Q3 2023 Torex Gold Resources Inc Earnings Call
Thank you for standing by this is the conference operator, welcome to tour X Gold's third quarter 2023 conference call and webcast. 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.
Q 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 Zero I would now like to turn the conference over to Dan Rollins Senior Vice President corporate development and Investor Relations. Please go ahead.
Thank you operator, and good morning, everyone I'll.
On behalf of the <unk> welcome to our Q3 2023 conference call.
Before we begin I wish to inform listeners that a presentation accompanying today's conference call can be found under the investors section of our website at www dot towards gold Dot com.
I'd also like to note that certain statements to be made today by the management team may contain forward looking information.
As such please refer to the detailed cautionary notes on page two of today's presentation as well as those included in the Q3 2023 M DNA.
On the call today, we have Jody <unk>, President and CEO.
Andrew Snowden CFO as well as day step a noodle executive Vice President technical services and capital projects.
Following the presentation Jodi, Andrew and Dave will be available for the question and answer period.
This conference call is being webcast and will be available for replay on our website.
Last night's press release, and the accompanying financial statements and MD&A are posted on our website and have been filed on SEDAR.
Also note that all amounts mentioned in this call are U S dollars unless otherwise stated.
I'll now turn the call over to Jodi.
Thank you Dan and good morning to all on the line welcome to the Tor schools Q3, 2023 if it's I'll call Hello.
Under my remarks by saying that while the third quarter was challenging on a number of friends, it's behind us and we're well on track to achieve full year production guidance for the fifth year in a row.
We produced 85000 ounces in Q3 now partway into Q4 open pit grades are picking back up as expected October production came in at 41500 ounces and that is with a planned 100 to five hour planned maintenance shut down just start off on that.
We're now through the high strip low grade phase of the open pit mine plan and expect more consistent production moving forward.
As we announced at the end of October media Luna is advancing to plan and remains on track for first production in late 2024 with breakthrough of the schedule critical why has panel on track for a late December a full three months ahead of plan.
In addition drilling on both sides of the river continues to demonstrate the resource potential of the property and we'll have more updates on the drilling over the coming weeks.
Opening highlights for this quarters call include first ounce production was impacted by the sequencing of the open pits, which sauce rely heavily on lower grade stockpiled ore and lower grade run of mine ore.
The impact of the lower grade feed was partially offset by sustained performance excellence on throughput and recoveries in the mill as well as another new quarterly record on mining rates and the ELT underground.
Total cash cost guidance and all in sustaining cost guidance has been revised higher.
With about half of the increase reflecting the ongoing strength of the Mexican peso and the other half the combination of the higher mined and processed volumes, we were living a lot of material to help offset some of the lower process grade during Q2 and Q3.
We've also revised 2023 full year Capex guidance on media Luna to reflect the spend we have achieved year to date. This should come as no surprise, we've been talking about it since early in the year.
Notably on media Luna just late yesterday, we received our final permit for the in pit tailings deposition at Wahoo, which means that we are now fully permitted to start operation. So that's a significant derisking milestone for us.
In terms of the agenda for the call. It's the usual I'll provide a brief reminder, on the strategic pillars, which continued to frame our execution plan that I'll step you through the key business and operational highlights specific to the third quarter then over to Andrew Snow on the financials, then Dave stuff to noodle on video Luna I'll make some closing remarks.
And then the hand the call over to the operator for Q&A.
Starting on slide four with a review of our strategic pillars, which set up a long term vision of tour X the strategy remains unchanged.
Can see on this slide the five key areas of focus that frame up our work as we make our way to the finish line in 2023 first on optimize and extend D. L. G drilling at the <unk> underground continues to demonstrate the potential to replace reserves and grow resources, which in turn provides us with confidence in our ability to.
To extend the life of that mine well beyond 2026.
On de risking advanced media Luna with 15 months left in the project, we're sitting at about the halfway Mark on completion underground development and construction is tracking to plan and we made some solid progress on the engineering front in the quarter, which should in turn supports increased procurement activity over the coming months.
Surface construction is now picking up pace with concrete being poured across multiple work areas and steel erection on the flotation plant on track for year end.
Ah grow reserves and resources drilling any P. O highlighted the potential to upgrade additional inferred resources to indicated category, which will support initial mine planning and an internal economic assessment next year, which if positive we expect to pave the way for another new mining fronts on the south side of the river.
We have a few exploration releases in the Q. So you can expect to see some additional news on this front over the next three months.
On the pillar of prudent capital management, we closed the quarter with available liquidity of $501 million. This is compared to the $506 million remaining to be spent on the many of them in a build this strong balance sheet combined with another 15 months of free cash flow from EOG has us well funded to bring better illuminate into production in late <unk>.
Four.
On ESG excellence, we closed the quarter with a lost time injury frequency of 0.47 with no lost time injuries during the quarter.
Post quarter end the EOG operation. This is employees and contract has now surpassed 10 million hours lost time injury free for the third time since 2020, I know I'm personally pretty proud of that one I know the team is is while there are very few mindset achieved this milestone one let alone three times in a span of four years.
Turning to slide five.
Despite the fact that the operations are running very well, we produced 85000 ounces in the quarter, which places us at 316000 ounces through the end of Q3 against full year guidance support 40 to $4 70.
We remain on track to achieve full year production guidance with Q4 expected to be the strongest quarter of the year driven by grade coming back up in the pit as we're now in the higher grade punches the pushback.
The stripping quarters behind us and grade coming back up we'll just keep doing what we're doing with consistent throughput from the plant and consistent performance from the El G underground and bring this your home as planned.
On costs due to the impact of the stronger Mexican peso the focus on waste stripping and the lower ounce denominator, both total cash costs and all in sustaining costs were elevated during the quarter.
With a period of heavy stripping now behind us and improved open pit grades costs are expected to materially improve in Q4, just not enough to get us back in line with original guidance.
Cash flow from operations was $44 million impacted by the lower gold sold during the quarter as well as the higher proportion of waste stripping expense versus capitalized.
We expect a material pick up in operating cash flow in Q4, driven by the strongest quarter of the year production wise lower costs and continued gold price strength.
But the spending of $99 million on the media Luna project during the quarter, we closed the quarter with $209 million of cash on hand, and available liquidity of $501 million.
Turning now to some operational highlights on slide six you can see there on the top left that shows the quarterly production I've already discussed talk right.
Illustrates the steady performance of the process plant.
Throughput has surpassed 13000 tons per day for the last three quarters, and we expect a similar level of performance in Q4.
Bottom left you can see the quarterly dip in grade reflected on the chart, which is now behind us and finally on the bottom right. We set another record in the EOG underground with average mining rates in excess of 2003 hundred tons per day.
We'll keep the foot on the gas here in Q4 before pulling back on rates in 2024 on this point I would note that 2000 tonnes per day and that range is an optimal level for that underground asset based on current reserves.
Moving to slide seven which is the overview of our annual guidance Ron.
We're on track to achieve full year production guidance to open pit grades are picking up as expected with the average processed grade in October at 4.05 grams per tonne, which compares to an average grade of 2.47 grams per ton during Q3.
As noted earlier total cash cost guidance is up $95, an ounce from midpoint to midpoint, while all in sustaining cost is up $75 per ounce at midpoint.
The only other change to Capex is that many of them do not where we're now anticipating spending between 360 and $319 million this year versus the original guidance of $3 90 to 420 <unk>.
Noticed that spending was tracking towards the low end end of the guided range in the October media Luna update so the update here really just reflects spending through the first nine months of the year I want to emphasize that the lowest spend in 'twenty three it doesn't have any impact on the project schedule and Dave will step you through this in some detail later in the presentation.
Onto some exploration news in slide eight in July we provided an update on the El Che underground, which continues to reinforce our confidence in extending the reserve life at that asset well beyond 2026.
Our understanding of the structural controls of the deposit continues to be refined specifically around that north northwest trending corridor.
We're putting the final touches on another EOG underground results release and expect to publish that in the coming days, but of a spoiler alert here. There are some very nice holes in there that continue to reinforce our confidence in the long term potential of this deposit.
Moving now to slide nine the success on the North side continues to be replicated on the south side of the balance is river with drilling at E. P O delivering to keep findings first infill drilling along the southern portion of the deposit has demonstrated similar grades and widths.
Yes.
Previous drilling, which bodes pretty well for our ability to upgrade additional inferred resources to the end to get indicated category.
The second step out drilling to the North has confirmed mineralization 500 meters to the north, noting the potential for higher copper grades in this area as well.
E. P O remains a key focus for our geology and technical teams given the underlying resource potential to both the north and the south of the deposit as well as the potential to become a future source of mill feed from the south side of the property.
Next step studies T O R to deliver an updated resource at year end.
This resource will form the basis for some mine planning work, which will in turn form the basis for an internal economic study.
Given the proximity of Epo to many of you in the infrastructure and what we can clearly see as mineral endowment were quite eager to see these results. We expect to have a couple of more exploration releases out on the Soc side drilling activity over the next few months first stuff is expected to be a relief on our initial drill program that many of you in the west and South.
Sequent to that our final results from the drilling this year I D. P O.
With that I'll pass the call over to Andrew to take you through the financial performance and the balance sheet.
Okay. Thank you Jody and good morning, everyone.
Starting first on slide 11, our financial performance for Q3 reflects the lower production and sales volumes achieved during the quarter as well as the tailwind behind stripping phase of the year.
Just to emphasize as Jeremy noted in her remarks on financial performance is expected to materially improve in Q4, driven by the strongest production quarter of the year are materially stronger margins given the anticipated improved cost performance with continued strength in the Gulf coast.
Our financial performance in 2023 to date. There has also been impacted by the ongoing strength of the Mexican peso.
It averaged $17 eight to one relative to the U S dollar and the yen enough compared to our plan and guidance, which assumed a rate of 22.
Youll recall for every one peso relative to the Euro dollar.
In sustaining costs were impacted by approximately $10 billion, which year to date, we've added about $50 an ounce.
Total cash costs and all in sustaining costs.
These grades and foreign exchange factors combined have resulted in Q3 total cash cost of $1086 an ounce all in.
In sustaining costs at $1450, an ounce and adjusted EBITA of $61 million.
Finally on this slide just looking at free cash flow, which is shown on the bottom rung.
We reported a $72 million deficit during the quarter, reflecting the lower operational performance from our high spending on media Luna, which increased $22 million for about six to nine 9 billion.
We expect spending on media Luna to increase again in Q4 of surface and underground construction continues to progress.
Turning now to slide 12, you can see here a summary of our unit cost performance.
Despite the ongoing pressure from a stronger Mexican peso mining cost for trucking well and in line with costs achieved in 2022.
EMEA with improved productivity.
This helped offset peso pressures with unit cost trucking relatively closely for the full year 2022 performance.
Okay EOG underground the continued economies of scale from Brookfield mining rates achieved how much of a stronger comp performance you see today.
Right.
But the processing plants, the increased costs relative to 2022.
<unk>, primarily the higher consumable prices, which reflect installed to begin as well as a stronger Mexican peso.
Partially offset by the higher mill throughput we've seen just today.
Turning now to slide 13, you can see here the $17 million in negative free cash flow in the quarter results have been an expected decrease in our cash balance to $209 million.
As of September 30.
The key drivers you can see in the waterfall.
This use of cash will primarily to capital expenditures.
We invested $112 million during the quarter, reflecting the increased spending on media Luna 19 9 billion.
Media Luna spend was partially offset by working capital adjustment of $14 million, which reflects invoices accrued versus paid during the quarter.
Also just to point out unfortunately payments with $12 million in Q3, and Thats below the $6 million to $7 million of monthly installments, we anticipated in the year.
It's really just given the lower taxable income sort of Q3.
I do expect the monthly tax installments in Q4 to remain at these levels and that's because the higher taxable income we expect in Q4 will be partly offset against the income tax receivable position of the company was in September 30.
Based on the level of spending on media Luna over the next 15 months, we expect free cash flow to remain negative through the end of 2024 before improving in 2025 with the ramp up of media Luna and the material.
Declines in capital expenditure.
Turning next to slide 14, you can see here that despite the increased capital spending in Q3 our balance.
<unk> remained strong continuing to position us well to fully fund media Luna.
We closed out the quarter with $209 million in cash.
A further $292 million of available capacity on our credit facilities.
So a total of 501 billion in available liquidity.
You'll also note total lease obligations have increased during the quarter to 21 million. Let's further advance payments were made by <unk> to the media Luna multiple equipment suppliers.
It started to receive some of this equipment from Q4.
It's demonstrated excellent slide 15, you can see how this liquidity well supports the remaining capital expenditure on media Luna, while also supporting our broader strategy to invest meaningfully in exploration drilling while maintaining a strong balance sheet during the build period.
We now estimate the total of $106 million of cash flow generation is required from <unk> over the next 15 months to fund our strategic objectives.
Includes the $508 million remaining on media Luna as well as our strategic goal of maintaining at least $100 million on our balance sheet.
This internal cash flow requirement components with $184 million of free cash flow generated prior to spending on them to be dilutive project over the last 12 months and this includes Q3, which in our view does not reflect the true cash flow generation of the deal.
<unk> operations.
If you extrapolate this last 12 month free cash flow from EOG over the remaining 15 months project period, it's implies $230 million of cash generation from existing operations compared to the $106 million requirement.
This is why we're confident on our ability to fund the remaining expenditures on media Luna.
Any cost pressures arising from the Mexican peso.
Finally, maybe just an update on hedging, which you can see summarized on slide 16.
There will be no change to that going forward contracts with respect to both volumes and price through to the end of 2020 as we've noted in the past we don't enter into gold hedges lightly we thought it was prudent to execute these purpose built hedges to protect between 25% to 40% of quarterly production during a period where internal.
Cash flow was a key source of funding for me at the moment.
An area that we've added the protection as the Mexican peso, we have now placed zero cost collars on over $100 million of future capital expenditure between October 2023, and December 2024.
These colo kind of an average peso floor price of $17 four on an average ceiling of 'twenty.
Given the strength of the peso, we thought it would be prudent to trim.
To minimize any further downside risk related to the peso given about 40% to 50% of the remaining project expenditures were expected to predominant denominated in pesos.
Recall consistent with our operating plans the $875 million of any dilutive capital had assumed an average peso of 22 one.
We will though continue to evaluate foreign exchange markets and May consider some additional protection should be ongoing volatility presents an opportunity to do so.
And with that I'll hand, the call over to Dave for an update on media Luna.
Thanks, Andrew.
Slide 18 shows the progress at media Luna after the first 18 months of the 33 month build period. The main takeaway is that at the halfway Mark the project is tracking to schedule and budget, noting the ongoing strength of the Mexican peso and the general inflationary pressures or headwinds to continue to contend with at.
At quarter end, the project was 49% complete across procurement engineering underground construction development and surface construction up from 35% at the start of the quarter on.
On the engineering front significant headway was made as we leveraged additional resources to make up for the slow start of the year, which is expected to support procurement and contracting activities over the coming months.
Steady progress was made on procurement with the first deliveries under the same that contract made in September overall progress was slightly lower than we had expected given several purchase orders and contract awards were pending finalization at the quarter end.
Surface construction activities on the north side are expected to ramp up over the coming months as more concrete work fronts become available as steel erection in the flotation area commences.
On the sell side completion of the Mazafa bypass road this quarter will allow for construction activities on the <unk> plant to commence as the roads have been widened to support the delivery of large pieces of fixed equipment.
Significant process.
<unk> was also meet with the underground development and construction driven by continued steady advance rates and the guidance tunnel and the soap portal lower as well as mobilization of Dumas, who has been awarded the underground construction in vertical development contract.
As of today, we have 20 active headings within media Luna and have completed over 19000 meters of lateral and vertical development, representing 63% of the total development required.
During the quarter, we invested $99 million in the project, resulting in a remaining expenditure of $508 million over the next 15 months as of quarter end, 68% of the upfront project expenditures have been committed including 42% incurred.
Although the level of spending is expected to pick up in Q4, we have lowered our guidance spend in 2023 by $30 million. The level of spend is expected to remain elevated through Q3 2024 before declining as the project nears completion and achieved commercial production in early 2025.
The lower spend has no impact on project schedule given that the spend really reflects the decision to align with the installation of the iron sulphide flotation circuit in the water treatment plant with the installation of the remaining copper flotation circuit as well as some modest rescheduling of non critical elements.
With respect to the island sulphide flotation circuit and water treatment plant the rescheduling and reflects the reality that the business case for an early installation is no longer warranted given cyanide consumption levels have been stable at two five kilograms per ton compared to the plus five kilograms per tonne level experienced in 2021 when the schedule.
<unk> was initially defined.
Moving on to Slide 19, we provide an update on the scheduled critical what is tunnel.
With approximately 600 meters of advanced left at quarter end, we've officially pulled the breakthrough of the scheduled critical was tunnel to late December. This is an amazing three months ahead of March 2020 for breakthrough that was envisioned in the 2022 technical report.
Progress north to south and south to North has truly been impressive with an advanced combined rates and average combined rates.
Vince a 11 two meters per day over the last three months.
From north to South our own crews have averaged seven five meters per day, which is a world class by any standards.
Considering the size of the widest tunnel, which is six five meters by six metres wide deal.
Additional three months of schedule will provide ample time to install and commission the seven kilometer conveyor, which would be hung in the tunnel, increasing emboldened for the 1000, plus conveyor tables will commence shortly.
All of the conveyor tables are now at site and are over.
Over half of the belt segments with the remainder in transit.
On slide 20, our some recent pictures from the site. The top left picture is a picture of a sunset of the flotation plant, which is really coming together with.
With the installation of the counter cream, we expect to begin steel erection by year end.
Center, you see the foundations progressing for the water treatment plant in the foreground and foundation work starting in the back for the new 230 kv substation.
So the rate domestic earthworks fill is underway and the location of the new copper concentrate storage and blending building.
Lower left picture as the Needless App, a bridge abutments ready to receive the precast concrete beams and bridge deck, which will allow movement of larger loads and materials to media Luna by year end.
Finally on the lower right the medium voltage and fiber optic overhead distribution lines were relocated into Berry conduit and successfully energized, allowing the flotation plant construction to proceed and with that I'll now turn it over to Jody.
Great. Thanks, Dave.
Overall in my closing comments of this we have a challenging five months behind us we're well on track to close out 2023 on a solid note and one which will demonstrate the operational and financial performance our shareholders have come to expect of us.
We plan to carry the strong Q4 performance and momentum into 2024, which will be a big year for the company as we complete that illumina as we finalized an internal economic assessment on Epo as we continue to unlock the resource potential of the broader umbrella property with ongoing exploration and critically from my perspective as.
We make our way back to cash flow in 2025.
With that I'll pass the call over to the operator for the Q&A period.
Thank you we will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad Youll 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.
I'll pause for a moment as callers join the queue.
Our first question.
Once again, if you have a question. Please press Star then one.
Once more to join the question queue. Please press Star then one.
Our first question comes from Don Demarco of National Bank Financial. Please go ahead.
Thank you operator, and good morning, Jody and team.
Congratulations on getting through this tough period and also.
I'm encouraged by the strong results in October So maybe my first question starts with that.
You mentioned that you've got an average process grade of four grams per ton in October and.
What can we expect for the rest of the year and into Q1 on grades.
Certainly you've got a lot of momentum and looking at our strong Q4, but do we expect that momentum to continue into Q1.
Yes, Thanks, Dan and Steve tough months behind US the short answer to your question is we expect grades to return to around four grams, a tonne branch, they're really dense and Gracie parts of the deposit at <unk> 83, and that open pit pushback and we plan to be mining that through <unk> through Q4 and into two.
2024, so momentum will continue we will return to usual tour X quarters here.
Looking forward to it.
Okay. So sorry.
The technical report calls for Great next year, I think about just over three grams per tonne.
I think you mentioned that you expect these four grams per ton to continue for a period of time does that suggest that.
Reduction next year is going to be front end loaded that Q1 will be happier in order to kind of reach that three grams, a tonne average grade over the year.
Production next year, we're looking at a fairly balanced profile I would say the exception to that is the plan has us taking a four week.
Downtime at the process plant in October to do the tie ins and the motor changes any installation of the <unk> and the ball mills to break up media Luna. The grade we expect to be in the four Gram a tonne range. There may be periods of time and theyre doing that its three gram because recall next year, we're mining from 83 in the.
Open pit, we're going to continue to push EOG underground and we're drawing from stockpiles with a view to generating smooth production and cash flow as we have said that this transition between the open pit is coming offline and many alumina coming on at the backend of the year.
Okay, that's great.
<unk>.
So we see that the guidance was revised upward the new midpoint for ASIC is now 11, 80, an ounce still very attractive relative to industry peers.
But also referencing back to the technical report we saw for 2023. It was 97. So there's about a 200 dollar delta there of course, we know that the Mexican peso has.
Weighed on a number of operators in Mexico.
But is it fair that we should maybe in looking at our models are just some of the basic or costs in 2024 25.
Bye bye similar margins as we saw in 2023.
But.
It's Andrew I'll take that.
We'll come out with our full year 2020 forecast guidance in January as we usually do so Barry to provide more clarity on not to that point I will just add our incentive.
Since the Tech report was released.
Whenever it was March of 2021, sorry.
I've seen a number of industry wide factors, including inflation.
Mexican peso that you referred to as well as some higher cyanide costs that we experienced through the course of 2023.
So those are all factors that will put some upward pressure on ASIC.
That said I do expect the Asa will decline in 2024 versus what we've experienced here in 2023 of course as Tony has mentioned with through the heavy stripping phase of the pushback now in 2023, and so we will see.
Much less waste removal required through the course of 2024, and so youll see or is it kind of normalized more now through the course of 'twenty four but won't be out in January with some more specific guidance on that.
Okay, great well.
Thanks for that color, then we'll recalibrate our estimate with those factors in mind as we await that guidance in.
In Q1.
Now you've got about 500 million left in Capex to spend.
And.
You may have covered this but what are you thinking about impacts from the Mexican peso or potential inflation on that number.
Are you still pretty comfortable with that number or do you think those factors are maybe putting a little bit of upward pressure on it.
We're still comfortable with the number dynamic Colombian and Mexican peso is putting pressure on all cash expenditures across the board both operational and.
On capital.
<unk> talked before about at least as it relates to meet the Luna.
One peso impact.
Peso movement in the exchange rate the balance of $15 million impact on total project costs and so.
Look at year to date, we've had at rates of 18 to 18, four one versus 'twenty and so over the life of the project if that was to continue throughout the life of the project by a bouncer at $30 million of pressure on the capital. We are of course looking for opportunities as we execute on the project to try and find offsets to that.
But thats about where we all see.
Some pressure.
Okay.
Great well that's all for me, thank you for that and and good luck with the rest of Q4 and congratulations also on that favorable summer not decision that just.
Came out this morning.
Great. Thanks, Thanks, Don we're pretty excited about being fully permitted.
Once again, if you have a question. Please press Star then one.
Our next question comes from Eric Windmill of Scotiabank. Please go ahead.
Great Good morning, Jody and the team thanks for taking my question.
Just a question on the cyanide consumption, obviously came down in the quarter.
Any additional clarity on that is it all sort of just ore feed related or are there. Other measures are contributing to that decrease in the cost.
I'll take that one Eric there are a number of measures that relate to cyanide consumption improving quite materially over the course of the last year or so number one is they haven't.
Different feed mixes with different levels of soluble copper and soluble iron soluble iron as the primary consumer of our cyanide and so as we moved out of <unk> and into early model more specifically through the middle of this year that helps number two we have a very disciplined blending program that just keeps getting better and better to control.
The feed inputs to the plant what you don't want are the peaks in soluble copper so that you overdose and waste the cyanide. So if you saw our run charts. Our SPC charts, we Brian very smoothly that way and number three we just also technology called Mach reactor in hour weeks.
Circuit and what it essentially does is it blows bubbles into the solution to help breast out some of that iron instead of consuming the cyanide. So those three things have really supported us in driving down our consumption and then the other really relevant factor for us is margin and we've been able to negotiate some.
Early aggressive contracts for unit rates on cyanide that we're pretty pleased with and we're going to continue to push on our suppliers to get even better rates through next year.
Okay, Great no that's super helpful. Thank you.
Maybe just one more for me obviously, great to see the permanent here for the in pit tailings.
Any comments, you're I know you're doing work to prepare for that next year in terms of like critical path items before you can start the in pit tailings.
Yes, absolutely in terms of the actual.
Work to start that position this is Dave stuff Newdow here.
To start the <unk> and the <unk>, but we do need to prepare the floor of the pit.
The preparation is actually quite simple we have already installed our downstream monitoring wells that will use post starting the deposition to monitor any potential <unk> groundwater quality issues. So that work is actually already completed.
The next.
Steve is really installing a drainage system at the base of the <unk> pit and a pump back system and so we're scheduled to do that probably starting around mid next year. Its actually quite simple work and then there'll be a discharge line for the actual <unk> system to put in place. So we're well positioned we weren't anticipating originally in the <unk> to get the permit this early.
So we've got quite a bit of time now to do this final installation.
Okay, great. Thank you I appreciate that and I guess should we assume then are you intending to decommission all the dry stack or you will obviously continue to sort of run both concurrently at the outset.
No. The intent is that we will we will stop the dry stack, we won't fully decommission. It there is no rush to do that however, once we do transition to the <unk> system.
Cannot readily go back to filter tailing without expanding some capital to change our facility to do so.
So really that can become a provision in the future should we ever have to go back to filter tailings, we will be able to do that but now it's a little bit of work on the infrastructure to facilitate that so really our plan is once you start media Luna, we will start in pit deposition with 50% of the tailings going to the <unk> pit and then the other 50% will be deposited.
As part of their paste backfill underground in the mine.
Okay. Thanks, I appreciate that.
Really appreciate the added color I'll hop back in the queue.
As there appear to be no more questions. This concludes today's conference call. You may disconnect. Your lines. Thank you for participating and have a pleasant day.
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