Q3 2024 Fortuna Mining Corp Earnings Call
Greetings! Welcome to Fortuna Mining's Q3 2024 Financial and Operations Results Conference Call. At this time all participants are in a listen-only mode. A question and answer session will follow the formal presentation.
Speaker Change: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Carlos Baca, Vice President of Investor Relations. Carlos, you may begin.
Carlos Baca: Thank you, Paul. Good morning, ladies and gentlemen. I would like to welcome you to Fortuna Mining's 3rd Quarter 2024 Financial and Operational Results Conference Call.
Hosting the call today on behalf of the company will be Jorge Alberto Ganoza, President and Chief Executive Officer Luis Ariel Ganoza, Chief Financial Officer David Whittle, Chief Operating Officer, West Africa
Today's earnings call presentation is available on our website. As a reminder, statements made during this call are subject to the reader advisories included in yesterday's news release, the earnings call webcast presentation, MD&A, and the risk factors in our annual information form.
Financial figures contained in the presentation and discussed in today's call are presented in U.S. dollars unless otherwise stated. Technical information in the presentation has been reviewed and approved by Eric Chapman, Fortuna Senior Vice President of Technical Services and qualified person. I would like now...
Speaker Change: I would now like to turn the call over to Jorge Alberto Ganoza, President, Chief Executive Officer, and Co-Founder of Fortuna.
Speaker Change: Thank you, Carlos. Q3 performance demonstrates the strength of our business. We remain focused on delivering value to our shareholders through our strategic investments, operational excellence, unlocking geologic potential of our properties and responsible mining practices.
And we're tracking to generate sales of over $1 billion this year. We benefited from incrementally higher gold prices, selling at an average realized price of $2,490 per ounce.
compared to $2,330 in the second quarter and $2,080 in the first quarter.
Speaker Change: We recorded earnings of $50.5 million and earnings per share of $0.16, well ahead of analysts' consensus of $0.11.
Speaker Change: Boivita was a strong $131 million, representing a 48% margin over sales, which is an increase from 43% in the second quarter and 42% in the first quarter.
Speaker Change: Our free cash flow from ongoing operations was a strong $56 million, compared to $38 million in the second quarter.
Speaker Change: We remain disciplined with our costs, achieving a cash cost of $1,059 per gold equivalent ounce in the quarter and $977 for the nine months.
Speaker Change: We are well aligned to meet our guidance for the year of $935 to $1055, that's our range for guidance.
Throughout the mine portfolio, we are not experiencing significant inflationary pressures on labor, services, or consumables against our annual budget.
Speaker Change: For West African operations, Yaramoko and Seguela are driving performance and tracking on the low end of cost guidance.
Speaker Change: In Argentina, Lindero is about 10% above guidance for the year due to lagging currency valuation against inflation.
or 75% of the annual budget.
in the second half of this year with an additional capital budget of $11 million. This unbudgeted development is bringing new mineralized zones identified throughout 2024 into the 2025 mine plan.
I remind you that in 2024, this project alone represents approximately $400 in the Lindero ASIC and $90 in our consolidated ASIC.
This project, once completed, served the mine for a decade.
Thank you. Thank you.
Speaker Change: Our ASIC for the quarter and nine months were $1,695.00 and $1,000.00.
$618 respectively.
Speaker Change: ASIC is tracking on the upper end of the guidance range for the year, driven by the aforementioned increase in underground development to access new resources at the Yaramoku mine and the higher costs at Lindero resulting from the lag in peso devaluation against the inflation.
in order to expand our drill program at the Seguela Mines Kingfisher Discovery made earlier this year, and also continue extending deeper mineralization at the Sunbird Deposit in support of an underground mine plant.
Our aim remains to produce an updated resource estimate for Ceguela before the end of the year, encompassing new mineral deposits and extensions such as Kingfisher, Badiour, and Sunbird Deep.
Thank you.
Speaker Change: With respect to the San Jose mine, after 13 years of operations, we have made a decision to initiate a progressive mine closure starting in Q1 2025.
Speaker Change: Our project team is expected to deliver the final closure plan and budget in the fourth quarter of this year.
which considers closure and monitoring activities over an eight-year period.
Closure activities will be concurrent with continued mining and processing at a reduced rate of under 1,000 tons per day for approximately the initial 18 months starting next year.
Speaker Change: Management expects cash flow from continued operations during 2025 and half of 2026.
Speaker Change: will offset closure costs currently provisioned at around $15 to $20 million, but expected to increase as a result of the updated feasibility level closure plan being developed.
Speaker Change: We have achieved the set objective of putting together a fortress balance sheet after a capital intensive few years here at the company.
Speaker Change: under a low of 0.2% and reducing quarter financial costs year-over-year comparison by about $3 million.
Speaker Change: Second, priority, we continue investing record annual amounts to unlock the geologic potential and value of our properties. We're focused on high value opportunities in our portfolio at the Seguela mine, the Dian Batsu project in Senegal, and the Lindero mine in Argentina.
Speaker Change: With that, thank you for your continued support. I'll now let David Whittle provide us with an update on West African operations.
Thanks, Jorge.
David Whittle: I'm pleased to report on the strong operational performance and significant milestones achieved by our West African operations during the third quarter of 2024.
Speaker Change: Both mines exceeded their planned production targets and again reported zero lost time injuries for the quarter.
Sigala and Iaramoko had a successful third quarter regarding production.
Speaker Change: Combining for 63,004 ounces of gold for the quarter and 189,168 ounces for the first three quarters of 2024.
Speaker Change: The power interruptions experienced by both Yaramoko and Ceguela did not extend into the third quarter, which enabled both mice to surpass their production targets for the quarter.
Speaker Change: In the third quarter, Cigala mined 484,000 tonnes of ore and an average gold grade of 2.48 grams per tonne and 2.9 million tonnes of waste, achieving a strip ratio of 6.1 to 1.
Speaker Change: The processing plant treated 418,000 tonnes with an average grade of 2.69 grams per tonne, producing 34,998 ounces of gold for the quarter.
Speaker Change: and totaled 102,537 ounces for the first nine months of 2024.
Speaker Change: The increased run time due to the additional power availability of the processing plant allowed for the processing of additional lower grade ore when compared to previous quarters.
Speaker Change: Plant throughput averaged 210 tonnes per hour for the quarter, with a peak of 216 tonnes per hour averaged in September.
Speaker Change: Initiatives have started in order to further optimise the processing plant's performance.
Speaker Change: The increased throughput at Sigala has necessitated the advancement of preparations for the next lift of the tailing storage facility.
Speaker Change: The design for the next lift has been completed, which when constructed will see sufficient tailing storage capacity until mid-2029 and the planned throughput rates.
Speaker Change: In the third quarter, Cegaila experienced full power availability from the national grid.
Speaker Change: Backup power generating capacity is now installed on site to mitigate any further power supply issues and work is scheduled to commence on the construction of the solar power plant in the fourth quarter.
Speaker Change: Mining activities at Sigala continue to be focused on the Antenna, Antion and Cooler pits, with mining at each of the three pits being in line with the mine plan.
Speaker Change: Continued exploration success combined with the processing plant optimizations providing exciting opportunities for the Segala mine to surpass previously expected annual production targets.
Speaker Change: and 2025 will see us bring forward a number of capital initiatives to exploit these opportunities.
Speaker Change: Extensive drilling is continuing at the Kingfisher Deposit and Sunbird Underground Project.
Speaker Change: It is expected that a maiden resource for the Kingfisher deposit will be produced by year end.
Speaker Change: drilling at the Sunbird underground project is producing good results and mining feasibility work is progressing well. Both deposits have the potential to be core production deposits for a number of years at Ceguela.
Speaker Change: In addition, an initial scoping study is currently being conducted with regards to underground mining opportunities at the Antium Pit, whilst further drilling continues within the lease on some of the many identified exploration targets.
Speaker Change: The continued strong production performance at Segala resulted in a cash cost of $655 per ounce and an ASIC of $1,176 per ounce of gold.
Speaker Change: So GALA remains ahead of schedule year-to-date, and is on track to achieve annual production guidance of between 126,000 and 138,000 ounces.
Speaker Change: At Yerimoka, 102,000 tons were mined. It's an average grade of 7.75 grams per ton, for 25,589 ounces of gold.
The processing plant treated 124,000 tons.
Speaker Change: with an average grade of 6.71 grams per tonne, producing 28,006 ounces of gold.
Speaker Change: in line with the mine plan, and totaling 86,631 ounces for the three quarters of 2024.
Speaker Change: Following the seismic event in the second quarter, mining schedules of the Zone 55 ore body were reassessed to mitigate the effects of future seismic events.
Speaker Change: This review and subsequent re-sequencing of mining activities reduced the availability of the higher grade stopes during the third quarter, leading to the slightly lower production when compared to the second quarter.
Speaker Change: As a result of this review, Fortune has been able to optimise the development layout of the mine and reduce future development requirements.
Speaker Change: As such, it is now expected that development operations will cease at the Zone 55 ore body late in the fourth quarter, with only stoping activities occurring in 2025 and beyond.
Speaker Change: Mining operations at the QVP ore body continued in line with the mine plan.
Speaker Change: Recent drilling is indicating the potential for the extension of mining further along strike to the east and development will commence to test those extensions in the fourth quarter.
Speaker Change: Yaramoko's strong production during the quarter resulted in a cash cost of $974.
Speaker Change: and an ASIC of $1,373 per ounce of gold and remains on track to achieve its production guidance of 105 to 119,000 ounces of gold.
Speaker Change: of the Diambosud project in Senegal. Drilling will recommence in the fourth quarter now that the wet season is over.
Speaker Change: A resource update is currently being prepared based on the drilling to date. Geotechnical, hydrological, environmental and other studies are continuing in order to be able to produce a PEA in 2025.
Speaker Change: Our West African operations have demonstrated resilience and strong performance. We remain focused on optimising production and advancing our exploration opportunities whilst maintaining our commitment to safety and operational excellence.
Over to you, Jorge.
Jorge: Thank you David. Luis will now take us through the highlights of our financials report.
[inaudible]
Thank you.
Speaker Change: Our strong financial performance in the quarter was a result, as Jorge emphasized, of record high metal prices and costs per ounce aligned with our guidance for the year.
Speaker Change: Our cash cost per gold equivalent ounce was $1,059, higher than the last two quarters, but still within our annual forecast.
when compared to the same quarter in 2023.
Speaker Change: Cost per ounce was higher by $244, mostly as a result of higher costs at Ceguela and Yaramoco and with a lesser impact at San Jose.
Speaker Change: In the case of Ceguela, costs are higher due to the low cost production in Q3 of the previous year related to low stripping ratios and higher initial head rates.
A few comments on the...
on their income statement.
Speaker Change: On the general and administration line item, expenses were $16 million.
Speaker Change: And as shown in the breakdown we provide in page 11 of our NDNA and in the news release, this was comprised of $9.9 million of in-country DNA at our mining operations.
Speaker Change: $3.96 million of corporate DNA and $2.2 million of share-based compensation.
Speaker Change: We recorded investment gains of $3.2 million for the quarter from cross-border Argentine peso denominated bond trades.
and 8.3 million dollars here today.
Speaker Change: This is a benefit granted to exporters by the Argentine government whereby 20% of export proceeds is allowed to be converted into pesos at a preferential exchange rate.
Speaker Change: We saw a $2 million reduction in interest and finance costs this quarter, contributing to our overall cost efficiency. As shown in note 21 of the financials, the actual interest expense charge
Speaker Change: was $3 million below the prior year, reflecting lower debt balances and lower cost of financing year over year.
Speaker Change: Our effective tax rate was 21% for the quarter and 22% year-to-date. The nine-month period is distorted by the $12 million deferred tax recovery related to the convertible note offering closed in Q2.
excluding this effect, and quarterly variability from foreign exchange.
Speaker Change: At current metal prices, we expect our effective tax rate to be in the 28% to 30% range and our current tax rate to be in the 32% to 35% range.
Moving on to the cash flow.
Speaker Change: We generated 92.9 million dollars of net cash provided by operating activities, which includes 26.4 million dollars of negative changes in working capital.
Speaker Change: The bulk of this negative change is related to timing of accounts receivable.
Speaker Change: As we have disclosed before, we have been experiencing challenges in the collection of VAT at our Yaramoco operations in Burkina Faso and anticipate this might continue to be a challenge moving forward.
Speaker Change: VAT receivables at Yaramoko increased $2.6 million in Q3 and $12 million year-to-date.
Speaker Change: In the investing section of a casual statement, we recorded $50.2 million under additions to property, plan, and equipment, consisting of approximately $38 million of sustaining capital, including brownfields exploration.
and $12 million of non-sustaining capital expenses.
Speaker Change: Year to date, we have recorded additions to property plan and equipment of
$141.9 million, consisting of $103 million of sustaining capital.
and around $39 million of non-sustaining capital.
Speaker Change: and the $6.5 million repurchase of the Ceguela NSR back at the beginning of the year.
Speaker Change: For Q4, we expect to see similar levels of CAPEX as in Q3, mostly related to the conclusion of the leach pad expansion at Lindero.
Speaker Change: Our free cash flow from ongoing operations was $56.6 million. This is after corporate expenses, interest, and all sustaining capital expenditures.
Speaker Change: Our net free cash flow after all capital expenditures was $44 million.
Speaker Change: Moving on to the balance sheet, we close the quarter with a cash position of $181 million and total liquidity of $431 million, including the full and drawn amount of our $250 million revolving credit facility.
Speaker Change: Subsequent to the end of the quarter, we have amended the credit facility to reflect a stronger balance sheet position coming out of a convertible note offering in the second quarter.
Speaker Change: The amendment includes a resizing of the facility from $250 million to $150 million.
Speaker Change: Additionally, the prior facility carried an accordant feature of $50 million, which has been increased to $75 million.
Speaker Change: We have also achieved improvements in the pricing read and covenant terms. In summary, this has allowed us to reduce our cost of capital and provided us with added financial flexibility.
Speaker Change: I would like, sorry, we would now like to open the call to any questions that you may have. Please, Paul, if you can prompt the audience.
Speaker Change: Certainly, 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.
Speaker Change: A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: Once again, please press star 1 on your phone if you wish to ask a question at this time. One moment please while we poll for questions.
Speaker Change: The first question today is coming from Don DeMarco from National Bank Financial.
Don your line is live.
Don Demarco: Thank you, Operator, and good morning, Jorge and team. Congratulations on the strong quarter. So, first question. Jorge, I'm just reading in the MD&A that at Lindero, the company may be required to temporarily repatriate U.S. dollars.
into Argentina and convert them into Argentine pesos.
Don Demarco: Can you just give us a sense of what, maybe quantify the financial implications of this?
Thank you. Bye.
So,
What we were disclosing is that...
Don Demarco: In the next few quarters, what we expect to see in Argentina is a shift from what we have been seeing up to now.
Don Demarco: where we have been able to repatriate cash surpluses from Lindero.
Don Demarco: through the intercompany financing arrangement we had in place. That has been exhausted by now.
Don Demarco: And we will find ourselves in the situation most exporters are in today. Any cash surpluses?
We'll have to be either kept in concrete or...
Don Demarco: We'll be looking into different alternatives as to how to manage that exposure. All cash surpluses are kept in...
Local currency in pesos in country, right?
So, we are...
Don Demarco: We're going to only start accumulating cash locally towards year-end. It will build up at current prices over the course of 2025.
And we're looking to different alternatives as to...
Don Demarco: Manage that exposure. That's the best we can say at this stage. Yes, and this is subject of course to the current effects restrictions in the country.
Don Demarco: The government has consistently been signaling, lifting of those restrictions, but have not provided a date. As we know, Mr. Millet is a very pro-market politician.
Don Demarco: to promote investment into the country and the removal of those FX controls is central to that, no? So, I mean, he indicates his priority, lifting those FX controls is a priority, but he has not provided a date.
Don Demarco: For that, we believe the country is tracking in the right direction, but we still need to see some of those milestones. There are some positive signs there. The gap between the official rate...
and the
Parallel rate in the street has significantly narrowed.
Speaker Change: Okay, and do you have any opportunities to invest either at Lindero or in Argentina?
Speaker Change: Yes, absolutely, we, well, one, we've been expanding our leach pad for the next decade that has been a $42 million project.
Speaker Change: That's set to the mind, as I said, for a very long time, for the life of reserves we currently have.
Speaker Change: and we have other opportunities in the Arizato Porphyry, in other properties in South, if that were to be the case.
Speaker Change: The previous government, for the previous government, removal of those FX controls was not a matter of discussion. For this government, it is a priority.
Speaker Change: So, you know, now, when it happens, it's something we're all looking and watching carefully, right?
Speaker Change: Okay, thanks for that. Then just one more question on the mining codes in or proposed changes to mining codes in Quart and Burkina Faso. Have you been in touch with the government or have any dialogue with the government or have a sense of what
Speaker Change: You know, what the potential implications of these changes might be on either Yarmouk or Saguala or separately Deambasud.
Speaker Change: at a company level and also through the mining chambers that are quite active in both countries.
Speaker Change: And with respect to the changes recently enacted in Burkina Faso, they really do not impact us.
Speaker Change: No, today we do not see an impact to our business.
Speaker Change: A different process being driven, I believe the authorities are doing the right thing. There is a draft, a new mining code being circulated and properly consulted with industry.
Speaker Change: and that's what's taking place right now and we see that as positive.
Speaker Change: to our business in Cote d'Ivoire or Burkina Faso as an outcome of these changes.
Speaker Change: Okay, thank you for that. That's all for me. Good luck with Q4.
Thank you.
Speaker Change: Thank you. The next question will be from John Pereira. John is a private investor. John, your line is live.
John Pereira: yeah thank you and Jorge yeah congratulations on a good quarter
Speaker Change: to the team. From the last call, you reported that the leach patent, I think you just mentioned that was a $42 million project. Correct me if I'm wrong.
was you were expecting to complete...
Speaker Change: The CapEx spend on that during Q3. I think I heard earlier that that was going to extend into January of 2025
Can you just elaborate on...
Speaker Change: What's still left to complete, not the details of the project, but in terms of the spend here in Q4 and how much more is left on that CAPEX spend?
Anything for the video?
And...
Speaker Change: The leach pad has been turned to operations and we're placing her on the leach pad, right? The second one is there are some ancillary activities that don't impact the continued operations of the expanded leach pad.
Speaker Change: that will drag on until early 2025 and conclude with demobilization activities of the contractor and what not in January, perhaps extending into February.
Speaker Change: But the key thing is that the bleach pad is operational.
Speaker Change: Yeah, I'm not in an isolated manner for the leach fat, but we can...
Speaker Change: And exclusively, it might be in the range of $10 to $15 million, right, in Q4. The expectation that we had provided before with respect to a bit of the spend taking place in January hasn't changed for any significant purposes.
Speaker Change: Yeah, it's about 10 million dollars what we might see coming into Q4.
in the range of 10 million dollars.
Speaker Change: If you had $38 million of sustaining capital in Q3, are you expecting any upward surprises then in sustaining capital here in Q4?
Speaker Change: Or are you expecting then that the sustaining capital costs should start to diminish?
as time goes on because essentially this project is completing.
Yes, that is the case.
Speaker Change: As I said, we'll see a bit of a spillover into 2025, you know, a couple million dollars.
Speaker Change: Something in the range of four or five million dollars, and then something in the range of eight million still attached to these final activities of the leach fed in Q4.
Speaker Change: Yeah, I'm just trying to get a sense for the, you know, the cash flow number.
overall cash flow number and net cash flow. But anyway...
Just a second question, a follow-up on Burkina Faso.
Speaker Change: You mentioned, you know, in terms of the government noise about the licenses, it's really not going to affect...
Fortuna and, you know, I think the understanding from
The news release you put out on it was...
Speaker Change: that, you know, those were just, you know, their impact would be just on new mines and new licenses being issued going forward.
Speaker Change: Is that kind of the sense that you're getting from the government?
Speaker Change: So, I believe you're referring to an unfortunate statement made by the president of Burkina Faso, Captain Traore, some weeks ago? Is that what you're referring to? Yes. Yes, that's correct.
Speaker Change: Yes, he was misquoted really. What he was saying in that statement is that companies that do not comply with the new mining code.
Speaker Change: they could be subject to a cancellation of their licenses. And I think that as a general statement, is something we're all subject to in many jurisdictions all the time.
Speaker Change: If you don't comply with the law, well, you're subject to cancellation of your concessions.
put out there without much context.
Speaker Change: the foreign mining companies in country, right? If I need dialogue with the Minister of Finance, he is available. With the Minister of Mines, he is available. With the Head of National Security, he is available. So all of that is going well.
Speaker Change: Okay, yeah, and then there was another statement that was made earlier about recovery...
It was out of VAT. I didn't quite understand.
Speaker Change: and is that in is that in Burkina Faso? Well can you just elaborate on what that was?
Speaker Change: on VAT. For us, towards the end of the year is a figure in the amount of $40 to $50 million.
Speaker Change: The government of Burkina Faso, I would say up to a year ago, has been quite diligent in providing returns on VAT.
Speaker Change: But that has stopped. As I said, the country is going through all sorts of crises, not only security, humanitarian, financial crises as well.
Speaker Change: So, we did receive an advance on VAT within the last...
three, four months.
Speaker Change: about $1.5 million, but it's trickling down, right? It's coming slowly and it's building up, right? Particularly at these prices.
Speaker Change: So when you're reporting your your cash flow numbers are you accruing for these
Speaker Change: These VAT numbers, are they included and they're accrued or they are just not included in the cash flow number because you haven't recovered it yet?
Speaker Change: It is included as a negative change in working capital, right? So when we talk about free cash flow, it is considering the fact that we're seeing those delays in collecting VAT.
Yes.
Speaker Change: So is that part of the $25 million in receivables that was referenced, is that VAT and that which reduces... Yes, that's correct.
Okay, okay good
Speaker Change: So, you're not including it in your cash flow, it's affecting your cash flow, so that'll come through whenever that comes through and be built into the cash flow at that time.
That is correct, yes.
Speaker Change: Okay, and then the last question, I'm sorry for taking up so much time, but the last question with respect to San Jose.
Speaker Change: Has the company looked at potentially selling that mine versus obviously sustaining the closing costs that you're going to have to absorb over the next months or years?
Speaker Change: With respect to the first part of the question, we have stopped exploration at this stage.
at least for 18 months.
Speaker Change: because the mine, although it is exhausting the reserves we estimated a year ago, still has resources, right? The discovery of the ESC vein and resources of the Victoria vein and other portions.
Speaker Change: So, yes, we are updating those resources based on not only the current prices.
when a year ago was closer to 16.
Right.
So, all of those things do have an impact.
Speaker Change: But the way we see it is just residual mining, right? We are always considering strategic options, no? For the asset? Yes.
Speaker Change: But, independent of those that might come or not, we have a base case, which is the progressive closure.
Speaker Change: Okay, so like the current strategy, you're calling it a progressive closure so you continue to mine on a reduced rate to, you know, to help absorb whatever... 18 months, pretty much.
Speaker Change: So, we will, we're winding down operations, we have a, we're, this year already we executed a significant reduction in workforce and concurrent with mining activities.
Speaker Change: We will be conducting also closure activities of ancillary facilities. We have two tailings disposal facilities. We have a dry stack facility and a conventional tailings facility.
Speaker Change: We will be starting the work to close one of those. So concurrent with the production at a smaller rate, there are a lot of activities that we can initiate.
Speaker Change: And then the last point is, I think, as I read, the expectation is that
Speaker Change: The ongoing reduced mining operation should cover costs, so you're expecting that that mine is not going to be a cash drain. It's going to continue to at least break even during that 18-month period.
Speaker Change: You know, we are doing a trade-off between a complete halt of production.
Speaker Change: and just carrying the closure cost, which is a project, right? A closure is a project.
Speaker Change: So, you will be carrying a project that will be intensive in the initial 24, 36 months and then goes into more of a monitoring phase, right? So we trade off.
Speaker Change: The alternative is where we can continue doing some residual mining, generate some positive cash flows that help offset.
some of those costs.
that we would be incurring anyhow, right?
Speaker Change: those project costs, if you will. So, you know, in our estimate to date, we see a benefit, an economic benefit, of continuing with that residual mining while we concurrently do closure activities, starting with ancillary facilities, right?
Speaker Change: Okay, and then you had accrued for the mining closure cost, I think it was $90 million several quarters ago, so there would not be an effect on the net earnings number, just an effect on, potentially an effect on...
Speaker Change: a cash flow number. Do you believe that what's been accrued on the balance sheet
should cut, you know, will be adequate to...
Speaker Change: at this point? We are updating. We are currently, as I stated during the call, updating a feasibility level.
closure plan
Speaker Change: And we anticipate that as an outcome of that, with more basic detail engineering on some of the closure activities, that figure will increase.
All right.
Speaker Change: complete this fourth quarter, probably end of November, sometime in December, we should have the final numbers, but we can anticipate that that provision will likely increase.
Speaker Change: To be precise, the numbers in the balance sheet for direct closure costs
are in the $10 million range.
Speaker Change: the provision we carry in the balance sheet, plus, end of last year, we took a
Speaker Change: Okay, I have to go back and look at that. Okay, that's it for me. Thank you very much, gentlemen.
Thank you.
Speaker Change: Thank you. And the next question will be from Adrian Day from Adrian Day Asset Management. Your line is live.
Adrian Day: Oh yeah, good morning. Excuse me, I had two questions if I may. Sorry, one just quick follow-up if I may. I'm sorry about this on San Jose. So, does the residual mining get, does the cost of a residual mining continue to show up as a cash cost of mining?
Does it get included in your role in sustaining costs?
Speaker Change: I'm obviously asking because, you know, with the lower production, those costs are going to go way up and it's going to affect your company-wide costs. Or does it just count as a... Sorry, go on.
Speaker Change: what would be the more adequate way to account for that income, right?
The way we see it technically is...
Speaker Change: We have a closure project that's generating some income. We're even considering if we should include those houses, which are small, in our guidance, right? In our 2025 guidance.
Speaker Change: We're giving consideration to that, we're talking with the auditors, we're analyzing that as we speak.
I won it.
Speaker Change: that we will be taking a position with respect to the future of San Jose in the third quarter. And consistent with that is that we are advancing to UO that...
and David Whittle.
Speaker Change: exchange rate and prices do, we believe, provide an economic benefit to the project, right?
Speaker Change: So that is what we're advancing, but we certainly have a bit more work to do. As I said, we do not have final closure numbers yet. We can anticipate that it's going to be a number higher than what we currently have in the provision, as discussed with the previous caller.
Speaker Change: And how we're going to manage the reporting of those ounces or not is something that we're still figuring out.
Speaker Change: Okay. Okay, thank you. The second question, if I may, is on exploration. So, two parts. One is, what is the proportion of your total exploration spend that is on new projects, new exploration projects?
Speaker Change: And then, do you look at new exploration projects when you're looking at a potential for a new exploration project?
Is it purely opportunistic or are you favoring particular regions?
take on a new project.
Speaker Change: I will start with the second part of your question and then we allow Luis to provide the breakdown. But to answer the second part of your question.
Speaker Change: You know, we have the benefit of being in different geographies.
Speaker Change: and that we see opportunities emerge in all of them. And what we do, Adrian, is we rank them based on their own merit, on their own technical merit first.
Speaker Change: And then, depending on the nature of the opportunity, we decide if tactically it makes sense for us. Strategically, we are very comfortable for the long term being...
Speaker Change: in all the jurisdictions where we are, right? Now, tactically, there are places where we could commit to deploy more capital than others.
Speaker Change: Today, we clearly favor Cote d'Ivoire, Senegal, ahead of Burkina Faso, or for any large capital investment, ahead of Argentina, right?
Speaker Change: So, if we do not gear for the opportunities as always, we want to be more weighted towards Latin America now or more weighted towards silver or not, no. We rank the emerging opportunities on their own merit first.
Luis, on the breakdown.
Speaker Change: Yeah, so just to try to answer that question in the most effective way possible, the only new project really where we're spending exploration dollars is the AMBA.
Speaker Change: areas around our existing projects, our existing mines I should say.
and mainly today, Seguela, right?
The balance of sustaining.
Speaker Change: Okay, okay. I was thinking of, you know, new greenfields like, say, the Joint Benchy or the earning you have with Riverside on Sicilia and Mexico. Is that all very, very small?
Speaker Change: Well, yeah, or as described by Luis, our largest greenfields project is the AMBA, no?
Speaker Change: exploration, engineering, you know, or owner's cost associated with being in country, managing the project.
Speaker Change: So that figure hovers around 13 million, probably 9 million out of that is classified as exploration.
okay
Okay, thank you.
Speaker Change: Thank you and once again it is star one on your phone at this time if you wish to ask a question. That's star one if you wish to ask a question. The next question is coming from Peter Freed who is a private investor. Peter, your line is live.
Peter Freed: Thank you, Moderator, and congratulations on the solid quarter. My questions are regarding the normal course issuer bid.
Specifically, the approximately $36 million in funds that
were to satisfy the 2019 convertible debentures.
Why
Speaker Change: None of those funds were then used to repurchase the 7,184,000 shares.
that were converted.
Speaker Change: despite several many opportunities to repurchase those shares at below $5.00.
Speaker Change: And then also, what does this mean for the company's NCIB program going forward?
Speaker Change: As you would expect, we've been managing at the discretion of management based on the opportunities we see in the market. We have not committed publicly to any particular prize.
Speaker Change: And I think all that's relevant to say on that point is that we will continue taking those opportunities as we see them in the market, given the restrictions we typically have around certain blackouts during the year. So we...
Speaker Change: I mean, with a specific reference to $5, I don't believe we've made any commitments, again, to any specific share price, right?
Speaker Change: Our capital allocation priorities, I think, are clear. We've been first giving priority to providing the strength we need in the balance sheet, I believe, at times like this.
Speaker Change: mining companies where we have no purchasing power, pricing power of course.
Speaker Change: to work on the balance sheet and that's something we've been doing after many years of capital intensive phase, right? It's the first time we pivot into a net cash
net positive cash position in several years.
Speaker Change: So with that, you know, it's a set priority that you know strengthens the balance sheet and return to shareholders, of course
Speaker Change: For us, it's not a question of when, of if, but when.
and we have in place the NCIB.
Speaker Change: and be sure that we are keen to provide, at the right time, returns to our shareholders.
Speaker Change: via the buybacks or the institution of identity and policy, that's something that's being analyzed and discussed at the board level at this time.
Okay.
Thank you.
Speaker Change: Thank you. And there were no other questions from the lines at this time. I would now like to hand the call back to Carlos Baca for closing remarks.
Carlos Baca: Thank you, Paul. If there are no further questions, I would like to thank everyone for listening to today's earnings call. Have a great day. Bye.