Fortuna Silver Mines Inc. Q1 2023 Earnings Call

Speaker 2: Greetings and welcome to the Fortuna Silvermines first quarter 2023 financial and operational results call. At this time all participants are in a listen only mode and a question and answer session will follow the formal presentation.

Speaker 2: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded.

Speaker 2: I will now turn the conference over to your host, Carlos Wacha, Director of Investor Relations. Sir, you may begin.

Speaker 3: Thank you, Ali. Good morning, ladies and gentlemen. I would like to welcome you to the Fortuna Silvermyke's first quarter 2023 Financial and Operational Results Conference Call.

Speaker 3: Roberto Ganoza, President and Chief Executive Officer. Luisadio Ganoza, Chief Financial Officer. Cesar Velasco, Chief Operating Officer, Latin America. David Whittle, Chief Operating Officer, West Africa. And Paul Wieden, Senior Vice President, Exploration.

Speaker 3: Today's earnings call presentation will be available on our website, FortunaSilver.com. As a reminder, statements made during this call are subject to the reader's advisories included in yesterday's news release and in the earnings call presentation. Financial figures contained in the presentation and discussed in today's call are presented in U.S. dollars and let's talk about the Yahweh

Speaker 3: Otherwise stated.

Speaker 3: Before I turn over the call to Jorge, I would like to indicate that this earnings call contains overlooking information that is based on the company's current expectations, estimates, and beliefs. This overlooking information is subject to a number of risks, uncertainties, and other factors.

Speaker 3: Actual results could differ materially from a conclusion, forecast, or projection in the forward-looking information.

Speaker 3: Certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the overlooking information. Additional information about the material factors that could cause actual results to differ materially from the conclusion, forecast or projection.

Speaker 3: in the overlooking information and the material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the overlooking information is contained in the company's annual information form and MD&A which are publicly available on CDER. The company assumes no obligation to update such forward-looking information.

Speaker 2: Business performed well during the first quarter. We recorded net income of $0.04 per share, achieved production of 94,110 gold equivalent ounces on track to meet annual guidance, and our costs were all in line with our guidance projections for the period.

Speaker 2: that sustained worldwide inflation.

Speaker 2: and corresponding cost creep that we all experienced over the past couple of years.

Speaker 2: has been compressing business margins across the precious metals mining industry, this despite initiatives to optimize our operations and streamline the business.

Speaker 2: Gold and silver prices did not provide any significant relief on margins as of Q1 2023, but going into the second quarter, metal prices and margins for the business are looking much stronger.

Speaker 2: Our average realized gold price for Q1 was $1,893.

Speaker 2: which is essentially flat against what we realized in the comparable quarter for 2022.

Speaker 2: and only 7% higher against a realized price two years ago in Q1 2021.

Speaker 2: For Silver, the story is even a bit more difficult.

Speaker 2: For silver, the story is even a bit more difficult. For 2023 we realized

Speaker 2: For this Q1 we realized $22.52.

Speaker 2: which is 14% lower against the $26.20 we realized in Q1 2021.

Speaker 2: Over the last year, quarter against comparable quarter or consolidated cash cost per ounce went from $772 per ounce.

Speaker 2: to $923 per ounce up 20%.

Speaker 2: Despite all this, our EBITDA came in at a healthy $65 million and the business generated net cash from operating activities of $41.8 million.

Speaker 2: After meeting all our sustaining capital demands, funding corporate expenses and paying $12.9 million in taxes, the business generated free cash flow.

Speaker 2: of 8.7 million.

Speaker 2: Luis will expand on our management discussion of financial results later in this presentation.

Speaker 2: Subsequent to the end of the quarter, we have had a few relevant events of importance that I want to mention.

Speaker 2: During April at the San Jose mine in Mexico we had to contend with a 15-day stoppage derived from a union claim demanding increasing profit sharing beyond what's stipulated by law. This dispute has been resolved and operations resumed.

Speaker 2: In early May as well, the Mexican government approved the new mining reform, which we view as negative for investment in the country, unfortunately.

Speaker 2: In early May as well, the Mexican government approved the new mining reform, which we view as negative for investment in the country, unfortunately. For starters,

Speaker 2: mineral exploration in open ground becomes an activity reserved for the government.

Speaker 2: An existing mineral concession and mine operation will be subject to many questionable articles in the law which provide for higher costs and uncertainties to investment.

Speaker 2: We expect there will be many constitutional appeals filed with the Supreme Court of Justice in Mexico against the new law coming from mining companies and other interest groups.

Speaker 2: Another item to be aware of is our first gold pour at the newly built Seguela mine which is imminent and we expect

Speaker 2: the poor in this second half of May.

Speaker 2: On May 8th, we reached an agreement with Cheser Resources to acquire 100% of the company for an all-share consideration.

Speaker 2: representing approximately 5.1% of the pro forma for Tuna. We expect this transaction to close in late August .

Speaker 2: Chester is of great strategic fit to Fortuna. Geographically the Chester properties are located in Senegal, a near neighboring country to our existing operations in Cote d'Ivoire and Burkina Faso.

Speaker 2: a mining-friendly jurisdiction, Senegal, and a place where we can leverage our West African management infrastructure and expertise.

Speaker 2: The Diambasut project is a high value advanced exploration opportunity with multiple target steels to be drill tested.

Speaker 2: located in the heart of the Senegal Malish years zone within a few kilometers of tier 1 mines in the Porta Polio of Gold Major.

Speaker 2: The preliminary economic assessment carried by Cheser on the AMBA suit outlined a conventional open pit and CIL process that even with a submillion ounce gold resource as it stands today can deliver robust internal rates of return above our minimum investment threshold.

Speaker 2: Paul Weidon, our Senior Vice President of Exploration is with us and Paul can you please share our views on the exploration opportunities that Cheser presents to us.

Speaker 4: Yes, certainly. Thank you, Jorge. As Jorge said, JESTA represents the next step to our West African growth and it follows the Saguerre development.

Speaker 4: And this is a project we've also been tracking for a few years now and watching it grow over time.

Speaker 4: So just a quick summary. I saw it's located in Senegal. It's actually located in the south-eastern corner of Senegal, about 680 kilometres from Dakar. Easy to access. It's a well-serviced, major regional road that runs down through that way. It's a highway. Low security risk. It's a mining-friendly jurisdiction and we've got several tier-one-scale mines within 50 kilometres of the project.

Speaker 4: CHESS has highlighted a, just a scoping study highlighted a technically simple open pit mining concept across several pits with a conventional 2 million tonne pranam operation and we would say that's something we'd continue to pursue.

Speaker 4: We would also anticipate this being a project that we would follow very closely behind the Sagala Development Park, given that when we acquired that four years ago, we had an inferred resource of 400,000oz and today we're about to go to poor gold. I would anticipate it would be similar growth for the younger soon.

Speaker 4: Just moving across to the geology side, why do we really like it? It's located in the really highly prospective Kini-Ibuka-Dugga Inlaya, which is a world-class mining district.

Speaker 4: host to several large T1 operations. The Downrearford project itself is located on a series of displays that go off the main Senegamalai Shear Zone, which is host to the majority of those large deposits. And I really like the structurally complex nature of the deposit that highlights racial prospectivity.

Speaker 4: And also you see there's a lot of similarity to the nearby for Cola and Gungoto and Yalaya operations of Beattie, Gold and Barrick. They're all within... the closest to them is 12 kilometres away.

Speaker 4: So far the Chester folks have identified four shallow gold deposits with a very well developed oxide supergene signature to them and we'd certainly see that evolving further with further exploration work that we'll be looking to carry out later on this year and we'll resume that work.

Speaker 4: At the moment though it's a very attractive exploration play for us. They've got the resources, they've currently got 625,000 ounces of indications at 1.9 grams and a further 235,000 ounces of inferred at 1.5 grams.

Speaker 4: We see those growing over time as well as the work we've got to do as Chase has announced.

Speaker 4: The recent work at Casasoco, there's been some decently-sized intervals reported there. Gumba Gumba Nord, and the Western Splay. So these are all drill-ready targets and some preliminary work done to date. In addition to those, there's several new additional targets that we've identified using their data sets, and that's really one of the highlights for us.

Speaker 4: There's a portfolio here of new targets available for us to walk up and test. And then there's also the potential there for a wider regional consolidation. We see a lot of encouragement there. Derek immediately adjacent me to us is Kebbe West. Let me share at least Andrew with him.

Speaker 4: They've got a project there which is looking quite interesting and then to the immediate west they also have Africa's Karakayeni project which is also again highlighting the potential that we see through the area.

Speaker 4: So, you know, in short, what we see here is an advanced exploration play that we could see moving through the phases to feasibility in a fairly short order of time, on which we had a high potential for growth, very simple geology in the sense that we know what's there, it's got a nice degree of structural complexity which adds a bit more excitement to the process, but it's a project which is anything we can carry through fairly quickly and looking forward to.

Speaker 4: getting into the grad election this year.

Speaker 5: Thank you, Roy.

Speaker 2: Thank you Paul. We'll move now to get an update from our operations from our Chief Operating Officer. So David, do you want to get going?

Speaker 3: Thanks, Jorge. Operations in West Africa continues as highly performers during Q1 2023. The Yaramoko delivery gold production of 26437 oz.

Speaker 6: This was ahead of the mine plan. The additional production contributing to Yaramoko is all in sustaining cost.

Speaker 6: and cash costs of $1509 per ounce and $819 per ounce respectively.

Speaker 6: both ahead of the lower end of ankle guidance.

Speaker 6: The wireless construction remains on time and on budget.

Speaker 6: with the first load ball projected for this month.

Speaker 6: Safety performance at the Aramoka was strong with no injury reported.

Speaker 6: Unfortunately, Exe Gala and exploration contractor received a finger injury which was later classified as an LTI.

Speaker 6: In early April , a failure of the Artec tunneling structure at the Yaramoko portal occurred which resulted in the loss of the access to the underground mine for a period of 27 days whilst rehabilitation operations took place.

Speaker 6: Normal underground operation resumed on 1 May. The processing plant treating existing stockpiles throughout the rehabilitation period.

Speaker 6: Production for Q2 remains constant and we do not anticipate any human-

Speaker 6: Yaramoko underground grave control and Brownfield's exploration programs continued with encouraging results, extending our planned mining boundaries on the western side of the ore body and increasing soap tonnages within the existing reserve boundaries.

Speaker 6: and milling circuits and grade control drilling of the initial benches at Antenna.

Speaker 6: with more than 12,000 meters drill. Load clearing and construction to the Amtian pit, the second deposit being mined, is currently taking place with great control drilling expected to start building late May 2023.

Speaker 6: All mining major equipment is now being mobilised to site and Motor Angle, the mining contractor, and now in the final stages of the construction of key infrastructure.

Speaker 6: in parallel with excellent progress on the ground, operational readiness, scope, to advance as well.

Speaker 6: The mining, technical, processing and maintenance teams have all been recruited, with Motor Engiil scheduled to recruit the remaining members of the mining team over the coming months.

Speaker 2: Back to you, Jorge. Thank you, David, Cesar. Can you give us your update on LATAM operations, please?

Speaker 3: Sure Jorge, thank you very much. And as you mentioned before, last week our San Jose mine in Mexico resumed operations after a 15-day illegal blockade.

Speaker 3: We are now working on the production recovery plan and don't anticipate any impact on annual guidance at this stage. We are also assessing potential impacts on the additional costs related to the agreements reached with the union.

Speaker 3: as well as production targets and safety performance for the year.

Speaker 3: production targets and safety performance for the year. During the first quarter.

Speaker 3: San Jose produced 1.3 million ounces of silver and 8,231 ounces of gold.

Speaker 6: These results are slightly below Q1 2022.

Speaker 3: Due to lower grades than planned, as a result of higher dilution in one of the sublevel stopping areas, and a small delay in the mining sequence at level 800.

Speaker 3: We anticipate mining better grade stops in the upcoming months though.

Speaker 3: Cash cost per ounce at San Jose has come under pressure from a stronger Mexican peso, coupled with higher inflation and lower headgrades.

Speaker 3: All the sustaining costs for the quarter is in line with our guidance.

Speaker 3: as lower production and higher cost of sales were offset by timing in capex execution.

Speaker 3: Moving down to Argentina.

Speaker 6: The global production of the lindere mine was 25,258 ounces.

Speaker 3: aligned with the mining sequence for the quarter.

Speaker 3: Air grades are expected to improve in the upcoming mining zones as per mine plan.

Speaker 3: Mine production for the quarter was 1.6 million tons of mineralized material with a stripping ratio of 1.07 to 1, which is aligned with the operations planned for the year of 1.17 to 1.

Speaker 3: Linderos ASIC is in line with guidance for the year. Cash cost per ounce was impacted by higher labor and one-time services costs.

Speaker 3: as well as the effect of lower grades but partially offset by lower CAPEX execution and savings in key consumables. ASIC is expected to come in at the high end of guidance for the year.

Speaker 7: Peru.

Speaker 3: Despite social unrest and numerous road blockades throughout the country, in January and February , operations at the Cayama mine have not been significantly affected.

Speaker 3: The operation delivered strong production for the first quarter, with 8, 19, and 10% higher production for silver, lead, and zinc respectively.

Speaker 3: The operation benefited from better headgrades at levels 16 and 17, the deepest levels of the mine, and higher tones processed during the period.

Speaker 3: Calioma's all-in sustaining cost for the quarter benefited from higher production, lower cash costs, and lower capex execution, and is on target to achieve the lower cost range of annual guidance.

Speaker 2: That covers the three Latin American operations. Jorge, back to you. Thank you. Luis, you wanna give your report on financial results, please?

Speaker 2: result in American operations. Jorge, back to you. Thank you. Luis, do you want to give your report on financial results, please?

Speaker 2: Yes, good morning. So sales were $175.6 billion in the quarter.

Speaker 8: a decrease of $6.7 million or 4% compared to Q1 2021.

Speaker 8: A slight decrease was driven by 10% lower silver prices and 14% lower zinc prices.

Speaker 8: The volume effect on our sales year-over-year was neutral as slightly lower gold and silver sales were offset by higher sink production at our Cayuga mine. Year-over-year, our key financial metrics reflect the impact from inflation rates experienced throughout 2022.

Speaker 8: as well as lower operating margins at Yeramoco and Lindero related to schedule decreases in head rate. These impacts resulted in cash cost per gold equivalent ounce sold of $916 for Q1 2023, which was $916 for Q1 2023.

Speaker 8: $144 above the prior year. As I just mentioned, this increase is a combined effect of higher input costs across our operations.

Speaker 8: more processed tonnage to produce a lower number of ounces at the Aramoco and Lindero.

Speaker 8: and the negative effect of relative prices in the calculation of gold equivalent production of approximately $29 per ounce. So adjusted net income for the quarter was $13.2 million down $20 million year over year.

Speaker 8: An adjusted EBITDA was $65.3 million, down $15 million year over year.

Speaker 8: We have disclosed for the quarter consolidated all-in-sustaining costs including corporate expenses of $1,514 per gold equivalent ounce sold which represents an increase of $230 per ounce year over year.

Speaker 8: The increase is explained by higher cost per ounce sold described before, higher sustaining capex of $109 of which two-thirds is timing of payments in the prior year.

Speaker 8: with an offset from lower corporate GNA of $24 per gold equivalent unsolved.

Speaker 8: For Q2 of 2023, we expect to see somewhat higher consolidated all-in-sustaining costs due to a pickup in sustaining capex and a stop at Chateau Saint-Jose.

Speaker 8: For Q3 and Q4 of this year we expect to see a trend towards lower levels as Segella starts weighing positively on our all-insustaining cost performance.

Speaker 8: Moving on to cash flows, net cash from operating a tier list in the quarter was $41.8 million compared to $33.2 million in Q1 of 2022 as changes in working capital and lower income taxes paid compensated for the lower EVA of $15 million.

Speaker 8: capex, brownfields exploration and corporate expenses. It does exclude ceguela construction and greenfields exploration.

Speaker 8: Our additions to mineral properties and properties, plants and equipment as per the cash flow statement was $61.5 million which consisted mainly of $30 million of sustaining capex and brownfields exploration.

Speaker 8: $17.3 million Seguela construction expenditures.

Speaker 8: $4.5 million of other pre-production activities at Seguela.

Speaker 8: $3.7 million of greenfield exploration and capitalized interest of $2.8 million.

Speaker 8: Onto the balance sheet, we closed the quarter with a liquidity position of $129.7 million which includes $45 million and drawn under our existing trade facility as of the end of March. Total

Speaker 8: The remaining cash to be spent on the Seguilla construction at the end of the quarter was approximately $23 million.

Speaker 8: And finally, our total net debt, including the outstanding convertible debenture, is $166 million resulting in a leverage ratio of total net debt to adjusted EBITDA of 0.7.

Speaker 2: Back to you, Jorge. Thank you. That concludes the management of the questions. So Carlos for the Q&A.

Speaker 3: Thank you Jorge. We would now like to open the call to any questions that you may have.

Speaker 9: Thank you. At this time we will be conducting a question and answer session. If you would like to ask a question please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.

Speaker 9: You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker 9: One moment please while we poll for questions. Thank you. We have a question from Tony Christ with Odyssey Investments. You may proceed.

Speaker 10: Thank you. My name is Chris. Uh, Jorge, could you give any more...

Speaker 10: specific indication of what you expect from the gold mine starting production this month.

Speaker 10: what you expect in the future. The other comment I have is I imagine you gentlemen are looking forward to a very exciting future.

Speaker 2: Thank you for the question, Chris. We already provided for 2023 our guidance estimates for SEGELA.

Speaker 2: We have guided for gold production between 60 and 75,000 ounces.

Speaker 2: For all in sustaining cost we have provided a range of

Speaker 2: that goes from $880 to $1,080 per ounce.

Speaker 11: a

Speaker 2: So that is our more immediate estimation.

Speaker 2: based on our best assessment of where we are with the project and how the project has been evolving, which is really on time and on budget. I can only commend the good work that the entire West African team has done.

Speaker 2: based on our best assessment of where we are with the project and how the project has been evolving, which is really on time and on budget. I can only commend the good work that the entire West African team has done.

Speaker 2: achieved and delivered throughout the construction commissioning and now ramping up, right? We expect first gold pour in the coming days, it's imminent.

Speaker 2: before the end of this month we should be having our first gold.

Speaker 2: Looking forward, looking at the bigger picture, Seguilla is a flagship asset for the company. It has many key features.

Speaker 2: One is meaningful production. Second is low cost mine operation. Third, it has today a long life of reserves. Today as we see the mine based on reserves.

Speaker 2: and the conversion work we are doing on sandbird resources, we can easily see beyond a decade of mining based on reserves. And beyond that is tremendous exploration potential. We hold a commanding land position.

Speaker 2: In the Seguela camp, we have 30 kilometers from north to south along what's most prospective and productive mineralized gold belt.

Speaker 2: a camp. We have 30 kilometers from north to south along what's most prospective and productive a mineralized gold belt.

Speaker 2: Sometimes I am asked, so what follows after Seguela? And my immediate response to that is more Seguela. We have the expectation that Seguela can be a much larger mind than what we are bringing into production today which is already quite major.

Speaker 12: Yeah good good afternoon. Two questions if I may. First one, do you have a sort of budget for exploration at the Diembo sorry Diembersud.

Speaker 12: project for the next year and then the second question would be You know, I just wondered if you had any any high-level views that you can give on the geographic spread of the company and do you look

Speaker 12: you know, are you looking at region? Are you wanting to emphasize particular regions or are you looking purely at each mine, each opportunity as it comes along?

Speaker 2: Thank you, Adrian. With respect to the AMBA suit budget.

Speaker 2: Thank you, Adrian. With respect to the AMBA suit budget, I would like to say that I am very happy to be here.

Speaker 2: The transaction, the CHESS acquisition is expected to close in late August . So we are currently working on our plans.

Speaker 2: The transaction, the Chester acquisition is expected to close in late August . So we are currently working on our plans to...

Speaker 2: for the work that will start once the transaction is consummated in August . That will of course encompass an exploration budget. We do not have a budget at this time. I can advance to you.

Speaker 2: That exploration will be a focus for the Diambasud work that's coming ahead. We also will likely be doing some engineering work.

Speaker 2: will be a focus for the Diambasud work that's coming ahead. We will likely be doing some engineering work.

Speaker 2: The ambassador has a published preliminary economic assessment and Cheshire management was working already on a feasibility study.

Speaker 2: So, although completion of the feasibility study, I wouldn't call it a priority for us right now. Certainly, we will look at aspects of the feasibility study, looking to see opportunities for optimization and...

Speaker 2: and bringing our own expertise and thoughts to the design and conceptualization of what could be a future minder.

Speaker 2: know bringing our own expertise and thoughts to the design and conceptualization of what could be a future minder.

Speaker 2: So,

Speaker 2: Exploration will be a priority and we are working on those budgets and plans as we speak. We have some time because the transaction is set to close in August as I explained. With respect to the more strategic question, your second question, I have a question for

Speaker 2: on geographic spread for the company. And that is a key aspect of Fortuna. Fortuna is a company that today has a wide geographic spread, right? We operate in five different countries, in two continents.

Speaker 2: So this is a key strategic aspect of our business and the subject of strategic discussion.

Speaker 2: has been the subject of strategic discussions. What you will see is Fortuna anchored in the two regions where we are already established, that's West Africa and the Latam Cordilleran belt. In these two most productive mining regions.

Speaker 2: You will see us focused one in the countries where we already operate, in the five countries where we operate. The five countries where we are established are mining jurisdictions, Mexico, Peru, the province of Salta, which is proud of its mining heritage.

Speaker 2: Burkina Faso, the Ivory Coast and now expanding into Senegal. But you will see us first focused in the countries where we are already established and as a second priority is near neighbors. So what we want to do is be able to leverage

Speaker 2: The existing infrastructure we have in our management hubs in the city of Abidjan, in Códibá and in the city of Lima in Peru, that's where our management hubs sit for the two regions and where we have expertise that we can leverage within the region.

Speaker 2: You should not look to see Fortuna stepping out of these regions. For example, sometimes I'm asked about Africa. Africa is quite a large place and diverse. We're not looking for opportunities across Africa. We are looking for opportunities in West Africa.

Speaker 2: In near neighbors, in the countries where we are already established. The same with La Tam. So we are not looking at opportunities in North America or Australia or the Philippines or places like that. Our core areas of focus are where we are already established. We feel very comfortable there growing our business and we believe we can manage the geographic dispersion we have in place today.

Speaker 9: Okay, thank you. Thank you. Thank you. Our next question is coming from Justin Stevens with PIE Financial. You may proceed. deemed and

Speaker 13: Hey guys, just a few questions from my side here, more sort of on the exploration and sort of ops side end of things.

Speaker 13: I know there was some talk earlier this year about looking at Arisato. Can you just maybe give us an idea on what the timeline might be for the evaluation there? The potential to potentially bring that into the modern life and what would be needed from a permit side of things? Yes.

Speaker 2: I can advance things from the permit side of things. Arisado is within our mining concession and any ore that we mine there will be fed to existing infrastructure so we don't see any significant issues with permitting. And for the exploration side of things I'll let Paul talk to Arisado. Thank you rot to?

Speaker 4: Thanks Roy.

Speaker 4: Last year we wrapped up another phase of work around ParaZaro and we were successful in expanding the footprint of the minimisations there. We ran out of some good optimisation of the results.

Speaker 4: Certainly very encouraging. The grades that we've got are comparable to what Lindero is. Given Lindero's long life of mine, there's not a real need at the moment to continue to advance that because it doesn't displace.

Speaker 4: anything that's better value. So with that, as Arizara went at the end of the Landera mine life, there's still some work to be done on the optimisation of it, but we've certainly got a reasonable-sized resource there at the moment. We will continue to look at the structural repeats of it. It's a polyphase intrusive that's here. And we do see some evidence of...

Speaker 4: of a reasonably strong, reasonably coherent structural overprint that I don't think was recognised previously. But, yeah, we're not really doing a lot of work at Arozaro for the next year or so.

Speaker 13: Got it, that makes sense. Moving over to the gila end of things though, obviously some pretty nice results coming out of Sunbird the last little while as you've been drilling off there and good to see sort of that resource bump.

Speaker 13: Are you planning to put out another updated resource on that or is it just sort of expecting that to fall into the usual annual cadence and sort of line up with the annual reserve and resource updates?

Speaker 13: Are you planning to put out another updated resource on that or is it just sort of expecting that to fall into the usual annual cadence and sort of line up with the annual resource updates? Cool.

Speaker 4: Yeah, thanks for that. Yeah, look, we're just going to have the sunbird... Sunbird's drilling's just wrapped up now. That's moved across to the OpSkies to start the optimisation and then introduction into the life of mine later on this year. So it'll come out as part and parcel of the regular update next year.

Speaker 13: Got it. That makes sense. And just on that, I mean, obviously, it's looking like it's got a decent amount of size there. What sort of, you know, or...

Speaker 13: two different ways, either what sort of potential flexibility do you have in deep bottlenecking in the plant, or what do you sort of see as the main Seguella process bottleneck if you were to try to look at increasing those replays.

Speaker 2: David, do you want to address this question on the bottle making of the Galas plant and what our plans are with respect to assessing the expansion of the mill?

Speaker 6: Yeah, yeah, yeah. So that one although, within the initially anticipated setup of the plan, from the discussions sequ Called MPLS of with,

Speaker 6: It was expected that we would be able to increase the three-plus for the plant around year three to about 1.5 1.6 million tons a year.

Speaker 6: That was ultimately based around changes with grind size and a couple of other modifications through the plant. The design of the plant also has an option for the installation of a ball mill and a pebble crusher later on in life as well.

Speaker 6: further expand the throughput. At the moment obviously the focus will be to see where the real boundaries

Speaker 6: existing the existing plant. At the moment we're just establishing operation of the plant and we're feeding oxide ore so it's a little bit early.

Speaker 6: to be able to go through that process. But by a little bit later on this year, we should be starting to feed pressure and we should be able to start looking at where some of the bottle necks lie and be able to work on removing those bottle necks.

Speaker 6: I think Segaler over the following years is going to be a very, very dynamic environment. With the Sunbird deposit coming into the mining plan and some other good exploration opportunities, I think the mining plan is going to be a very, very dynamic environment.

Speaker 6: very dynamic over the next few years and there's going to be probably a lot of engineering work to

Speaker 6: really determine where the production from the Segaler 6 and whether the constricting factor will really be planned through the mine. I think both will be pushing each other along for a good couple of years later.

That's it for me, though. Thanks. Thank you.

Thank you. Our next question is coming from Jasper Wike with Valparo. So you may proceed.

Thank you operator. Most of my questions have already been answered, but I have one question on your recent acquisition of Chester Resources.

So.

You will you will be focusing on the on exploration and finding more answers and more satellite tips at the level data scientists and also what they found is that the

at the Ambassador, but do you have any sort of target in amount of bounces that you would like that you would be able to settle for before moving into development and devising a feasibility study on the Ambassador?

Thank you. Thank you. That's a good question, Jasper. We have a threshold and a view that the Ambassador to the United States has been working on.

with the work that Paul has outlined, has a fair chance to go beyond a million ounces. So that's with the work in the immediate area of deposits.

that have been discovered and drilled and also with some of the other initiatives outlined by Paul. So, our view is that it can certainly get beyond a million ounces. How big? The drill bit will tell us, right?

But beyond a million ounces, we believe a reasonable expectation based on the information and our understanding today.

We have certain criteria. We want to see a life of reserves that support a mine for over a decade. We would like to see in our mine portfolio all of the assets at 10 years plus in reserves.

And we would like to see production that for a company of our size annual production from each asset nor in the range of 150,000, 120,000 ounces annually. So with respect to physical metrics.

That is what we would like to see in every asset. And then of course we have our financial thresholds with respect to our expectations on internal rates of return and things like that. More on the fixed cycle side of metrics, 10 years of reserves minimum and meaningful production at competitive costs of course, right?

and with the grades that we have at DiEM Basut, you know, over a gram and a half.

We believe we can achieve low cost rounds and it's conventional mining, conventional processing. So we just need to focus on exploration and get it beyond that.

that mount which is the million ounces. Today is a sub million ounce deposit. As we have said in the past it looks very much like a Segella look to the exploration team back in the day when the Segella acquisition was made.

Back in 2019, Seguela was a 400,000 ounce deposit. Today is touching 2 million ounces.

and continues to show potential to grow. So we see a similar opportunity in general terms.

Thank you, Jorge. That was a great answer and you provided some great color on that. Sounds reasonable. That was it from me, operator.

Thank you so much. At this time, we have no further questions on the telephone lines, so I will hand the call back over to management.

Thank you, Ali. If there are no further questions, I would like to thank everyone for listening to today's earnings call. Have a great day.

Thank you. This does conclude today's conference and you may disconnect your lines at this time. We thank you for your participation.