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Ladies and gentlemen, thank you for standing by, and welcome to the SBM Briefing on FY '20 Q1 September Quarterly Report. [Operator Instructions] I'd now like to hand you over to your first speaker today, Mr. Bob Vassie. Thank you. Please go ahead.
Thanks, and thanks, everyone, for joining us for St Barbara's Q1 quarterly report briefing. This is our first quarterly with Atlantic Gold in the group with the acquisition finalized on the 19th of July. The operation is performing as expected and integration activities are going well. On the call with me today as well as the usual suspects, I have great pleasure in introducing Maryse Bélanger, who has now accepted the role of President of the Americas for St Barbara. So as many of you all know, Maryse was COO of Atlantic Gold prior to acquisition, and now she's taken over the role of looking after all operations, exploration and activities in the Americas as well as a global role leading business development for the group. So I'm very pleased to have Maryse onboard, and she's attending this briefing by phone. Also with me, we have Garth and Rowan and David as usual. We also have Lucas Welsh, GM Finance and Procurement, who is leading the integration effort with Atlantic at the moment, just got back from Canada. As usual, I'll cover the quarterly results and also discuss our updated guidance that we put out on Friday, updated guidance for Gwalia as well as new guidance for the first time for Atlantic. Most of you would have read our guidance update on Friday last week, so I'll discuss that now first. While this September quarter was impacted as you know by a number of factors that we've been discussing for some time, the constraint on ventilation and prioritization of Gwalia Extension project activities and construction and mine development, so those activities as well as mine development at the cost of production. So we're going to make those choices on a daily basis. In September quarter, we also saw the mining sequence in the lower grade parts of the mineralized system, including the final stope on the level out on the periphery, and that area is prone to increase dilution as well further reducing the grade. So we have this impact of making, prioritizing away from production towards GEP activities in mine development and having that compounded by grade and dilution. Further on top of that, any delay to stoping activities cannot be recovered as we have nowhere else to go until we have ventilation and use that to develop more working areas. I've discussed that with most of you before. As an example, we had difficulty pulling the slot on a couple of stopes during the quarter. That caused delays, and we weren't able to catch those up. The production expectations for Gwalia were recently reforecast and indicated we wouldn't be able to capture that so -- and in the constrained environment we're operating now. In Q3, so early in the new year, we anticipate that GEP will be finished and the mine ventilation doubled, but much of that extra capacity will be initially used to facilitate development rather than production as we set up essentially a new mine underneath our sales. We are seeing some improvement in our underlying efficiencies, improving our total material move this quarter to a level we haven't achieved since Q3 March FY '19, noting that the total material moved up the decline is over the 1 million tonne per annum rate, and that's in a ventilation constrained environment. As many of you know, we were targeting 1.1 million of ore once we get our ventilation and being able to deal with the waste underground, as PAF has been wet commissioned as we speak is going to help us there as well. Also in the current quarter, we are beginning -- we're implementing a new ventilation strategy that we believe will facilitate mining of deepest levels more efficiently. So we believe we're gearing up to hit the accelerator once the ventilation has doubled. And that will be early in the new year. But the impact on this current financial year is limited because we have to catch up that development. I'll quickly go through some other points to note in the quarter before I open up for questions. Safety on Slide 4 -- sorry, highlights on Slide 4. First, contributing quarter from Atlantic, which delivered $9 million of the $43 million cash contribution from operations for the quarter. We paid a fully franked dividend of $0.04 per share, bringing the total paid for FY '19 to $0.08 per share, which on a yield basis is currently an attractive 3%. We have some promising exploration results at all the operations, showing good regional potential at Gwalia. The Simberi sulfide drilling is now complete and continuing to look promising. And we have lots of results from near-mine targets in Nova Scotia. On safety, you'll note that our total recordable injury frequency rate has stabilized at 5 and then we want that to go lower. We've seen some good work at Gwalia, especially on safety leadership, and working closely with our contractors because there's many of those as work peaks at the Gwalia Extension Project, especially surface infrastructure as well as the underground raiseboring. I would add that we haven't included Atlantic in these numbers yet as we're still in the process of integrating the safety systems. But for context, we've started the year well at Leonora with only 1 reportable injury so far this financial year, a cut finger. We've had 2 recordable injuries in Simberi, including a cut finger; and 3 in Atlantic, again, including a cut finger as well as 2 shoulder strains. So generally relatively minor but we want to be able to keep that low. Slide 6 has the consolidated results for the quarter and an all-in sustaining costs with lower quarters at Gwalia and Simberi mainly due to grade. On a positive note, the underlying numbers and key constraints of total material moved underground at Gwalia and mill throughput at Simberi were both the best results for some time. Slide 7, we have Gwalia's result which I've touched on earlier. Grade at 7.4 grams a tonne was lower than we normally have and lower-than-anticipated and the main driver of the results versus our expectations. Slide 8, Gwalia guidance, I just covered that earlier. I would highlight again that because of the constrained ventilation and sequential mining schedule and the interruption was allayed, so stoping cannot be recovered until we complete GEP and develop new working process in some new areas. Total material moved on Slide 9 shows gradual improvement as we get the results of that work focused on underground mining efficiency especially in development. But again, that's still under a ventilation constraint, and the fruits of all this effort would really be released once we get that ventilation doubled. And I understand, it's a year we've had to have, but we'll get through it. We're sitting at the mine to deal with the depth and the ore body geometry well into the future. On the Gwalia extension update, slide 10. The raisebore part of that project continues to go very well. We've got the 2 surface shafts and 1 underground shaft done. And we've got breakthrough of the final shafts pilot hole last week. So we're attaching the head to start reaming of that last shaft. The surface works, which include bands, chilling, power station extension are also progressing well. PAF construction is now complete and wet commissioning is underway. The Board and I viewed this a couple of weeks ago ourselves in some precipice sub kit. It has a significant benefit for us, and I have asked the team to let me know when we run our first stope. We do not have one to fill at the moment, but we're recommissioning on water and paste and then ready to put aggregate into it. Importantly, we can use PAF or paste aggregate fill on the raisebore chippings that we're about to generate in the final shaft. I should mention that we're looking to get some benefit out of the 3 completed 5-meter diameter Gwalia Extension Project shafts before the final leg is done so we can utilize the 2 surface shafts and the 1 underground shaft. Once we get to commission the fans and the chillers late next month, we can get some extra air boost down the mine ahead of completing the project which is on track to the end of January. We're also going to change our ventilation strategy to go to a more conventional system of discrete ventilation districts. This delivers significant efficiency benefits and also reduces future capital requirement for ventilation. It would take some setting up, and that adds a bit of CapEx but also causes disruption in the decline from time to time in this quarter. And we’ve factored that into our forward guidance that we released on Friday. Finally, on Gwalia. We've been running a program with external consultants to look at costs and efficiencies. We've also engaged some specialist consultants to optimize our resource extraction sequence, including the other loads that we haven't been mining that go up to the surface. As I've said before, once we double ventilation and then demonstrate increased development rates, we can file this into our life of mine plan and optimize it to be able to show a better future for Gwalia So very briefly, grades were lower in the quarter as around 1/3 of the mill feed was from stockpiles which are lower grade than what's coming down the hill from -- on the rope conveyor. As I mentioned last quarter, some barriers in the stripping phase at the moment where mining activities are focusing on opening up our brand-new Botlu pit as well as some new regions around Sorowar. There are some improvements in the plant occurring in this current quarter with a replacement scrubber going into the ball mill circuit and a new pebble crusher into the SAG mill circuit. We haven't actually been doing pebble crushing, but we're about to start to and that should deliver us benefits especially in some of the harder ores in Sorowar. Simberi guidance for the year remains unchanged. I should point out that the mining lease has been extended at Simberi. The government approved that during the quarter, so we have a mining lease extension for 10 years. That's no main feat to get those e-mails renewed. As many of you observers of PNG would know, we're really pleased the team got that over the line. Atlantic costs -- sorry, Atlantic Gold production cost on Slide 12. Our first quarter reporting Atlantic Gold's production, a very consistent quarter with only one notable event, where we had some power disruption associated with Hurricane Dorian and in September as well with some unplanned maintenance on the detox tanks. All together, we lost a week of processing there. I flew immediately in to decide directly after the storm as did the Board and some investors and analysts. And I think we're all pretty impressed how well the team there coped with this, quite a fair sight, hurricane going through there and only really to lose out on a bit of power. So we're very pleased with that recovery. Guidance for FY '20 was announced on Friday and followed a fair bit of planning as we went from a calendar year to a financial year and do it the way that St Barbara forecasts and budgets. Since we've got the keys in late July, we've been having a good look at the Atlantic opportunities with the team there in Atlantic and looking at improvements we can make to the operations. Most of the opportunities, the Atlantic team had already identified and we have supported, and we've added a few ideas of our own. So I think we genuinely got the most out of our combined experience. The all-in sustaining guidance for Atlantic is driven by sustaining CapEx this year of around CAD 15 million. This includes some big chunks, and the main chunk is CAD 4.5 million on the tailings lifted, the tailings facility at Touquoy. We've got mining equipment coming up at the same time from midlife rebuilds or in a couple of occasions, we wanted different machines that we're going for replacement and a fair chunk of plant improvements, especially on the crushing circuit and the gravity circuit. These improvements will incur capital this financial year, but the benefits will be mostly realized in the following year. Having said all that, it's important to note and recognize that Atlantic is a low-cost gold producer at the right end of the global cost curve. It is our lowest producer, a cost producer, and there's lower cost in mostly operations in our peer group. Also, we had the pits that we have planned in the corridor, production increases beyond 200,000 ounces. With the gold we're continuing to find in the region, I think we'll be mining in Nova Scotia for a very long time. I was asked recently how many St Barbara people who were now in Atlantic operations. The answer is 0. We have not had to parachute in operating people, and we've retained the key operating team or all the operating team and key executives. So we're very pleased that the operation is delivering as planned with that team in place and the integration efforts, which are more designed that Lucas is leading to integrate our finance, HR, procurement type of arrangement into Atlantic and proceeding well. Consolidated guidance is on Slide 13, including Atlantic for the first time, comes down at 380,000 to 420,000 ounces at all-in sustaining cost of between AUD 1,240 and AUD 1,330 per ounce. Growth CapEx figures for Atlantic and not in our forecast as yet whether incumbent or was sustaining obviously but we'll be pulling together those plans for the 3 mines that we're about to build and getting that out next quarter. Slide 14 shows how we've been using cash and our change in cash balance. The main changes from last reported quarter with the acquisition of Atlantic Gold was AUD 780 million, dividend payment of AUD 19 million, income tax payments of AUD 8 million, exploration of AUD 13 million and growth CapEx of AUD 14 million. There was also, as usual, a working capital adjustment from quarter-to-quarter. In exploration, Slide 15 gives a summary there that I won't dwell on too much, but we've got significant exploration in across all 3 places and some greenfield areas. At Gwalia, on Slide 16, relatively quiet quarter. We've finished the last of the truly deep pilot holes that we've -- parent holes that we'll be doing for the foreseeable future. We haven't got the SA results there, but we remain very interested in the potential next sweet spot zone for this orebody in this heavily shallowing of the Gwalia system that we've talked about before. There are some slides and appendices on 27, 29. We're stepping out around Gwalia in the Leonora province looking for other deposits, maybe something that we can throw onto the mill. Best results are at Horse Paddock Well and Trevor Bore. Simberi, Slide 17. Some truly encouraging drilling results there underneath the Sorowar. We've finished the drilling there now for the sulfides projects to add to the Pigiput holes. So the last of 64 holes are in the full report, many at fairly high grade and also quite shallow depths below the oxide floor. We're very positive about the mineralization we've been observing and these results this quarter are even more encouraging. In parallel, we've been progressing study work and EIS work focused around pit design, processing options and concentrate handling. And we'll be planning to provide an update including resources and reserves in the March quarter. We've got some exploration results here from our Fifteen Mile Stream and Cochrane Hill exploration. This is focused on potential further satellite pits in those projects as well as resource conversion. You can see this on Slide 18 and 19 with more detail on the full report. We're finding more and more of the types of disseminated mineralization that we can mine at low cost in and around the existing corridor, and that's very encouraging. The -- we are focusing on the corridor, but we are also stepping out. We've got -- started the exploration on the 2,000 square kilometer patch of ground we have southwest in the province on the other side of Halifax, and that's where we think the mineralization is similar to where we're mining now. Slide 19, 20, an update of the grade pipeline, and that really highlights the -- what Atlantic Gold brings to St Barbara. We previously did not have a growth story and now we do. We've also choked there the early stage powder of our project pipeline. We've now significant ground to explore in our own right or through joint ventures and even equity investments. I should mention that I'm pleased we are now have some -- or we have now have some exploration to do in the great state of Queensland through the JV on Horn Island with Alice Queen that's up in the Torres Strait Island area. I’m very excited about the early-stage exploration and the source sampling of rock chips showing up a lot of gold and normally to follow up with the drill. In conclusion, it's been a challenging quarter for Gwalia. However, we will get there and we're about to reap the benefits of waste staying underground and ventilation doubling. We'll also have our first quarter from Atlantic which was solid and the operation is running to plan. Integration is going well. And our growth portfolio is gearing up to be delivered there in Nova Scotia. Simberi continues to perform, and the e-mail has been renewed. The mining lease has been renewed. We continue to have positive sulfide results there as well as promising regional exploration around Gwalia and Atlantic opportunities that I mentioned. So I'll leave it there to open up for questions.
[Operator Instructions] Our first question comes from the line of David Radclyffe from Global Mining Research.
I had a question here on Gwalia. You're obviously talking to the GEP ramp-up in Q3. Could you just give us some more color on how long you expect ramp-up to take? Are you happy with PAF so far? And obviously, we appreciate it's really early days. And then given the recent revisions we've had to Gwalia this year, how confident are you if we come back to the number you provided in March for 2021 of hitting the 230,000 ounces?
Yes. I'll -- that's a lot of questions in one, but I'll try and work backwards. Just on the 230,000, our -- when we were reforecasting, that resulted in the recent change to Gwalia's current financial year. We carried all that forecasting through the next financial year and reviewed it with the Board. And we remain at 230,000 with a good degree of confidence for getting the benefits in that financial year of having used the doubling of ventilation to develop out more work in places. So we've got places to go and operational resilience in the operation and also keeping waste underground. So that forward forecast stays as it was. The -- with PAF, how pleased are we? Well, I'm pleased that's the -- actually construction's finished. That project was -- as well as GEP's going, 80% of its ventilation, infrastructure shafts and chilling and fans and power stations is that project's going really, really well on track. But PAF is where we've struggled. It's late and it's cost more than we expected. But now it's finished. We're just commissioning it now. So the last parts of commissioning were done last week, which was running up with the positive displacement pump to its full pressure and flow for 6 hours and then acceptance testing is past that and also getting the spoke mixer which mixes the aggregate and paste together. That's been sorted out. We're just getting a new paste line to it direct through the drilled and lined paste line. It's the last leg into the mixer. And we're looking for stopes to start filling the course of this next 3 weeks, I think. So we don't have -- we've filled up our schedule with paste, and so we're looking for that opportunity. Really the GEP coming in, like I said, we -- I think there's been a good deal of innovation there around ventilation because you can't do anything without shafts. We're completing those shafts now. Surface infrastructure fans and chilling is going to schedule. So the power station budget, that innovation of being able to use the existing shafts and surface infrastructure before the last shaft is done could give -- is looking to give us a bit of a boost in ventilation over the Christmas time and the hot time before we finish the complete shaft there. So -- and really, as I've said before, we double the ventilation. And then I want to run the rest of the financial year demonstrating what we can do on development rates because this becomes a development rate line. We've got double declines, we've got -- which we haven't had before and very long drives in between them as the ore body's got longer long strike but thinner in the section. So dealing with that ore body geometry, we can already demonstrate rates of over 1 million tonnes a year, if you include the waste. But we're keeping waste underground and doubling the ventilation. We should be able to get to our 1.1 million output as grades decline and potentially further. So really, what you'll see from us is that the way it's starting to stay underground from now on, ventilation coming in at the end of January, accelerated development rates that will demonstrate over the remainder of the financial year. We'll take those demonstrated rates, wind them into the life of mine plan, which we're already working on with Whittle Consulting to optimize the extraction sequence where we will look at mining and other loads and the sequence at the same time. All that will come together at the end of the financial year as a whole new optimized life of mine plan.
Right. Okay. And then maybe just on Atlantic, can you just talk to the sort of the permitting process, how it's going there? You've obviously just put in the Fifteen Mile permit.
Yes.
Were there any scope changes there under St Barb's ownership? And then maybe you could just talk to Beaver Dam and when you do expect that to be approved.
The -- we haven't made any changes to that time line. Obviously, Beaver Dam's in on the way and we do it -- I think, we're in our second round of the usual request for information. Beaver Dam's relatively simple in that it's only just 2-stage crushing of ore. There's no plant or tailings down there. We are busy with some working through the road route through the forestry there. And I think we've done the land swap there to facilitate that as well. So that's the one, the track that we've mentioned before. Fifteen Mile has gone in, as we mentioned in the report. So really, we think that's on track. We -- to your point, we haven't made any scope changes to that. You've got -- in a sense, you've got to lock down the scope or you'll never get a permit. If you keep changing or tinkering with that or adding to it, you won't get through the permitting process. So you're far better off doing what Atlantic has done is make your footprints reasonable enough that you can support but still have some room, giving good information upfront so you don't get too many requests for information because that's when the 365-day permitting process clock stops, if you get a bunch of questions. We have factored in a number of rounds of questions into our time line there. But also, once you've got it going on the general scope, which in the scope of Fifteen Mile Stream is a tailings dam with a plant that does gravity goal as well as flotation concentration to truck the extra distance with the concentrate rather than roll ore. That, we haven't changed that. Once it's permitted, we're continuing to find stuff as we drill Fifteen Mile Stream now. A lot of that can be accommodated within the existing permit. But if we're lucky and find our satellite deposits, it will be a good problem to have but then you can seek variations.
Our next question comes from Michael Slifirski from Crédit Suisse.
Starting with Atlantic Gold, the all-in sustaining cost increases. Is it all driven by sustaining capital? Or was there any underlying cost creep within the cash cost? And that additional all-in sustaining cost, how much of that was sort of previously considered project capital that's become sustaining capital under your perhaps more conservative way of accounting?
Yes. Look, it’s -- to your questions, largely driven by sustaining CapEx. And look, there were a few differences in how we looked at sustaining versus growth. And that's not unusual for the style of thing where you're actually going to have orebodies come onstream in the corridor, and we do have to do things at Touquoy to be able to accommodate that. So there were some adjustments there. There was a bit of -- but largely, when you're looking at the tailings lift that would put that as sustaining, that's a big chunk. It is about, I think, 4 million in the mine. We're looking at replacing an excavator and doing a mid-life on another one plus rounds of overhauls on tracks. The plant ones we had put in our due diligence. We thought the plant was down as a turnkey with the SpinCo on time, on budget. That's good, but then when you get to operating, you see some improvements, and the site was already on to that. But we really supported getting those done quickly. So we're constant. Where we thought perhaps there might have -- some of those improvements might have gone out over this financial year and slipped into next, we've accelerated them to get them done because they are valuable. There is a little bit of underlying cost creep that I mentioned the extent that we haven't done some in the transition of going through this focus on integration. There's been some mining improvement opportunities. We've identified all sorts of opportunities to bring some work that's contracted more in-house and they haven't been delivered yet. So that's sort of crept the underlying operating costs up a bit, but we have to be able to handle that into the future by optimizing some of those things and bringing some of the activities in-house.
Okay. Secondly, with respect to the ore mine, the grade of the ore mined being below reserve grade, is that reflecting material that was outside reserve that was talked about on the site visit, the low-grade and medium-grade material that was outside the initial reserve? Or is it simply a lower-grade area you're mining through?
It's mainly sequence-driven, where we just mined through some parts that are lower grade than higher grade. We've got a higher-grade year forecast. I think, as you'll notice, it's about 1.4 million in the forecast. And we're experiencing that now in the current quarter. We can see that coming through the mill. The point that you've pointed out is we are accumulating, I think -- well, we've got over 3 million tonnes of low grade and medium grade. I think 60% of that's medium grade, which is stuff that could definitely go through the mill. But we haven't been putting it through the mill yet.
Yes. Okay. Moving onto Gwalia, your comment about having 2 million to 1 million tonnes per annum hole is right with constrained ventilation versus your aspiration of 1.1 million tonnes with the vent. What defines that 1.1 million? What constrains you to 1.1 million? Or do you now believe you can do better than that?
Yes. Look, when we targeted -- now we are doing GMX. We're just not doing it with pumping. And then the huge benefit of that is extending the mine life from 2024 to 2031 at reasonable volumes and all-in sustaining costs. So that's trying to -- we have been doing under 700,000 tonnes of ore. And now we want to put all the decline capacity to work rather than waste it now. We were trying to shoot for 1.4 million with pumping, but we found that the orebody geometry that I just described and with the twin declines and the reliance on a lot of development meters per ounce, sort of we couldn't get to 1.4 million all the time because of orebody geometry. So we just set the rate for trucking at 1.1 million. Now the decline capacity with the ventilation and the trucking, we'll be able to do 1.1 million. It's just what are the opportunities to do more than 1.1 million. We're too opportunistic to get the 1.1 million quicker because we only plan to be out there at 1.1 million not this financial year or next or even the one after that. We were conservative in our ramp-up. So I think what we'll find is we'll get to 1.1 million a lot quicker. I mean, as you can see, the metrics that we've got now, that will be development-constrained rather than decline-constrained. So it will come right down to development rates. And if we can demonstrate development rates anywhere near where our mining contractor is getting them elsewhere, adjusted for our depth and our bolting pattern, then we should hopefully be able to get to 1.1 million quicker but also go beyond it. But I don't want to bank a number above 1.1 million until I can demonstrate those development rates when we get the ventilation.
And to be clear, Bob, that 1.1 million is the deep mining, not looking at the parallel shallower loads?
No. Yes, you're right. We haven't factored in any shorter-haul loads. One of the things we are definitely looking at though, along with our optimization project that we're doing, the plan that we're doing with the consultants, is I think if we can establish some stopes and do see a path to boost load further up in the sequence, not only -- and bearing in mind, that would be in the different ventilation district now potentially. And that's going to mean that we'd have a short haul, but also we'd have some stuff to go to if we get tight in the deeper parts of the mine. Now NPV-wise, it might favor going deeper first and then coming up later. But from a resilience point of view and flexibility in the mine, I think it would start to favor being able to mine a whole another series of mining fronts. So that's something we're going to be focused on in this current quarter with the planning team.
Great. Two last ones, Bob, if I may. First of all, the Simberi mining lease extension to 2028, what defines that year? Was that what you asked for initially? Or is that all you're allowed to get? And how do you think of that in terms of the sulphide project, which presumably goes well, if it does go well beyond – conceptually it goes well beyond 2028?
Yes. So in -- under the law there, you only get 10-year extensions. So -- and we -- our last one expired in December '18. They let you carry on until they tell you otherwise. So it's particularly pleasing to get the document in the mail. So it's just a timeout. Now what we have to do to get sulphides, apart from getting the project approved by the Board, would be something we'd be able to finance ourselves. There's not too many mines you could buy for that price, and we've got our team there already. So we're favorable on the project, but it's going to be approved by our Board. But we also need the state to approve the EIS, which is something we never stopped to work on so that we can bring that in very quickly. Yes, sulphide will go out beyond potentially 2028. But once you got the sulphide scope approved and you're operating through your mining lease, extensions should be relatively okay to get on the basis that you're an operating mine. And in fact, you need a mining lease to close an operation as well. So I think the main thing with sulphide is just the actual permit approvals for sulphide rather than owning lease.
Okay. And then finally, with the increase to Gwalia's sustaining capital. I'm really not sure how to think about that in terms of where you're at, whether that number is still artificially low because the amount of catch-up developments you have to do and the narrowing of the ore zones, or whether it's high because it's already including catch-up capital -- capital developments. So how should we think about the number you've given for this year and projecting forward?
Look, I think the number we've given for this year, we didn't want to get into continual changes as we -- for every disruption we had. We've built in a range there. We're confident with -- the thing that impacts us is not so much extra development or the orebody geometry. We've got that detail planned. It's more if we get a significant disruption in ore and pulling a slag or filling a stope or a problem with dilution that we do get sometimes on the first stope of a level and then on the other stopes. They are the disruptions that we can't recover from until we get the ventilation. And bearing in mind, we get the ventilation halfway through the financial year, but we don't have the development done to actually have more places to mine if we get into trouble. So that goes to the end of the financial year. We reflected that and then detailed, but if you had a big disruption, the point is you just can't recover it.
Yes. And I get the permits, specifically the dollar millions that you're spending on sustaining capital because that's not really production-related, and that number increased. So I'm just trying to understand whether the number for this year that's higher than what it was originally goes up from here because there's catch-up, or whether it's a good number to base our projections for future years from.
I think that's a good number to base because -- and the big step-change, as you know, is the -- is stepping out to '20 declines.
Our next question comes from Reg Spencer from Canaccord.
I think Michael covered off on a lot of the key questions that I had. Just the one remaining one I do have is just back to Atlantic. You mentioned that you had brought forward some of that expenditure -- sorry, that sustaining capital at Atlantic. Just thinking about sustaining capital longer term, I'll avoid the debate about what's considered sustaining versus growth because you are a little bit more conservative than many of your peers. But is it likely to be much divergent from perhaps what Atlantic had guided to in the past for life of mine sustaining capital? Or the number you have, is it likely to be any quicker than over the longer term?
Look, I think -- like I said, we haven't changed the scope of that strategic plan of Atlantic as yet. I mean now what you do find is, when you do the studies like with Fifteen Mile Stream for instance, equipment selection in the plant where we incorporate learnings from our current experience at Touquoy, any -- the changes in capital, if we come up with any, would be justifiable on an NPV basis of improvement. What would really impact the timing of the spend is the permitting process. We're well underway for Beaver. Cochrane Hill is a bit further out. Fifteen Mile Stream is one that we're really focusing on at the moment because that's the one that does also have a concentrator, but also comes in a similar time to Beaver Dam. So we've got to really stay focused on that one. And we are finding -- we were out there with the Board a couple of weeks back at Fifteen Mile Stream, which is quite an isolated area, in a forestry area. There's not even one living around there. But areas that we hadn't been able to drill until we got permitted to drill are yielding the same sort of mineralization. So it could be quite a big production center for us and a growing one. So that's something that might impact that forward look. Now we are looking at using a similar approach to use the Whittle Consulting optimization team to look at optimizing across the cargo as we find more and being able to continually update that optimization and try and further then into our permitting process. But whilst our permits have scope to change a bit, major revisions would need to be approved. And so we're just going to be careful what we do there. That's a big focus of what we're -- post the immediate integration of the functional activities of the business, that's going to be a -- that optimization of that growth path is something we are very interested in. And Maryse and her team will be leading.
Bob, you mentioned before in an earlier question around permitting and it being important not to make any scope changes prior to having your permits. And so is that kind of pointed towards if there is any change to the sequencing or the design of the expansions going forward, that you're unlikely to reveal what that might be until that permitting is complete?
Yes. Look, it's just a question of degrees. If you just turn around and said, "Actually, at Fifteen Mile Stream, we're going to build a CIL plant." Well, that's not contemplated in the current scope and that would be a major change. You need to have to go back. We're not looking at that. We like the idea of concentrating in trucking for that operation. But if you find more, it can come into the mine plan without significant change. So it really depends on what you're doing and what impact it has especially the main impact in those areas is not so much people, it’s watersheds.
Our next question comes from Matthew Frydman from Goldman Sachs.
Two questions for me on Gwalia. Firstly, on grade, it seems pretty clear that the softer quarter was mostly driven by the lower grade rather than any particular issues with material movements. So I guess just wondering what actually surprised you about the grade in the quarter. I mean was it mainly driven by this one-off overbreak issue? Was it a question of not having the exact mix of stopes available that you would hope for in the quarter? Or I guess bigger picture, do you need to start potentially rethinking your assumptions around dilution and grade, particularly around, I guess, the peripheries of this narrower design of the orebody? I guess I'm ultimately wondering whether this might present an ongoing issue as the mine moves away from the sweet spot it's been in previously or whether it was just, I guess, a one-off sort of confluence of events in the quarter.
Look, there's a lot of things because, as I mentioned, we do have to make some daily calls on whether we're going to go and shoot our water ventilation in there to sort out a problem with a slot, or whether we're going to just put that towards the PAF plant for the final commissioning. They are the choices we had to make, and they get adjusted by where we are in the stope cycle. The grade, we knew -- because of the sequence, we knew we're in the outlying cutoff zone stopes, where the next stope is not a stope. It's beyond cutoff grade. So you're close to cutoff grade on some of those get your fix and if you get a bit dilution, I mean, you can be in the last month of the quarter. I think we might have -- because we're in those areas and we had a bit of dilution, we're running about 4 grams. Now reconciliation-wise, when we reconcile, we've got grade control out ahead of us, usually about 3 years ahead of us. But it still means that you've only got a capital of 3 holes in the stope. And what you can find is the early firings of those are lower than you expected, and that's what we got this last month in the last quarter. But actually, in this month, the firings and the same stake are up higher, a lot higher, and we're benefiting from that. So it's just within stope reconciliation. But what we find on a level, we don't get surprises. What we will see, to your point, in the future though is in the lower-grade areas as we get deeper. So we have enjoyed a year at, say, 12 grams a tonne in the past. And we might be down towards at the end of the mine life, that they're averaging around 6.4 or 6 or something like that because in these lower-grade areas where you're really going to get the mining volumes up, and that's why we're moving to the higher mining rate. You -- in the lower-grade areas, you don't see these swarms of high-grade shoots as much. You do see a few, but not as much as we've seen in the past where we might be pulling a stope of 30 grams a tonne. So that's probably the whole way to deal with that is get ventilation, get a number of working phases out in front of you, and then you can focus on that stoping cycle of excellence and filling them quick. Then also just get the tonnes out of the ground. That's the way to combat the ground -- rather, the grade.
Sure. That translates well to my next question, I guess, on volume and also following on from Michael's questions on volume and development rates. If we look at this quarter, you're running at near enough 0.5 million tonnes per annum of development waste, and that's without the GEP, obviously. Just wondering how significantly or how quickly you expect that will ramp up going forward, particularly in the second half of the year when that ventilation does get turned on. And then also, I guess, how much of this will you be looking to divert to PAF? I guess if we take the 0.5 million tonnes per annum that you ran over this quarter, would you be expecting half of that would ultimately end up in PAF? I guess, again, what's the steady state expectation in order to achieve that 1.1 million tonnes per annum rate of ore mined?
Yes. Okay. We're looking -- I think we're budgeting about half of development going through PAF, but we're going to ramp up to it over a bit of time as some raisebore chippings coming out of the last slot. The development waste, it's a good problem to have. If we -- for example, if we were to double our development rates, we're making a lot of waste. We got now some of the developments in ore. But you make a lot of waste, but then you've opened up a lot of stope areas. And so it's a bit of a trade-off there. Also, your cost per meter goes down significantly if you're using 4 jumbos to do 600 as opposed to -- meters in a month as opposed to doing 300. So all those things factor into the life of mine plan, which is something we're working on now. But you're running double the amount of decline developments than you used to be. The tenor of the ore body has dropped from being almost 9,000 ounces per vertical meter in the areas in the past. And you got a lot more development driving to do because of the -- where the orebody spins and longer long strikes. So there's a lot more development meters per ounce. Now as we -- as I mentioned before, I do want to demonstrate these development rates when we get the ventilations. Otherwise, I'm just -- I'm talking without solid data. Now we have reason to believe we're going to do better because the same mining contractor can do better elsewhere, but we are a deeper mine and we have a different bolting pattern. So it's something I want to be able to talk more about at the end of the financial year with the life of mine plan to demonstrate it and demonstrated rates built into that.
Our next question comes from Paul Hissey from RBC.
A quick question for me, maybe for Garth, just a little bit boring perhaps on the financial accounting of Atlantic. I may have asked this already over the last couple of months, but can you remind me, will you be accounting for that as a minority or only proportionally consolidating that component, please?
This is to cover the MRRI component? So there's no...
No -- sorry. Sorry, yes. That's right. The ownership component at Touquoy. Yes, sorry.
Yes. So we've consolidated the whole of Atlantic, and then we'd just show a distribution to that MRRI ownership because they own 40%. So we've consolidated 100% and then show the contribution that will be paid out, which won't -- that's not paid yet because they're still -- we're still earning back or they're earning back their free carry.
Our final question comes from Kate McCutcheon from Citibank.
Three questions on Moose River from me, perhaps given that I didn't make the site visit. Just firstly, the previous May study, you had ore mining rates of 2.5 million, 3 million tonnes in the first 2 years. And you've been doing upwards at 4 million tonnes now on an annualized basis. So how should we think about the mine life going forward? Is there an increase in total life of mine inventory compared to initially? Or is there a change in year-on-year ore mined profile?
Yes. I think a lot of that probably relates to the fact that we stopped it within the model as waste has become low or medium-grade ore in Touquoy. And that may not be the case in other deposits, but it's a good problem to have. The -- it also lowers your strip ratio in that part. So I might get Maryse. She's -- I think she's on the speaker part of the line. Maryse, do you want to offer any comment there?
Yes. So to Bob's point, there is a lot of ores that, based on the control joint, that we identified as medium-grade stockpile material and low-grade stockpile material. So we now exceed 3.2 million tonnes of stockpile. And by the end of the mine life at Touquoy, we expect to have an order of 10.8 million tonnes of stockpile material, which again was not expected. So a bit of a different view. And if you combine it with the fact that last year, the volumes were replaced net of depletion and that we got a bit of head expansion, longer life at Touquoy is essentially the story. Until we have the mining experience of the other deposits, we don't know if we're going to see the same thing. We suspect it might be the case, but we don't have the data yet to support that.
Okay. Great. And then just following on from Paul's question perhaps, just on the ownership at Touquoy. What's the appetite to buy out Moose River Resources' stake now that the 18 months or the 3 million tonnes per annum tonnes processed has passed?
Yes. It's Bob here. I have a high appetite for that.
Sorry, a high appetite?
Yes.
Great, certainly. And then finally, do the guidance numbers at Moose River include the 4,000 ounces per year acquisition?
Yes. So we footnoted that in the quarterly also, yes, so it does include that. Yes.
So the guidance…
That way, it would -- because it was just into the financial year, it confuses everyone. We just keep everything to the financial year.
Thank you. And thank you, everyone. That was our final question. So this does conclude today's conference call. Thank you so much for your attendance. You may now disconnect.
Thanks, everyone.