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Welcome to the Resolute Mining December 2020 Quarterly Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Stuart Gale, Interim CEO of Resolute Mining. Please go ahead.
Thanks, Ali, and good morning, everyone. Thank you all for joining Resolute's December quarterly's -- quarterly update. I'm joined on the call today by Dave Kelly, our COO; Bruce Mowat, who's the head of our Exploration Team; Jordan Morrissey, who is the head of People and Sustainability; and James Virgo, who's our Financial Controller.I am actually doing this call from a hotel in quarantine. The rest of the team are in the Perth office. I came in last night following a visit to our operations in Mali and also a visit to Ghana and the Bibiani mine. So really positive visit and trip. And it was great to have the opportunity to see the team at Syama and see some of the things that they're working on, the focus of that team, and it's very encouraging.It was also great to have the opportunity to visit Bibiani. We took the Chifeng team to Bibiani and had a really good conversations with the key Ghanian stakeholders there, in particular, from a government perspective and also from a local community perspective. So that's all moving along pretty well. And we have a lot of positive support from those key stakeholders in Ghana.From a closure standpoint, we're still hoping to get it sorted out by the end of March. That's the closure of Bibiani. And we require not only the Ghanian Ministry of Mines support but also Foreign Investment Review Board support from Australia and Chinese government support also. So there are a couple of the key things that remain outstanding.I think as we turn to our operations, I'll touch briefly on the imminent handover today to talk more in a more detailed way about those. But what's particularly pleasing is to see our safety performance throughout the course of 2020. As we all know, the 2020 threw up a number of challenges for everyone around the globe. And it was really pleasing to see how our teams were able to adapt and manage through all of that, particularly as we had a number of people who were caught on site for the extended periods.So great to see that trending in the right direction. And also, the other focus that we have maintained from a COVID standpoint, in particular, just the way that we're managing the hygiene and social distancing and things like that. So that's all moving along well.Just looking at the quarterly operations. I think it would be fair to say we had a mixed result for the December quarter. What was, again, very pleasing was the performance of the Syama Underground operations, where we've been consistently hitting the sort of magic 2.4 million tonne per annum rate.Unfortunately though, mining at Cashew wasn't what we'd hoped it would be. We had some equipment availability and some materials handling issues there, which resulted in an underperformance in terms of material delivered. Mako though, of course, just continues to keep delivering, another very strong performance from the team there and consistent quarter-on-quarter throughout the course of 2020.One last point before I hand over to Dave is just to touch on the strike activity that we experienced during the September and December quarters. We had -- we're particularly impacted during the December quarter by local union and national union strikes. We've been through a process with all of that, as we've discussed at length on these calls, where we've gone through the labor inspector and all the various other key aspects that we need to satisfy in order to manage our labor force at Syama. So that's pleasing.One of the other things that, I think, was also very pleasing was what we did at those strikes that we were able to keep our plants running, and we were able to divert people from other areas to ensure that we kept those plants running. So that was a really good outcome, not to have to shut anything down during the December quarter as a result of those strikes.Dave, I'll hand over to you just to touch on sort of the key operational points plus the power project.
Thanks, Stuart, and hello, everyone.As Stuart said, we had another solid quarter at Mako. It's contributed around 40% of the gold this year in 2020, I should point out, and it once again provided a reliable source of gold during the last quarter.A couple of things have changed over the last half year at Mako. #1, obviously, we put out a new life of mine plan in about July, which provided the market with guidance as to production and cost expectations for the remainder of the mine life and obviously extended that mine life. Part of the implications of that is some increased waste stripping over the next few years.We mobilized more equipment to the site in the second half of the year. And that's been manifested in a higher strip ratio and more waste movement in the second half of the year. And you'll see that the life of mine average is about 6.5 strip ratio. We're doing about 7 for the last 2 quarters. It will step up a little bit more in this coming -- or this current financial year. But to all intents and purposes, the mine is operating very much in the same manner as it has since its commencement.Next year -- or this year, I should say, we will have slightly lower grades at our disposal, and that's reflected in our guidance for this year. But overall, Mako has continued to provide us with a very reliable and straightforward source of production, and we expect that to continue into 2021.The main difference in this quarter from the previous one is that we had a mill shutdown, a regular mill reline in August. So that meant that September quarter's production was affected. No such reline was undertaken in the December quarter, and hence, there was an increase in throughput. We are processing slightly harder ores at the moment, and that is reducing throughput a little over what we've seen at maximum levels, but to all other extents, the mine is operating very reliably and normally.Turning to Syama. We had a pleasing improvement in the sulphide operations, although we didn't quite get the rebound we were hoping for from the September quarter, where we had some significant issues associated with industrial license interruptions. We actually increased overall gold production by about 15%.As Stuart pointed out, the underground mine is very much running now at full nameplate capacity. And a couple of key changes that will continue to drive costs down in the underground mine are the fact that we're now drilling from the cave. Close to 100% of the materials we've blasted in the cave. That means that the effort and expense required to produce each tonne of ore is falling.Our overall development requirements also will fall over the next few years. So that, again, will reduce the cost base underground, and we will then look to sustain and build a little bit upon the existing levels of production, which, as Stuart pointed out, running at about the 200,000 tonne per month mark. And we are very confident of retaining that level of production for a number of years to come.The big disappointment, if you like, in the last quarter was the oxide operation. As Stuart mentioned, we started new pit Cashew. The contractor was slow in mobilizing fleet. That meant we fell a little behind with mining rates. And that meant ore presentation to the middle was below where we expected to be.So the negative effects of that were somewhat exacerbated by us having encountered a slightly perched aquifer in the upper parts of the pit, which meant that the material we're handling was wetter than the normal ore supply. And we had some issues with hold-ups in shoots and other things which reduced throughput. So we had a double effect that reduced gold production in the December quarter.Thankfully, those issues are being addressed in the current quarter, both from a materials handling perspective, but also we're increasing mining volumes. We've got more material, more equipment now mobilized to site, and the excavation rates are increasing. So we expect an improved performance from the oxide operations in the current quarter.The focus for the remainder of this year will be on simply consistency in cash generation, on meeting ops externally and internally determined targets and trying to get, particularly, with the sulphide operation, a consistent achievement of demonstrated capacities that we achieved at various times during 2020.Finally, I might mention the power project at Syama. The purchase of this project, to remind everyone, is to replace about a 30-year-old fleet of small-scale diesel engines, which are generating electricity on site, with modern, medium speed, high -- heavy fuel oil generators, supplemented by batteries to reduce spinning reserve and further supplemented in the future by solar to reduce, again, generator costs.That project is well underway to completion. We had hoped to get it completed by the end of 2020, but some of the logistics issues associated with both the COVID pandemic and the coup d'état in August 2020 have stymied those efforts a little bit. But we will have that plant commissioned this quarter.We've already commissioned the batteries, which contain 10-megawatt hours of storage. We've got all 3 of the generating units on the ground. We're just building the ancillary units around those generators. And we've almost completed the HFO offloading and storage tanks, which means that we can run those generators as soon as they're all done.So that's going to be a significant generator of improved costs, we hope, over the course of this year. And certainly, as fuel prices increase, as they have a little bit lately, the magnitude of the saving we make actually grows. As much as we like the fuel prices to be lower, it somewhat justifies our investment when that does occur.So overall, an improved quarter. We still have some work to do over the course of this year to consolidate those gains further. And the focus for this year is very strongly on operational discipline and consistency. And that will be very much the same for the year.I might hand back to you now, Stuart.
Yes. Thanks, Dave.So look, I'll just touch on a couple of the other points that we've incorporated in the presentation, the quarterly release.So just turning to exploration. Obviously, we had a release yesterday, upgrading the resource for Tabakoroni Underground. Obviously, that's very pleasing. And the drilling activity and exploration activity at Tabakoroni Underground is going really well. So we'll continue to put more effort in there with the hope of building up more resource over the next little period of time.There is also a pretty prospective area, and we shouldn't forget about the oxide opportunities that could exist there as well. So again, as has been discussed a couple of times on these calls previously, we want to see if we can squeeze as much oxide out of Syama as possible because that just helps to defer any capital expenditure around the Tabakoroni Underground. So Bruce and the team are doing a great job there in terms of that near-mine focus.Just turning to cash. Our cash was broadly consistent with the previous quarter at $89 million of cash and $17.5 million of bullion. Figure 2 in the release sets out the key movements from a cash perspective. So I'd just like to touch on a couple of those.Royalties. Obviously, we had -- the overall royalties that have been paid during the course of the quarter sits at $9.5 million. That's for each of the 3 operations.VAT and tax. The VAT and tax of $11.1 million includes $2 million of SOMIFI, which is our oxide -- Syama oxide operation. So that's just a tax bill that we have tidied up from 2020. So the balance of that $9 million is essentially VAT that we're paying at Syama and the sulphide operations there. That -- as we've discussed previously, what we're trying to do to capture some of the VAT credits that we are owed by the government is to offset VAT against the -- sorry, offset our royalty obligation against the VAT. And we were able to do that during the course of this quarter to the tune of about $4 million.One other point that I'd like to raise here is just there's a new column in this chart, which is the government dividend and withholding taxes of $16.5 million. This is in relation to our situation in Senegal, where we've completely repaid the loan account that was in place for the development of Mako -- the ongoing support that was provided. So that's obviously very good and just reflects the terrific cash generation that we've been able to get from Mako.What's somewhat unfortunate, although it's a good news story, is that in order for us to move cash out of Senegal, we now need to do that through the payment of dividends. And as you'll appreciate, the government is a 10% shareholder in those operations. So that chart there reflects the dividend that was paid -- the 10% dividend that was paid to the government of Senegal, together with withholding taxes, which are also due on those dividend payments.Just touching on tax more broadly. Look, we've been working really hard to try to resolve our situation on the tax side of things in Mali over the last 12 months. The challenges associated with having an interim government in place had meant that we -- whilst we -- it feels like we're making good progress, we're yet to come to a conclusion around that tax position. So we'll keep working hard on that and keep everyone posted as and when we come to a conclusion around those tax positions. But from our side of things, nothing much has changed in terms of our position on those taxes.We've set out in Table 8 our hedging position. So we can see our forward position there. We also have 0 cost collars, which we're pretty good there a little while back. They -- there was a pretty reasonable spread between the ranges. That spread has narrowed quite a lot over the last period of time. So they're not quite as exciting as what they were previously. So we'll keep reviewing our position in relation to the opportunities around hedging, but that's our current situation.And look, I'll just briefly touch on the 2021 guidance. I know there's been a few concerns, particularly around our all-in sustaining cost and why that all-in sustaining cost has increased to -- we're forecasting between $1,200 and $1,275 in 2021. So I'll just work through each of the operations and point a couple of things out.Firstly, at Mako, Dave's touched on the fact that we've got to do a cutback this year. So we'll see, as a result of that cutback and slightly lower grades that we'll be processing, that our production from Mako drops from 170,000 ounces or so in 2020 to about 120,000 ounces. So that has a pretty significant impact in terms of the math behind the calculation of the all-in sustaining cost.And we also have higher capital costs which are associated with that cutback. So that's ultimately the reason why we see Mako going from just over $800 an ounce in 2020 to somewhere between -- around that sort of $1,200 mark in 2021.Syama oxides were fantastic at Tabakoroni, and the production at Tabakoroni ceased sort of in the middle of the year. That all-in sustaining costs for the oxides for 2020 was $844 an ounce. So as we look to 2021, we're operating from a number of satellite pits, which are not quite as economic and we've got to move gear around a bit. So that's ultimately why we have slightly lower production from the oxides and, of course, the resulting increase in all-in sustaining costs from our oxide operations.And then lastly, just touching on Syama sulphide. We're increasing our production from 120,000-odd ounces in 2020 up to 155,000 -- between 155,000, to 170,000 ounces. So that's -- so there's a pretty significant increase in terms of the overall production. And what we're actually seeing is a significant reduction (sic) [ increase ] in the all-in sustaining cost from $465 to $1,275, which is essentially driven by that production. So that's the 2021 guidance story.And I think just touching on the production, and that's really where our big focus needs to be through the course of 2021, is to make sure that we hit those production numbers. There's certainly some stretch associated with the numbers that we've provided to the market. But having just visited the plants and the enthusiasm of the team on the ground there, I'm sure that we'll be able to achieve those targets.Bibiani as well, obviously, that's going to be important to get that closed out. As we close that out, we'll have proceeds of around $100 million that will flow through. The plan for those proceeds is to pay off debt. So that's going to be the key thing, generate cash flow and from that cash flow, repay debt. So I think, as I said, I'm obviously confident around our abilities to close Bibiani, and those proceeds will be applied directly to our debt position.So look, I think with that, I'd just like to again thank the team. The team worked really hard throughout 2020. We haven't quite seen the performance that we would have liked throughout the course of 2020. But certainly, there's some good signs that have appeared towards the latter part of the year. So looking forward to taking that positive momentum into 2021 and to hitting those targets.
So now I have the pleasure of doing some Q&A. And I will read out some of these questions that we have received through the live Q&A event. And Dave, myself and the team will operate this or respond to those.So first question. From the outside, it looks like the political situation in Mali has stabilized. Any impact on operations today?Yes, I think that's a fair statement. Even look, the coup d'etat and the [indiscernible] around that coup d'etat, it was a little bit challenging with positioning from ECOWAS sanctions that occurred over that period of time. But the reality is that sort of came and went, and it didn't really have too many impacts on our operations.And I think as we stand here today, we're pleased with the way that the interim government is performing. It is, however, a little bit difficult to get key decisions made in terms of government sign-off around taxes and things like that. So -- but yes, the political situation in Mali is pretty good. We just need to get our tax position resolved.Dave, do you have anything you'd like to add to that?
Look, I think, operationally, the only implications of the coup were some difficulties in sustaining supplies for certain critical items. Other than that, we managed through that period quite well. I guess our observation is that there hasn't been too many major impacts above the ones that Stuart described. And I think the other issues we've had to deal with through the course of the year have probably been more significant, particularly COVID and some of the industrial license issues that we've had to manage.
Great. Well, I think that's our only question, unless I'm missing something. Ali, can you just confirm that for me?
No. At this time, that is the only question. If there are any further questions for the Resolute mining team, please follow the link in the top right of your page to type your question.
Ali, I reckon -- sorry, people are typing away furiously, but perhaps we can conclude it there. If anyone does have any questions, please feel free to reach out at any stage to the cell or through the contact e-mail address. But I think we'll wrap it up there. And thanks, everyone, for dialing in. I appreciate you taking the time to listen to our quarterly update. So I'll leave it at that. Thank you.