Q2 2019 Earnings Call
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At this time I'd like to turn the conference over to M.D. Copeland IPH and Investor Relations lead for Iamgold. Please go ahead Ms. Copenhagen.
Thank you very much and welcome to the idle gold second quarter Conference call.
They live to fly trade joining me today on the call are Steve Letwin, President and CEO of Island Gold Gord, Stothart Executive Vice President and Chief Operating Officer, Carol Banducci, Executive Vice President and Chief Financial Officer, Craig Macdougall, Senior Vice President exploration, and Jeff Snow Senior Vice President business development and General Counsel.
Our remarks on this call will include forward looking statements. Please refer to the cautionary language regarding forward looking statement disclosure documents and be advised that the same cautionary language applies to our remarks during the call.
The slides referenced on this call can be viewed on our website.
I will now turn the call over to our President and CEO , Steve Letwin.
Well good morning, everyone and thank you Wendy our second quarter demonstrated improved performance over a weak first quarter, we're buying gold zone looked stronger and ask Ken and Wes wait for the balance of the year I'll touch on a few highlights from the second quarter from a financial perspective, our balance sheet remains very strong with 660 million in cash cash equivalents and short term investments the exploration potential of our pipeline continues to be highlighted by ongoing drill results from now again and ran during the quarter as well as modest certainly cost when Andrew and post quarter.
We continue to focus on cost as we build out our self funding operating model across all of our sites, we have adjusted guidance and have reduced capital expenditures for 2019, including deferrals.
Production and cost guidance were adjusted to reflect the temporary suspension of mining and lower grades at Roosevelt while milling activities continue there.
From an operations perspective at Rosenthal, we added a very tough quarter and I'll talk a little bit about that more later I just returned from Rosabella yesterday.
We saw steady production in Q2 during a particularly challenging raining season as Saramacca continue to progress subsequent to the quarter and August 1st we reported an incident involving local police and the non authorized our tiznow minor within the Roosevelt concession, which resulted in the death of unauthorized brighter. So we're very saddened by this.
And obviously have expressed their condolences to the family.
The incident also resulted in damage to equipment.
As I noted to ensure the safety and security of our workforce mining activities have been temporarily suspended while the mill continues to operate I was just there.
Things have calmed down we are in a secure position, but it's being monitored literally on a daily basis.
And as I mentioned earlier, our thoughts are with the family and friends of the deceased at this difficult time.
And Thats again, we are positioning for a strong second half following a flat second quarter and at Westwood production was on track in Q2, and we are expecting higher grades in Q4, our projects are progressing within budget with Coty gold.
De risking and boto gold advancing project optimization.
On the exploration slide from.
Our success is highlight the district potential at our core sites. We are advancing the resource stage projects that now again grew and Golden pitching D and maintaining disciplined program implementation.
As I mentioned in Q1, I am gold is committed to returning to a self funding model.
Our specific ask Pete was to generate returns after covering their operating sustaining insight expansion projects. Additionally, covering corporate exploration and financing costs. We would only look at funding new growth projects. Once we have the model instituted and Saramacca is online our teams have been looking hard at the life of mine plan is identifying areas for improvement to achieve this mandate.
And on slide seven you've seen this slide before so I'll just highlight the updates we are working to optimize performance through de bottlenecking, the mill and other projects and Thats again, the CIO and heap Leach feasibility study will be completed in the third quarter. Following our review through the self funding lens and add Bono, we are well advanced on our application for the mining concession I will now pass the call over to Carol to review our financial results.
Thank you Steve. This next slide presents key performance highlights for the second quarter revenues were $246.5 million in the quarter.
Cost of sales came in at $239.9 million, resulting in a gross profit of $6.6 million.
Adjusted net loss was $15.5 million or three cents per share.
Net cash from operating activities before changes in working capital was $42.8 million in the second quarter.
So 27% higher than the first quarter.
Although the second quarter was an improvement from the first quarter, we do expect better a better second half of the year at efficacy and Westwood.
We continue to hold a strong financial position with cash cash equivalents short term investments and restricted cash of $688.5 million at June Thirtyth 2019.
We experienced improved net cash from operating activities of $40.6 million in the second quarter compared to $8.8 million in the first quarter.
Our working capital has lowered overall due to increased accounts payable and decreased accounts receivable, including efficacy that collection and this was partially offset by an increase in finished goods inventory and specifically material and circuit at Roosevelt and we plan to convert that inventory into sales before the end of the year.
Note that we discontinued normalization of Westwoods at the onset of the second quarter.
Gordon will provide more details on mine site performance and got.
But on a consolidated basis for 2019, we lowered our total attributable production guidance to the range of 765000 to 810000 ounces.
We also revised upwards, our total cash cost per ounce produced guidance to the range of 860 to $910.
And finally, we revised upwards, our all in sustaining cost per ounce sold guidance in the range of 1090 to $1130.
We maintained our 2019 depreciation expense guidance of $260 million to $270 million and we also maintained our guidance for 2019 cash taxes in the range of $45 million to $60 million based on a gold price assumption of 1300.
We continue to joint to enjoy a strong liquidity position with cash and cash equivalents.
Of almost $6 million short term investments of over $50 million and an unused credit facility of almost $500 million for a total of $1.2 billion of liquidity.
This of course is prior to the receipt of the forward sale funds of $170 million slated for December this year.
We continue to exercise prudence in the allocation of capital positioning the company to not only benefit from a rising gold market to withstand the volatility I will now pass it over to Gord to discuss operations.
Well thanks Carol.
Our top priority is the health and safety of our employees. We've established strong targets for safety performance and in Q2, we continue to perform better than target.
We can we work every day to meet or exceed our safety goals implementing several initiatives, including a new comprehensive behavior based safety program to ensure a safe safer working environment.
Total consolidated attributable production for the quarter was 198000 ounces.
All in sustaining costs were $1132, an ounce and note that all in sustaining.
At the consolidated level includes corporate DNA costs.
I will review each operation and tour.
So starting with Roosevelt.
Attributable gold production for the second quarter to 2019, 72000 ounces was improved compared to Q1. Despite the heavy rainy season, while sales volumes were impacted by material still in circuit.
We expect to extract this with this.
In circuit material, and then circling fold over the balance of the year.
The carbon in column plant, which became fully operational in the first quarter of 2019 continues to have a positive impact on recovery.
With an additional 2100 ounces recovered from tailings and water during the quarter, bringing year to date tailings recoveries to 4300 ounces I'll note here that as these are recoveries from post things water and the ounces extract it will be variable each quarter.
We've progressed development work at Saramacca in the quarter with.
Tree clearing and the construction of essential infrastructure commenced along with pre stripping activities.
The construction of the haul road has substantially progress and we have started to receive haul trucks and graders.
Technical and Engineering studies also continued during the quarter, including pit slope design improvements.
The metallurgical testing to further optimize recovery.
And site infrastructure engineering.
We anticipate mining and stockpiling of ore in the third quarter with nominal production targeted for the fourth quarter 2019.
As we mentioned in the last quarter Rosabel is also conducting a scoping study to evaluate the potential of mining hard rock underground.
Following the planned.
Satellite open pit mining as this could substantially reduce waste stripping costs.
Diamond drilling to support this study and work to continue defying the mineral resource is ongoing and we reserve release, some attractive drill results last night that are directly relevant to this initiative.
Which Craig will speak to in the call.
At Roosevelt total cash costs of $915.
Per ounce were impacted by maintenance cost pressures and lower capitalized waste stripping due to mine sequencing. The site is focused on improving preventative maintenance practices.
All in sustaining cost per ounce sold for the second quarter 2019, or $1116 due to higher cost of sales, partially offset by lower sustaining capital expenditures. The higher cost of sales result resulted from planned weight capital being reevaluated its operating waste, which is then expense.
Sustaining capital expenditures for the quarter totaled $9.8 million and included capital spares of $3.5 million.
And mill equipment of $1.8 million.
Non sustaining capital expenditures of $9.6 million for the quarter were related to the Saramacca project.
For Roosevelt, we are guiding to attributable production for 2019 between 240 and 260000 ounces.
This follows on both lower grades in the first half of the year and the temporary suspension of mining following the incident, we reported last week, which Steve discussed earlier.
The mill continues to operate.
Capital expenditures are expected to be approximately $90 million.
Consisting of $40 million.
Sustaining and $50 million in non sustaining capital.
I'd ask Ken attributable gold production for the second quarter 2019 was 88000 ounces.
Ore feed for the second quarter 2019 was primarily sourced from lower grade zones and was slightly lower than Q1.
Mill throughput favorably impacted in the second quarter 2019 versus Q1 by higher mill availability doing due to the timing of.
Of major mill maintenance activities.
Material mine for the second quarter 2019 was higher due to the increasing the fleet size and improved equipment availability.
As the canned commission and additional truck loader and two excavators, which has allowed for increased hauling capacity improved equipment availability and reduced reliance on that contract mining fleet.
In addition ore mined was higher compared to Q2 2018, primarily due to the mining and stockpiling of lower grade ore to support the construction of a proposed heap leach facility at the end of carbon in Leach operations.
The carbon in Leach heap Leach feasibility study at efficacy is progressing well and is expected to be completed in the third quarter 2019 as discussed previously the feasibility study is expected to support investment in a mill debottlenecking.
Which could increase CIO plant throughput by 6% to $11.7 million tons per annum at 100% hard rock.
Compared to the 2018 run rate of 11 11 million tons per annum.
CIO crushing circuit would be used for the heap leach process and the CIO operations.
Optimization of oxygen distribution is ongoing at the oxygen plant, which was commissioned during the first quarter of 2019.
Total cash cost per ounce produced $887 for the second quarter 2019 was higher by 22% compared to the same prior year period, primarily due to lower capitalized stripping.
In addition to the impact of lower sales and production volumes.
Yes. It can also continued to face cost pressures with rising energy prices, which were partially mitigated by the supply of energy from the solar plant and by end goals hedging program.
Operating costs were higher primarily due to increased mining activity and the continued utilization of mining contractors. However, a stronger us dollar relative to the euro for the quarter helped to mitigate the impact of these cost pressures.
All in sustaining cost per ounce sold of $1077 were impacted by higher cost of sales per ounce, partially offset by lower sustaining capital expenditures in the quarter.
Sustaining capital expenditures were within budget at $10.4 million.
And included capital spares of $2.1 million capitalized stripping of $2.0 million and mobile equipment of 1.5 million.
Non sustaining capital expenditures of $16.6 million, including capitalized stripping of $8.1 million.
Tailings liners, and Dan tailings dam construction of five point Onemillion.
And mobile equipment of $2.2 million.
We are guiding to a higher attributable production at efficacy to a 2019 of between 380000 390000 ounces as we anticipate a stronger second half for the mine was steady improvement in grades.
As well as the increased capacity of sleep forward.
Capital expenditures are expected to be approximately $110 million.
Listing a $40 million on sustaining and 70 million in non sustaining capital expenditures.
June two gold production at Westwood was 24000 ounces a substantial improvement over Q1.
We projected.
Despite closures of some headings in respect of the seismic protocol underground development continued at planned rates in the second quarter 2019 to open up access to new mining areas with Laddered lateral development of approximately 1.9 kilometers averaging 21 meters per day.
Infrastructure development continued and future development blocks at lower levels.
Total cash cost per ounce produced higher $49 for the second quarter 2019.
Were lower following the Q1 reduction in labor costs.
All in sustaining cost per ounce sold of $990 were lower due to lower sustaining capital expenditures and lower cost of sales per ounce.
As Carol discussed normalization of total cash costs and all in sustaining costs was discontinued at the onset of June two.
Sustaining capital expenditures of $2.9 million in the quarter included deferred development of 2.0 million.
An underground equipment and zero point $7 million.
Non sustaining capital expenditures of $4.4 million included deferred development of 2.9.
Development drilling them 0.8 million and underground construction of zero point $7 million.
To aid in the continuation of underground development, while respecting safety protocols in place for mining in areas, where seismicity as president.
Three new Bolger's were received in 2018, which are which are designed to be operated remotely to manage our seismic exposure.
These were commissioned during the first quarter 2019 with training ongoing.
Westwood production in 2019 is expected to be between 95000, and 105000 ounces as we expect steady strong foot with grades improving markedly in Q4.
We are currently targeting positive cash flow at Westwood in Q4 on 2019 guidance and have seen $10 million to $15 million in savings from the reductions in aligning for self funding I'll note here that block three is now targeted for mining and Ernie 2020 .
Capital expenditures are expected to be approximately $35 million, consisting of $15 million in sustaining and $20 million in non sustaining.
We are studying various design approaches to Westwood with a permanent preliminary life of mine plan expected in the fourth quarter. This year, followed by a plan in accordance with Eni 43, 101 in the first half of 2020.
Our updated 2019 guidance reflects year to date progress and our expectations for the second half of the year.
We have lowered the guidance.
Full year 2019 total attributable gold production.
Two 765 to 810000 ounces from 810 to 870000 ounces originally.
Primarily due to lower production expected at Roosevelt, resulting from the temporary suspension of mining activity subsequent to the second quarter and from lower grades realized in the first half of the year.
Additionally, we expect Sadiola to continue producing into year end, resulting in an upward revision on production from the joint venture to 50 to 55000 ounces from original projection of 20 to 30000 ounces.
As mentioned gold production at Westwood is expected to continue improving for aggressively through the second half 2019 compared to the first half and is expected to be strongest in the fourth quarter.
Additionally, we are expecting a strong second half for efficacy steady improvement in grades as well as the increased capacity of the fleet.
Development of Saramacca continues with mining and stockpiling expected to begin in the third quarter and nominal production targeted in the fourth quarter.
Moving to capital, we reduced our capital expenditures guidance for 2019 by $80 million to $275 million.
Both sustaining and non sustaining capital expenditures decreased by $45 million.
Billion respectively.
The 80 million dollar decrease was a result of deferral of 25 million in non critical path infrastructure spend Saramacca project.
Reduction in sustaining capital of $30 million at Roosevelt, primarily due to lower capitalized waste stripping as a result of mine re sequencing.
Timing of spend that asset Candace.
$2 million decrease in non sustaining capital at Westwood $10 million.
These changes reflect our self funding approach realignment of priorities and adjustment of deferred spend.
I will now turn the call over to Craig to discuss exploration.
Thanks, Gord and good morning, everyone before I begin. Please note that the results I talked about today have been previously disclosed in accordance with securities regulations.
And signed off by the qualified persons within the company reporting.
Drilling activities that projected mine sites totaled approximately 84000 meters during the quarter.
In Canada, we completed a delineation drilling program at both Nelligan, Andrew and gold projects, both in the province of Quebec.
That nelligan, we announced the results from 22 diamond drill holes totaling 6970 meters from the 2019 drilling program.
Highlights included 37.4 meters grading 1.32 grams per ton gold 73 meters grading 1.09 grams per ton gold.
Six meters grading 56.49 grams per ton gold, which when Taft was 7.99 grams per tonne.
And also 16.7 meters grading 4.4 grams per ton gold 28 meters grading 2.11 grams per ton gold.
And 40.
Nine meters grading 1.4 grams per ton gold.
That through and gold project, located 45 kilometers southwest of our Westwood Operation, We announced first drilling results from our 2019 drilling program at the lab gambles on.
Results were reported for 31 diamond drill holes totaling 8400 meters and included highlight of 7.8 meters grading 11.02 grams per ton gold.
10.6 meters grading 8.21 grams per ton gold and 29.7 meters grading 8.96 grams per ton gold, which included 11.1 meters grading 17.49.
Grams per ton gold.
Subsequent to the quarter, we reported further drilling results from our ruin Monster Lake project in Quebec, as well as our new Gaza's one discovery at the coated gold project in Ontario.
At Monster Lake, we intersected high grades over narrow intervals of the anti zone, which is located north east along strike of the three to five Megan zones.
Which opens up a new area for exploration.
Highlights included 0.8 meters grading 350.
Grams per ton gold and 0.5 meters grading 133 grams per ton gold.
At our new guys lend discovery announced in the first quarter is Dakota Gold project. The results of our 29 drilling program continue to confirm the resource potential of this new zone.
Drilling highlights included 342.5 meters grading 0.98 grams per tonne gold.
248.3 meters to three three grams per ton gold.
And 412 meters grading 1.28 grams per tonne gold.
As Gordon mentioned Saramacca, we initiated a drilling campaign to evaluate the underground resource potential below the current design fit of the Saramacca deposit as well as test for extensions of mineralization along strike.
Overnight, we released drill results from this campaign highlights the 22.7 meters grading 8.54 grams per ton gold, which included a nine meter interval rating 15.23 grams per ton gold.
And 24 meters grading 9.67 grams per tonne gold, which also included a high grade interval of six meters grading 26.1 grams per ton gold.
I'll add that in support of our commitment to a self funding model. We are revising our 2019 exploration expenditure guidance from $60 million 49 million excluding project studies.
As a result.
Teen resource development and exploration program is expected to be reduced from between 250 to 275000 meters of drilling to between approximately 215 to 235000 meters of diamond and RC drilling.
Note that the 2019 planned spending for capitalized expenditures of $14 million is included in the Companys capital spending guidance of $275 million.
Overall, our exploration program continues to advance some of early stage projects, including a maiden resource at inelegant expected in the second half.
While we continue to support our near mine exploration to leverage our existing infrastructure.
With that I'll now pass the call back over to Steve to conclude all right well, Thanks, Craig Mike.
There is no sugar coating. This we had a very tough first half.
And on my main objective here and the reason I.
I've been traveling.
Is to make sure we resolve the unauthorized mining issue at Roosevelt.
And I look back in.
Get back to you the time between 2014 and 2015, where we went through similar challenges at island gold both at Westwood in Roosevelt.
And we turned the company around in 2016, we were the top performer on the TSX gold.
Side and in 2017 number three so we had I would say two and a half years of.
Very very good performance and we're very proud of it.
And this last year I mean, starting in 2018.
With Roosevelt we've had some headwinds we obviously had the Westwood hit.
At the end of 2018, and we've got to pour ourselves up and none of this particular phone we're in and rosabel in Westwood Westwood's, moving along nicely and as you know our relationship with the government in Suriname is a strong one on non the president announced nine years I met with him over the weekend.
And we have is full commitment to.
Get the reverse this resolved as soon as possible so I am heading back down there.
On in about two weeks time, and I will continue to head down there until this is fixed we have a huge amount of potential at Roosevelt Saramacca looks as you know.
Just to be an outstanding the positive we're seeing some great results along that trend line and Rosabel itself has got some near term catalysts that are going to improve as we can see.
Ill in heap Leach feasibility study is also there in the Q3.
And.
We've got some great projects in the wings. So we've got a lot of good stuff coming we've got to put our.
Roll up our sleeves here and focus on two main things one get rosabel back to where we know it can be and Gord and his team are working hard I will tell you Bruno Lima, when Martin Bolger, who are both down there are outstanding leaders.
And then if anybody can do this in a reasonable timeframe makena weve got to be very cognizant of the.
Community issues down there, which we have been.
But as you know in some of these countries the things rise up and need to be settled and we need to be settled in the right way and that takes time and I'm doing it with some help from and Linens Group Carol's Group, then are Jeff and Gord, obviously, all t. all the teams involved and I have every confidence.
There were going to be able to move this forward and improve the second half significantly.
And.
No there really isn't much more to say there, we do see improve operating and financial performance on a stronger outlook in the second half.
Our continuous improvement programs in implementation of our self funding model is working.
I was disappointed people on.
And.
We're going to work hard with the people, we have which is our greatest asset to bring this back in line and see some significant improvement so I'm going to look forward to speaking to you with Q3 in mind.
With a much more I think positive view on where we are headed so thank you very much for joining us.
We will now begin the question and answer session.
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Our first question is from far had terrific with credit Suisse. Please go ahead.
Hi, good morning, Thanks for taking my questions.
Just a bit more clarity on the Roosevelt security issue can you provide some sort of detail on.
Potential timeline to resume mining the suspension of mining activity is more to do with some sort of police investigation or damage to equipment or is it both.
And just just more clarity on the nature of the shutdown and potentially when they could resume would be helpful.
So.
The nature of the shutdown was prudent.
To protect the security and safety of our workforce.
Yes.
Partially.
We did lose a couple of pieces of equipment, which were in the process of replacing now.
We are.
The government very very closely as Steve mentioned.
To restart activities.
And our expectation is sometime hopefully within the next week or two we will get at least a partial restart of mining activities.
And we'll continue to monitor the situation and work with the government to move it forward.
We are still operating the mill we have.
Substantial.
Lower grade stockpiles at Roosevelt, so that allows us to operate the mill for for a long time on on just stockpile speed.
So we're hoping obviously to be able to return to full mining as soon as possible, but in the interim to protect the security and safety of our people.
We'll approach at hand in hand, with the government partners.
In a way that helps us manage that security and safety.
And as.
As.
As we usually do we have been very.
Conservative in our guidance to make sure that we're not over promising we've.
We can get a quick restart potentially could do a little bit better, but right now thats, where we felt we wanted to come in.
Okay, and just just a follow up on the Roosevelt Capex it looks like.
He is a 25 million of Capex deferrals related to.
Sorry, Michael Hall Road and then.
Non critical infrastructure on the haul road I'm, just trying to get an understanding of how how and what was deferred exactly like wouldn't that be critical to.
Moving the moving the tons to the mill or like what part of the haul road can be deferred to 2020.
It's not too much deferral of haul road, we actually are seeing some savings in our capital on the haul road.
However, and I sort of spoke to at last time I was here there are some.
Some logging roads in the area that will sort of cross and interconnect with.
With our haul road.
If we get started the first three quarters Diamond.
We can put together an alternative haulage for a period of time.
We're being quite prudent in our expectations from Saramacca, but we're still targeting to see if we can get some more headed to the plant in Q4 using those alternative routes, while we finish off the last section of the of the main Hall Road.
Most of the deferral is with respect to other infrastructure things like the maintenance repair shop.
The permanent fuel installation.
They also communication structures and things that we can.
We can do without especially in an early start up with new equipment, you don't have as much need for for all the infrastructure that.
We will eventually put in place there.
Okay. Thank you.
The next question is from Anita Soni with Credit Suisse. Please go ahead.
Well it was sluggish.
So.
Can you hear me guys.
Yes, we can.
Okay. Thank you hi are still coming up as credit Suisse in the system no. They did they didnt take my name is Mike.
My company when I.
Okay.
I know your way.
Yes so.
Just wanted to get a little bit more clarity on the production volume.
So it seems that there is a couple of moving parts or at least one mcquade.
Declining at Rosabel and then the second.
The the temporary shutdown, but can you give us sort of a breakdown of whats responsible for what and also the reduction that you've got rolling through school all Saramacca this year.
What is your expectation.
Would have been a little bit more than normal production this year.
Yes.
Look again, we've gone to serve the the.
At the end of the stick here.
I would say.
I'll be reduction in guidance, probably 70% of it has to do with Lyft.
The shutdown and 30% to do with the.
The lower grades that we saw in the first quarter.
In the first half.
It's large July and August we were seeing a nice uptick in our great.
Enhancing some some in some very nice uptick up until this events occurred.
So it was unfortunate.
The stockpiles were hauling from what we were able to go a couple of weeks on high grade stockpiles, but.
As we forecast the rest of the year and not knowing exactly when we'll be restarting.
Sort of the lower end of our guidance is predicated on being running just stockpiles for the remainder of the year.
With very limited input from from.
From Saramacca.
The guys are still very hopeful we can do better.
With Saramacca, we're still targeting to get some some tonnage out.
There is.
Theres or right on surface, and we will be starting the stockpile that or fairly soon here and size.
If we can find a way to haul it and protect our people and make sure that everybody is safe.
I will look at doing that sooner rather than later.
That is where we are putting together the guidance here over the last.
Understanding where things were coming from.
We've taken the view that we need to be very prudent so that we don't.
We don't set up a situation for another.
Reduction down the road.
Okay, and then Jim.
Okay, well first of all the stages Mo.
Former office home loan for Tony.
Yes, sorry, Anita you're not coming through clearly unfortunately aren't okay, so that well.
Yes, well I just wanted to ask do you think there is an impact to 2020 timelines for Mako at this stage.
No no impact to 2020.
Were very very confident will be coming on very strong with Sarah Mccabe 2020.
Okay, and then could you just elaborate on and I understand the sensitivity with possibly share but.
Well how is it that.
Equipment was impacted.
At the.
Oh, yes.
Although the ball I guess.
In my view it is a bit unusual when there's an issue hits are taking on there. So I'm just trying to understand what.
Slide eight is sensitive Anita and you have been around so you know this but as you know I'm very present, a lot of time in Suriname and.
This data does that doesn't to me personally it doesn't matter that its an illegal miners as a human being and lost his life.
Hi, and old employees had nothing to do with it whatsoever.
And the reaction to the Daft was some damaged equipment I don't want to really get into any more than that I would just tell you that.
You know, it's a we had a very we had a very strong and continue to have a very strong relationship with the local communities. We have an extremely strong brand down there.
And there were some challenges within that group not caused by us that resulted in this influx so none of this.
Is tied to anything that we have done, but we have to live with the fact that there are some challenges and we're working with those people.
They are part of our community or their stakeholders I personally put a lot of value on that the president of the country.
Who comes from the interior wants to deal with this properly.
As we do I spend.
Most of I forget what day it was because I lose track of time, most of Monday Tuesday with him.
And I would just tell you that key and I.
Both and Gord and the team are committed to moving this ahead as quickly as possible we have to do it in a manner that's safe in sustaining and both of those words are important to us safe and sustaining.
So.
It was a hiccup in the sense of our operations it was a loss of life, which.
As I said earlier it does to me personally.
It doesn't matter.
Who this person was in respect to our mine.
So human being and.
I don't want it to happen again, none of us want to happen again, even though the company really didnt have anything to do with it.
All right and then just last question switching gears, a little bit with the gold price all cresting over 15 move all gold as you think about your project pipeline and to sustain these levels of gold price and you had to fire on all the issues and having currently what would you think in the pipeline. It has a high quality can you give us a topic.
I would say Bhutto.
It would be our top pick and then I think we've got some very strong domestic opportunities in Canada.
That would not include Coty, So right now we see other smaller projects look it on we have priorities around lets get this operation running the way we know we can run thats our top priority.
Let's get our self funding model, working which we're making good progress in and then.
Let's take a look at which projects we can develop and I would say no. The message has been loud and clear from our shareholders. We want smaller on projects less capital intensive projects that we can move ahead.
Our projects, where we can add near term cash flow are absolutely at the top of the list so getting saramacca tied in and working.
Improving Westwood performance.
On getting a roosevelt concessions back to where they should be.
On getting asset can moving ahead with some of the optimization.
On creating enough of a pipeline of cash flow, where we can confidently say, we're self funding and.
Then we can look at development projects that have the kind of appeal to the current investment community, which is quicker payback low capex.
On lower risk opportunities for our company, that's what we're looking at.
All right. Thank you.
The next question is from Mike Jalonen with Bank of America. Please go ahead.
Oh, Hi, Steve.
I just want to call in the pipeline again.
I noticed at Sadiola sulfides is in the feasibility study category.
And then the Mdna I also noted debt.
Yourselves Anglo gold continue the process to dispose of the assets.
So just wondering what the status of that how thats going.
Especially given there must be 20 gold mines for sale these days and.
I want to how a development project actually this is a mind how would fit into the all of us.
Well I think you know the history of it Mike you've been around long time add a few beers with me.
And.
Sadiola.
It would be part of a long game is if it ever materialize, we are still actively trying to.
Dispose of it so.
It has performed.
A little bit better than we thought lately, we do have interest in the asset.
So our current look ahead.
Does not include Sadiola.
Adding to the mix for all the reasons that youve heard over and over again so.
No I am I don't want to.
I'd leave an asset that has.
3.7 million ounces attributable to it.
In a state where we lose value impair the value. So we have to do some work with it but we have no intention right now moving ahead with any kind of development related to Sadiola.
Hi, I guess I, just kind of assess because royal gold is trying to sell their peak gold project and.
They didn't meet the strategic or value expectations of the joint venture so they're going to keep it and keep moving ahead on us.
But.
So its hard just trying to figure out those market data opportunity I understand yes, we're not going to.
You're not going to lose money, we're not going to give it away quote unquote.
We're not going to move ahead on it.
All right. Thank you very much.
And our next question is from Tanya Jeff.
Jack This con neck with Scotia Bank. Please go ahead.
Great Good morning, everybody.
Two technical questions. So Greg just wanted to circle back to ask Ken.
Just as.
Bit of clarity.
On the several numbers one of them was thinking Q1, you talked about de Bottlenecking project.
Seeing the CIO plant go to 13.5 million tons per annum on 100% hard rock than I thought I heard 11.7 million ton today on the call and then I think we talked about a 15 million tons per annum processing study that was going to be done. So I just wanted a bit a clarity on all of these three numbers maybe on missing something here.
Now your memory is very good pangea, we all know that.
[laughter].
Like the the original de Bottlenecking concept was that I was looking at 13 and a half.
As we have been reworking our life of mine plans with this self funding sort of focus.
In the near term.
We.
We felt that was.
It was better from a near term cash flow point of view.
To to scale back the de bottlenecking, a little bit and take it up close to $12 million instead of the 13 and a half.
Specifically, it's not so much around the cost of of the de bottlenecking in the circuit, but more around the fleet and the stripping required to feed that circuit.
That is significantly less.
And more within.
The scope of the current fleet, we have with a few smaller additions coming in the next little while mostly replacement that easily so from a from a holistic point of view and really trying to focus on cash flow being self funded there.
We've we've taken the decision to come with a smaller project.
The nature of the de bottlenecking as with a lot of de bottlenecking projects is actually it's a series of sub project. So we'll continue to evaluate it going forward.
If we can find other ways to get that self funding model working better obviously looking at that share price that would sorry, it at full price.
There is.
There is an opportunity and there is a payback.
Potentially as we move forward to reinstitute some of those some of those other sub projects. The engineering is ongoing and ready to go.
I understand.
What the impact will be on the overall cash flow picture, including additional mining costs to be that plant. So your numbers were right.
The 15 million was an early content then and it will.
That opportunity is out there for us.
As we evaluated at more deeply the impacts to that to the near term mine capital are even more drastic under the $15 million case. So so right now that one is a much lower possibility.
Okay. So basically then focusing on this 11.7, then yelling you put this out in Q3.
Correct Okay.
Okay. Thanks for the clarity there.
Bob maybe turning on to.
Westwood Im just trying to get an understanding.
What happened because I know, we we started with a revision to guidance with Q1, we've now revised guidance again for Q2. So what are you seeing underground.
Is it just taking you a lot longer to access to that higher grade.
Material that you're looking for in Q4 that you're having to move slower already something there that maybe just some clarity on what's happening at Westwood.
I think there is a couple of things ongoing we've moved out into the into the.
The outside areas and that we obviously our production in Q1 was it was quite reactionary to the to the situation is right in front of that we've been able to stabilize it here in Q2 Q3.
And we will see higher grades in Q4.
Again, I think we're trying to be prudent here and make sure we're not over promising.
And I.
Yes, certainly my discussions with the site, where we're looking to to be.
Higher in that guidance range rather than lower.
But we want to incorporate some some risk adjustment into the analysis to make sure that that if we did run into a problem late late in the piece.
That were not.
Struggling at the end to make a guidance that was not attainable.
Underground things are generally going very well.
This study work ongoing with respect to the LM is progressing very very well and that really pleased with what I see there.
The.
We're seeing improved safety performance, the new management team there is performing well.
We.
Do you see an opportunity to move into these higher grade areas. If we can move faster we will.
If we can't move faster.
Then that our guidance will halt.
We'll see.
So maybe just to ask it a different way.
In July and August have you seen a great improvement yet or are we just waiting for that grade for two for you and say migrates to Q2.
We've seen a tonnage improvement, but not a great improvement so far.
One of the challenges on a challenge its it is what it is.
As we've moved into some of these lower grade areas.
We're actually seeing wider ore zones.
So we're getting a lot more tonnage in those zones.
Than we were expecting we are seeing a big pickup in total ounces.
So it.
It's allowed us to focus on those while we work on current activity hopefully that that positive reconciliation continues for us.
We've done some really interesting things in the mail they've been able to improve the throughput in the mill there Bob what are our.
Our design concepts were originally talking about so thats allowed us to compensate a little bit more as well with higher throughput even if the current mill at the current mining is positive I think for the for the second quarter. Our average grade was about 5.5.
As I look at July and August .
We're still sort of maintaining that range.
Okay. So you just have a higher throughput so.
Periodically Q3 should be a little bit better than than Q2, and then with the higher throughput and higher grade that Q4 should be a better quarter.
We're twisting some arms, we'll see where we get to it.
Okay, I will say that too okay. Thanks, a lot.
This concludes the allotted time for questions on today's call I would now like to hand, the call back over to Indiegogo Nathan for closing remarks.
Thank you very much daily and thanks to everyone for joining us this morning and for your continued interest in I am told we look forward to having you join us for our third quarter 2019 conference call in early November .
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
Uh huh.
No.
Hmm.
No.
And.
No.
Yeah.