 75.7 million or 11 cents per share for the quarter higher than the prior year period.

Due to higher revenue.

Accompany recorded a net loss of $31.8 million or five cents per share during Q1 compared to one set of loss of one cents per share in Q1 of 22 decrease is primarily due to an unrealized loss on the reevaluation of the Goldstein obligation at new often and is it related to the free cash flow interest obligation.

After adjusting for certain charges are net earnings was $18.4 million or three cents per share compared to net earnings of two cents per share in the first quarter of 22, because earnings increase was primarily due to higher revenues.

Set by a higher operating expenses.

Q on adjustments adjusted earnings include unrealized adjustments on the rainy River stream mark to market and the free cash will royalty at new asking.

M D N. A has details on on all of those and other non-GAAP measures discussed.

Our total capex for the quarter was $63.1 million $26.3 million was spent on sustaining capital 36.8 million on growth capital.

Standing spend with primarily related to plan tailings worked at both sides, both operating assets capital stripping at rainy River and stabilization activities at new <unk> and our girls capital was with specific focus specifically add season, new acid in the underground at rainy River.

<unk> provides details of our capital structure are cash at the end of the corridor is 197 million and liquidity was $570 million.

I'm in line with the end of 2022.

With our investments I'd say largely offset by the sale of the previously held Artemis skull chairs, which contributed approximately 31 and a half million Canadian dollars.

Subsequent to the corridor, we also amended our credit facility, increasing the maturity date by your to December 26th.

We we continue that execute short term hedges on <unk> and fuel.

[noise] are hedged on both commodity 75 per cent for Q2 in approximately 30 per cent for Q3.

With that I'll turn the call back to Pat.

Zero.

<unk> provides additional details in the first quarter of <unk>.

A quarter of them or email perform well and delivered solving production increase over the first quarter of last year.

While the <unk> what was the other one more plans I'm confident that we can get some hard to talk to you 340 year.

To the <unk>.

<unk> 40 processing plant.

Yeah Rose gold grade at Trinity River was one 112 grams per ton.

The first quarter of a lot from last year.

More on the ground or was processed.

I'm really sorry to say that mining of the overburden is now complete which will lead to significant improvement in Monday ever since.

I can also share that money in the note all that is finished.

Further come to <unk> to the reminder of the open pit mine life.

Surely.

<unk>, the cost saving and improving unfortunately.

Part of the open pit will be utilized to <unk>.

Going forward.

Over the last year.

<unk> I was married upgrades in preparation to water management infrastructures.

We have Ah boosted the pumping system.

Bold <unk>.

Bill <unk>, some channels and increase the water treatment capacity.

I can comfortably say Brittney river is pepper to manage.

With water.

<unk>, the <unk>, leading toward capsule spam and budget.

I'm confident that the team with ketchup over here.

Turning to the underground.

<unk> <unk> <unk>.

<unk> in the corner include over 69000 tons of four from the <unk> zone.

<unk> 52 grams per <unk>.

Most importantly.

<unk> <unk> well.

Going forward.

I remain confident that you're <unk>.

The room.

Noted in our gardens production was expected to get stronger in the second half of the year.

Netflix activities ought to be completed in the first half of the year.

With great expected to mobilize and chew too I want to reiterate our target of 80, 450, 845 55, four repulsion slip between the first and the second half of the year.

Slide 12 provide photo vetoes.

<unk> first quarter results.

The only <unk> average over 7700 tons per day or mine in the quarter an increase over the prior year period is b three reached city states money reinforced completion of construction activities in 2022.

The meal average 8100 ton per day that would be in line with mining great incorporating vitry online as well as all purchases.

Relation to our to our purchase agreement.

<unk> delivery to plan.

She's on the block and continue to advance.

1172 meters in the border.

<unk> scheduled drinks you wanted to do to <unk>.

<unk>.

<unk>.

However, I'm confident in our ability to achieve critical.

My name is <unk> or during the fourth quarter.

Deliver a commercial production in the second half of 2024.

Going forward.

<unk> position to me that's <unk> that's totally here.

Before I close all the presentation today.

Do I like what I do to be the key priorities for the company.

First.

<unk> operations.

Second.

They need to advance so we're all going to <unk>.

<unk> with <unk> deliver a workout and set out earlier in the year.

I'm proud of.

My colleagues.

I have done an excellent job to started a year. This will continue to drive about where success.

This complete our presentation that will now turn it back to the old breathing forward it to any portion of the call <unk>.

Thank you.

Gentlemen.

Question and answer session.

You have a question please press star.

Followed by the one on your Touchtone phone.

Technology and your request.

Selling process. Please press star followed by the two.

If you're using a speaker phone.

Pressing any cheese.

Moment. Please for your first question.

The first question comes from Michael.

R. B C capital markets. Please go ahead.

Thanks, almost right Mike Cybarco good morning, everyone just.

On the court or I mean, it was obviously I a great result, especially from new after and you talked about the maintenance in queue to but could you could you talk a bit about how we should look at at existing operations going forward sort of without looking.

<unk> at the C zone, and and the ramp up of of underground mining at at rainy should we be rebaselining, our our forecasts at least over the course of 2023 on the basis of of Q1.

So thank you for your kitchen, Michael the way we should look at this is actually we we are doing the.

<unk> from the Crusher 20 River.

We plan for the worst and we wish for the best So that's what we are with me all the way actually the crushers under repair and we are changing the main components.

After six years of operation. So we are.

I think we we we really plan too.

Rebecca regardless.

So is why we indicated 45 55.

Doesn't mean that we will do it because we actually working really hard so we put in place.

<unk> shut down we pre crush tons five.

We continued to upgrade the meal. So the frequency is less.

We got you 245 55, if you should consider that is the worst position that we can we cannot.

So should we be thinking you know coming out of of 2022, and what was a pretty challenging year should we be thinking of 2023.

As as a period of of stabilization at the operations, while you're continuing to to develop and invest in the the new growth from from 2024 and beyond or or is it more of a case, where you are operating at full capacity, if if that makes sense.

Oh, okay.

Do that first I will start with new Apple B tree is the the the blood cave.

He is performing really well so we are at the beginning of the <unk> in the blood. So it's performing well, it's a city state so.

Think it's for this I'm not concerned about the stability of the expiration.

<unk>.

For renewable is the same so I explained to you that we one of the reason we're into one we might need to replace us because we we we it was really loves the question to mind in the notes, though because it wasn't that rule shuttle pet so the face of a small and difficult to interact equipment mythical equipment in one single face that also we.

We we are.

Yeah I'd be interested at all of you that we all the overbuilding is over and it was it's a really difficult <unk>. So we maximize the airports in the winter of boats in three to shrug Bill. So it's behind US. So you'll know in term of fifth we have on my life of 3.5 years <unk> 2023, 24 24 25.

26, the first style. So we will mine and rug. The mine is in good shape.

The Orioles.

Pumping system is rubbish and litigations are all in place. So we are we deploy a lot of investment diamond and capital two people up the preventive preventative printed predictive maintenance.

<unk> actually so strongly confident.

I sent you that word <unk> to stabilize.

Going forward, we reduce a lot of <unk> of the purpose of them the guidance, let's see any.

People don't see the new address 40 operation going forward.

Okay perfect. Thank you so much.

Thank you.

Comes from.

[noise] financial please go ahead.

Hi, Good morning, I just have a couple of questions on rainy River I'm. Just wondering if you can give us an update on how that's prove English to block model and you know what your conviction is and that going for it.

You you talked about in the room.

Yeah <unk>.

Yeah, sorry, so so actually we are we are we we we have a team that is when we have a new as you as you bollea.

But we we the word was still working on the blood model so to optimize they're all shapes. We did a lot of work in term solution for the extraction for under the under the main zone. So we're working on that.

So <unk> will be equipment.

The great <unk> really well.

<unk> yeah.

Think we will be well positioned to two two <unk> two <unk> two three this year.

Okay. Thank you and then just one follow up just on the development of Terror C zone.

Just wondering if you can provide a little bit more color on delay that you mentioned this carter and.

If you see any impacts 0.4 at.

To the timelines that you've previously provided.

Good question really good question so.

So just to summarize ooh actually draws first we did love. This we can <unk>, we have the infrastructure is on the ground and we have the development on the wrong.

We have what we call the critical path and what all the supporting you ordered a loving supportive loving for.

<unk>.

So actually we respect your physical birth will too crazy on your card that the blockade and to give love the troubles and so the the strike.

And levels and also to do the development for to confirm that the crusher.

And it's a <unk> and the bottom part we have some some some zone, where we have a cave and we have to spend more time too short <unk> <unk>, it's part of my <unk>.

Mm mm and we we all full steam ahead, so we recently.

We will we argue it's going really well <unk>, so and we will receive our new electrical equipment.

In the following days.

And the.

For the second available 20th wouldn't dream two four and we are still expecting to review the commercial version or what we called <unk> 20th 24. So.

Paulson profile mobile is respected.

Okay. Thanks to the I think that's it for me.

Thank you.

Next question comes from.

Credits.

Hi, Good morning, Thanks for taking my question on rainy River you highlighted a few different mining efficiencies underground optimization just out of high level. How do you think about aspirational me what the cost profile could look like at this mine.

For example is it possible that the all in sustaining cost gets closer to let's say the $1200 an ounce range just trying to get a sense of like a best case scenario, where cost could end up longer term.

So I think for this.

So it just gives me more time to look at my numbers.

Because we are still optimising. This so the fact that we can now.

Find out the.

<unk>.

Is.

Provide to us a huge reporting D too short <unk>.

That's that's that's gonna be receiving it within four hours symptom of efficiency and fuel consumption and and <unk>.

M for auto loan itself I think because I was telling the tech reporters still valid, but we are working again too.

As much as we can reduce capex and to maximize the fact that we are the open pit that can be we can tell you to reduce the development. So it's what we are working all actually and so I said to you previously you said to the prescription.

The more information to answer to that means you're a tree.

Great. Thank you.

Thank you. The next question comes from.

Honey.

Please go ahead.

Hi, Good morning, <unk> I have a number of questions. So I'm, hoping you'll bear with me I just wanted to clarify first start bringing you've ever on the Greens. You said Green is expected to normalize and Q2 can you talk about what happened in Q1 like tons.

Tons of Great reconciliation <unk> I know you're pulling.

<unk> now, but you haven't given us an idea of how much time, they're coming from underground or somebody else's pet that if you can give us a break out it is both of the times and the great and then also what was different about what happened and what you want and that would be helpful.

Domain when the men come in the past with the number of vision is mainly because in the note logo. The we as as discussed previously I think.

Before the reconsideration was more tricky. So we apply your mind gold factor and we use our scheduling to to to do that to determine the grade. So we have more volatility in the <unk> all the other part of your body. So it would be and also find out so.

So this is why maybe we mainly we relate to nowhere come in that you're gonna be more straightforward.

<unk> will be easier for us.

For the <unk>.

You know what is the the entire grade so as I explain to you is 3.5 grams per ton and the <unk> plan. So we mind.

Mosley.

<unk> the the time that we process.

You know it was 60 70000 tons compared to 2 million tonnes process from the fifth so basically it's.

If the answer is point of view, it's what is making a difference.

Okay.

What did you say it decorated is expected to your online design, what you're talking about is that you've mind out the nurse smiled and you're going back and change. It I guess the name down and that grade should be more along the lines of quaint 996.9 0.95 or so.

Yeah, Yeah, something like this yes.

<unk>, it's easy for us to pay their degree.

We have a bit of reconciliation okay.

Okay and so you are when you reiterated that 50 545, you you were talking about when the great <unk>, you're still going through maintenance and fucking and sucking corner, but that should be complete by the end of second quarter right.

Yeah. So the shutdown is actually ongoing and is gonna handle the <unk>.

Alright. So my next question actually relates to financial I noticed that you said you often costs are there was <unk> as it relates to or purchase agreements previously previous agreement could.

Could you clarify what those or purchase agreements Ah referring to you at all.

I I apologize I don't think I've seen that before but I'm not sure. If you had previously mentioned authenticated explaining why or purchase agreements are that'd be helpful.

Okay. So is as you the the the new after a meal is having a bill tripled capacity of.

14500 tons per day, and we can't increase to 16000 tonnes per day and pigs, depending of the words index.

Actually we are using just 60 per cent of this capacity, so and we have neighbors around us or more smaller operation.

And for US it's no Fortunately, we look at so this this quarter.

Your purchase agreement as many is January for us so.

<unk>, 20th 2500 answers or promotions and we represent mostly seven per cent of the new <unk> reviews.

It's <unk>, we have a small small small operators beside those warner that'd be meeting.

D N or meal in place and so it's Joseph <unk> to.

To generate more castle and we also purchase agreement or <unk> six point of view, it's increasingly workers.

Okay, Sir <unk>.

Could you explain like how that for purchasing agreement works in terms of how it would impact your financials and and you you guys. You mentioned it added to the cost for them just to understand I'm trying to understand.

Purchasing the art.

Yeah, we we purchase that you are at a at a.

Factor and or a discount if you will and as.

As we process. So we we we recognize the balances and generate the castle. It's it's as simple as that there's no no significant it's not a complicated file.

Okay and then.

Sorry on one comment you guys mentioned that in your opening remarks, Rob you mentioned that you said, we are 75 per cent hedged and 35% hedged on both commodities and I think you were referencing pillow in cat, but I just wanted to clarify you meant <unk> gold and copper.

Yeah, I know it said input costs fuel and our our our exchange rate okay.

Alright, So you didn't mean commodities, okay, alright, uhm. We are we are we are unhatched.

[laughter] no.

Alright, sorry, I, just want to make sure [laughter] alright.

Another question I had was that and I, probably the last one I was looking at no 11 in the financials I just wanted to understand there's two different kinds of.

That two different kinds of.

Fair value.

Charges that are coming through and when I got cancelled the comprehensive income of owner of the owners and the other one came through the income statement and it's just a little bit higher than we've seen before so I guess I understand the one that went through the income statement that's related to the Royal gold and the teachers pension plan share Green.

And Ter, but.

But I don't understand really the the one that coin three D operating Friday, the owners side, and then and I guess, specifically why it's called related to our own credit risk I guess I wanted to understand is there any applications at the higher rate Sir happening now in that particular note.

Yeah, I know what the the big change in the Gulf stream obligation any new often free cash flow obligation is as you noted I think in in your note.

Some impact on higher metal prices, which increases that liability for both of those but the bigger change is related to our bond yields and the change during the quarter of those yields which impacts the discount rate that we use. So there was a there was a change of approximately 28% and knows that discount.

Right downward, which increases the liability there is some impact from the risk free rate, but not as much as what we've seen on that new gold credit spread if you will so it's it's it's a part of the options.

The model and that we have to we used to calculate these liabilities. Okay. Yeah, when I wasn't understanding of that that would've been quite <unk>.

Discount rate was going down on <unk> generally gotten upset if you are if you are perfect.

Yeah, specifically are exactly that's it Sir I have nothing to do with the open market rates a few other risk free right.

Okay. Thank you very much that's it for my questions.

Thank you.

The next question.

Uh-huh.

Go ahead.

Hi, there. Thanks. Good morning, most of my questions have been asked and answered, but uhm, maybe just following up on rainy River and the performance in Q1, and what you're kind of guiding for Q2 here.

Q1, what was wrong I think it represents something like 27 per cent or so of your full your guidance and yet you're calling for 45 55 split in the second half My my focus is actually on the cost you your coupon cost despite the good production.

Bob Your guide and right and I'm, assuming that if you have this whole back in grade and lower production in two Q I would imagine that costs are probably moving higher into two relative to <unk>.

And so in order for you to hit your your cough guidance at <unk> for the year.

That would imply something like operating expense and the seven to 800 dollar per ounce range and the second half of the year is this consistent with your expectations.

No.

First.

The second quarter of subdued that we plan for the worst and we wish for the best well that's one thing.

And we mitigate the risks they're going forward in our cost too so.

The plan and the budget to mind, mostly $131000 per day.

<unk> in the queue, one, but actually we are getting 170, so and you know we have a certain big part of our money because we are the same people send me equipment software costs will decrease.

Capital costs for the pushback will decrease as we are.

Waiting more efficient.

So in going forward and tell my basic I'm not expecting that we are we all slightly <unk> because of the contract or a cough and photoshop down, but when it will be behind us.

The second half of the year. These costs will go back to normal so and we are in control were in total control of <unk>. So you're all breathing we are pretty lean there's one organization that really so basically and tell them about <unk>.

Further propulsion going forward.

Okay. No. Thanks, that's helpful. I guess I'll spell <unk>, because I figured that there was some capex you know accounting moving over into the <unk> category, there, but just more of the <unk> because that was already running ahead of your your guidance for the year. Despite the strong production in the first quarter.

So maybe I can just follow up on that but I must have misheard you I I'm surprised to hear that you're expecting cost to come down what are you, saying you were expecting cost come down in the second quarter from from Q1 muscles or or is it really just a second half thing.

You know, it's always a question of the lemonade or two <unk>.

Based on the next quarter note on wall nothing too.

Because we have some <unk>. So <unk>. So I think if you just <unk>. So we need to you need do you need you need to look at the cost of going for the whole thing.

Taking a strong second hour from four <unk> produce in 2023.

Okay. Thanks, Thanks for that maybe I'll I'll, just switch gears a bit just a little bit on strategy Uhm in your in your wrap up slide you talked about your second priority being advanced in Europe organic growth opportunities How'd. You can you can you talk just a little bit about what goes and organic growth opportunities are is that does that.

C zone, and underground and rainy river or is there something else to be considered in that organic growth bucket.

So it's mainly this is the first is this is <unk>, it's it's an opportunity for us because it's an opportunity it's not all of <unk>. So it's our mission actually.

And and we have a strong vision from the cover price going forward and we want to be 40th <unk> 2024.

<unk>, sorry, when the corporate prices expecting to to increase so and then for US is the <unk> is the <unk> in terms of developing construction achievement of February videos is important because it's a <unk>. It's a nice aboard C D for us to be well.

Both of them.

Sorry from the culprit wave at the end of 2024.

<unk> rainy river, it's an abortion due to increase of extreme see efficiencies maximize what we get from the geology and to see we can do in addition to the reserve or we can address the resource underground.

I actually use it's what we are looking up and we <unk>. We are seeing we're still seeing this as an abortion D to create more value on on any of the point of view.

Okay. Thanks, and then maybe just the last question for me at the beginning of the call you talked about strengthening your balance sheet.

I believe you soldier Artemis shares in the corner you know you pushed back your your date on your credit facility.

I'm just wondering why if I mean, obviously, it's always good to have a good balance sheets or strong balance sheet, but I'm just wondering why the focus here it looks like your covenant physicians are in good shape.

It looks like your balances in relatively good shape. So I'm just wondering.

What's driving the focus on strengthening the balance sheet.

Focus on you know starting in the first quarter of this year.

Yeah, I think it's just driven by good housekeeping and Optionality and just keeping ourselves in good shape and ahead of the game.

Alright perfect. Thanks.

Thank you.

Next question comes from Eric.

<unk>.

Please go ahead.

It's actually scotiabank, but thank you very much yeah. Thanks for taking my question I think a lot of what I was gonna ask has already been addressed but maybe just quickly on rainy and the underground any additional details there in terms of maybe quantum and tons or greater.

What you're seeing there in Q1.

We'll talk about the past production or you could you talk moving forward.

Well I guess, both actually any additional details you could provide.

So.

If I'm looking so just make sure that I understand clearly the question, but the first part of <unk>, we modified and what would you change your mind and method.

Okay. We are pretty efficient now can we are what I'd like to say is that really we are consulting degrade tons. So that's.

Always <unk> when you start an operation on the ground like this.

Giving to us confidence.

Looking forward as explain to you will be in a better position to explain in the two two at the end of <unk>, where we our position with you as soon as you shouldn't be able to go online.

Actually it will be really subjective and three hours because when I will we will present the new numbers.

The efficiency of the number that we will stand behind and actually I can.

Let's talk about this.

Okay, great. Thank you and then maybe one more quick one on new often in terms of additional or purchase from third parties should we assume that it'll be the same throat the balance of the year or any sort of go ahead Sir.

Yeah, well you can assume that this we were looking at <unk>.

I think as we have we have a strong team will <unk>, that's new afternoon or anything or others.

<unk> your home's credibility in capacity.

<unk>. The retarding factors is excellent we have a lot of maturity.

And we want to maximize the value of our purchases and people with that.

Yeah, great. Okay. Thank you very much I really appreciate it.

Thank you.

Last question comes from Mike.

Let's go ahead.

Hi, guys. Thanks for taking my question just to follow up there.

The regional work purchases from third parties was that factored into the original guidance.

No it was not.

Okay.

And then with respect to drilling.

Some extensions at the rainy River under Brown when can we expect you guys to be like from what I understand you guys were looking to.

Resume that from underground rail stations, rather than from more costly surface locations. If that's still the case when do you think you'd be in a position to to start that up.

So we did the definitions ruling that that is business as usual this year four G. S version, it will be difficult for us to drill from the tip.

You know we have any activities and we can we didn't <unk>.

But we are actually looking at <unk> to develop during platform to drilling events.

It's probably something that will be ready to go in 2024.

Okay.

And then just stripping around with respect to.

Targeting your commercial production rates at new asked and when do you.

What.

Percentage of full capacity or you based on that off like 14, and a half thousand tons per day milk capacity or.

Something else what are you what's your boys.

It's a bit so you know usually with the definition of <unk> is when you achieve 70% of your <unk>.

The black keeping it said the different <unk> talk cause it to cave by itself. So when you <unk>.

So just to create the opening if you have the case that is already initiated.

You know her case you know it's.

It's pretty particular, because we only two mining companies are doing locating in Canada, but the way that the the the tab.

Fabulous the trigger to be in commercial production to sue too.

Is.

Is when we reached the religious where it came by itself. So for us it can be actually I think it's an average of 12.

12 to 16 draw Bill.

Not sure of the exact amount please.

Very you can change.

It can be 22 or it can be just M. But in our case, it's where we call you to repeat this commercial production. So when we will start to extract C zone.

We cannot draw a bill is that in what capacity. So we will not be able to extract at 14000 tons per day as his own but we are <unk> that is operating at the same time and it's <unk> and we have a progression.

That we reached 14500 tons per day. So M. C zone will be at maturity, if I'm right. It would be in 2025.

Okay.

And just following up on that.

Can you give us a sense of.

What percentage of your operating costs.

Kind of fixed versus variable homes.

Thinking you've got quite.

Quite a significant step off the tonnage coming but.

But that probably doesn't translate into steady state cost per ton from where we are today.

Likely drives a significant drop with fixed costume spread out over I think a number is it a little too early to ask that question or.

It is a bit early but I could I could you start to give you a range of between 70 and 80 70 to 80 per cent fixed it's a high fixed component as you know, it's but it'll be like 70 per cent range, but we haven't.

I haven't done the math recently, but.

It should be in that spot.

And then <unk>.

With Ontario teachers in terms of what their intention is with the Q T 2024 disk.

Decision to either take a direct interest in new I, often or maintain their interest in the free cash flow.

Yeah, we have a great relationship with teachers that by the Activations.

So we maintain open dialogue that there hasn't been any specific.

Discussions around at <unk> at your way from now.

Okay.

Alright, that's it for me and Rob Congrats on your retirement and I Hope you get it on a sailboat or something.

[laughter]. Thanks.

Thank you guys.

Thank you.

No further questions I will turn the call back.

Closing remarks.

Thanks, Michelle and again, thanks to everybody here enjoying the call today and ask those great questions is always did you have any additional questions. Please feel free to reach out to us by phone or email I have a great day.

Ladies and gentlemen.

Thank you for your participation.

Disconnect your lines.

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