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Good morning, and welcome to The Centamin Q1 2019 Results. My name is Chach, and I will be the coordinator for this conference. I would now like to hand over to Andrew Pardey to begin the presentation. Andrew, please go ahead.
Okay. Thank you. Good morning, ladies and gentlemen. Thank you for taking the time to dial into our Q1 results webcast and conference call. For those participating through the conference call, the quarterly presentation can be found on the website. Joining me on this call today is Ross Jerrard, our Chief Financial Officer. From this year, our reporting has evolved to a format and timetable you will be more accustomed to with the London market and subsequently more in line with our peers. I hope you'll agree this is a more comprehensive review of the group business activities within the quarter. It is important to note that in addition to the quarterly reports, we will be publishing financial statements at the interim and full year. Should you have any feedback, we are always open to improving our communication. Okay. Here are our disclaimers. Do please take the time to read them at your leisure. Okay. Our assets. Centamin holds greater than 4,000 square kilometers of highly prospective land across Africa. Our core asset and operating mine is the Sukari gold mine in Egypt. We've been operating this for 10 years and prior to that proving up what is a world-class deposit. Alongside the producing open pit and the underground mine, we have active development underway with the Cleopatra exploration decline providing alternative access and infrastructure to extract additional sources of high-grade ore in the future. Advanced exploration is continuous across the underground as the orebody is far from being fully defined. We have successfully replaced our reserves in the underground year-on-year and that remains a key objective going forward with Sukari. Outside of Egypt, we have had further exploration success with resource grades of Doropo and a maiden resource of the ABC Project, also, in Côte d'Ivoire. Okay. We've had a solid start to 2019 with the Q1 results delivered ahead of forecast. We reiterate our full year guidance for 2019 and the company will be releasing a longer-term outlook during Q2, providing guidance for 2020 and 2021. Importantly, Q1 was 116,000 ounces of gold. Costs were $631 an ounce, cash costs and all-in sustaining costs of $898 an ounce. Okay. Sukari is an established long-life, low-cost Tier 1 asset, which generates tangible returns for not only its shareholders but also its stakeholders. We have recovered all of the $1.2 billion capital investment to date. This year will be our third largest year of production as we navigate away from the operational challenges we faced in 2018. Key personnel changes, technological upgrades and ongoing improvements throughout all sections of the mine are a few of the illustrations of how we have successfully strengthened the business. Okay. Exploration is at the heart of what we do. Sukari has a mine life of greater than 15 years from the open pit and a rolling 5 years and growing life from the underground. We have successfully replaced the underground reserves year-on-year and the orebody remains open at depth, along strike and regionally within the tenement area. Exploration at CDI has been very successful, delivering a 58% increase in the Doropo indicated resources to greater than 2 million ounces and declaring a maiden resource that are exciting greenfield projects also in Côte d'Ivoire, the ABC Project. A strong, balanced, multidisciplinary board. Excellent progress has been made against succession planning and recruitment activities. We welcomed Dr. Sally Eyre to the board earlier this month. Sally brings not only a wealth of technical expertise but also capital markets experience. We have further appointments to make in 2019, including 2 NEDs, another technical appointment and a financial appointment. At the management level, we're delighted to welcome Jeremy Langford as Chief Operating Officer with immediate effect. Jeremy has an impressive career of developing and building gold mines in West Africa but also in maximizing operational performance. We have made key appointments throughout the operation, more namely operations director, supply chain manager, technical services manager and underground manager. These high-impact appointments have already made good progress delivering improved performance and driving results from the changes implemented throughout the operation last year. Responsible corporate citizens, responsible, safe operations are the forefront of our decision making. As previously reported, we very sadly had a fatality at Doropo exploration site, where a drilling contractor was attacked by a swarm of bees. We're continually reviewing and developing our safety measures to ensure we provide a safe place of work for all our employees, contractors and stakeholders. Managing risk. We have strong working relations in the countries we operate at federal and local community level, and we're applying the same approach within West Africa as we continue to unlock value against our production and cost objectives. Asset quality. Again open pit, the open pit is the foundation of the operations with a greater than 15-year life of mine. In 2019, forecast quarter-on-quarter growth is driven from the open pit as the grades improve with depth as Stage 4 drops down over the course of the year. The open pit. Stage 4 mining will continue to deliver the quarter-on-quarter growth. We mined 3.1 million tonnes at 0.73 grams per tonne and, importantly, 2.9 million tonnes at 0.83 grams per tonne was delivered to the mill. We've had strong initiatives at further workplace training, integrating the mine planning, optimizing programs, et cetera, have seen improvements in the mining sequence. Mine grades expect to continue to improve throughout H1 and towards the reserve grade as we progress into the Hapi Zone in the second half of the year. Okay, Sukari underground. You can see in this slide here, the areas of operation. You've got the Amun area on the right-hand side. You've got Ptah in the middle of the screen and then you got Cleopatra development on the left-hand side. It's important to note that the challenges we faced in the underground throughout 2018 are isolated to the southern section of Amun and are not across the entire underground operation. Okay. Underground. Total production from the underground was 270 million tonnes -- 270,000 tonnes at a grade of 6.34. Production from stoping, importantly, was 168,000 tonnes at a grade of 8.2 and ore from development was 102,000 tonnes at 3.27 grams per tonne. There was very good availability and utilization, including the operation and availability of 2 long-hole drill rigs. Over 2,000 meters of decline, ore drive and cross-cut development has been completed. And again, improving compliance to plan and integration of new processes and controls has been [ achieved and is ] brilliant seeing that increased stoping grade coming from the underground. Increased decline development in the lower Amun and Ptah areas is providing access to future production spaces going forward. And there'll be a 75:25 stoping development split due to an increased development classified as waste as we progressively climb down further for future expansion. Next slide here, you can see extensive infrastructure in place. The blue is existing infrastructure. And importantly, in 2019, we are doing increased decline development outside of the ore body to open up new production levels, which is partly relating to the increased waste movement. But more importantly, opening up and developing into the lower forest area, which is a future longer-term driver for the underground miner to carry. Processing, processing plant. The processing plant continues to perform well. Had record quarterly throughput at 3.25 million tonnes and a head grade delivered to the processing plant of 1.28 grams per tonne. We're targeting a mill throughput of 13 million tonnes for the year, an improved head grade, driven principally by the open pit as it drives down lower into Stage 4. Okay, now I'll hand over to Ross, who'll talk briefly on the financial flexibility.
Thanks, Andrew. Our robust financial strategy continues to deliver on its objectives. We finished the quarter with $332 million of cash and liquid assets. And with our disciplined capital allocation and cost management, this ensured that our bottom line results remained well-managed. The Sukari mine generated good cash flow during the first quarter. And net of EMRA profit share, investing activities, our West Africa spend and corporate G&A, we concluded the period with group free cash flow of $14 million. Talking about our cost management in a bit more detail, we are pleased with the Q1 cost performance and the fact that we were able to maintain and contain costs on an absolute basis. This was in spite of increased volumes mined and the inflationary pressures. We did have some benefits of volume variances in both fuel and reagent consumptions against budget and also benefited from the build in stockpile, but our focus on overall cost control is pleasing, and the team has done a good job in this area. The work is obviously ongoing and we are targeting further improvements during the year to reduce our cost base. Mine production cost of $89 million during the quarter was split across the primary areas, 49% processing, 36% open pit and 7% underground, respectively. Important to highlight is the cost per tonne profile against previous quarters, which remains well managed and, again, a pleasing quarterly profile. Our cost base exposure remained relatively consistent in terms of potential to [ split ] across the cost bases. One key risk remains that diesel fuel price, which contributes a large portion of our cost base and, pricing-wise, is out of our control. The solar project continues to be progressed as [ a whole investigation of ] exposure into the future. A final project feasibility study is to be submitted to the Board in H2 for capital approval. The focus on the whole procure-to-pay cycle is delivering results. And the progress on the key initiatives against ore [ cost ] and availability of items, local content and cost reduction initiatives is pleasing, and we continue to drive this process. In terms of CapEx, our spend mainly relates to the underground resource and infrastructure expansion including the fleet rebuild. We continue to match the CapEx spend with [ faulty ] production profile in order to match cash flows and, overall, our CapEx remains well controlled and on track. Our shareholder returns remains our core focus with the minimum of 30% free cash flow being returned to shareholders as per policy. We are proud of the fact that we are sector leaders and the fact that we have had 5 years of consecutive payoffs totaling $453 million, which is excess of 75% of free cash flow. With $332 million of cash and liquid assets on the balance sheet prior to the $34 million 2018 final dividend payoff, which is due to be distributed in May, we are constantly reviewing the cash position and our ongoing funding requirements. We are actively assessing the various alternatives available in light of responsible [indiscernible] and cash flow allocation and maximizing the shareholder returns. With that, I'll hand it back to Andrew.
Okay. The active exploration pipeline. We have an organic internal growth pipeline. We've got the Sukari exploration and development, the Sukari underground, the Cleopatra decline, the regional exploration and, importantly, the 2D, 3D seismic programs which are underway, which will unlock a complete geological architecture of the tenement area at Sukari and highlight, potentially, other areas outside of what we currently know. We've got Doropo advanced exploration, the Doropo resource area outside of that Doropo regional area and then the earlier stage, the ABC greenfield exploration and the Kona Permit exploration. Unlocking Sukari's underground potential. Continuous results, as expected, supporting further resource and reserve replacement and also growth. I'm not going to go through all these results but you can see some of the Q1 results are similar to what we've seen previously, including like Osirus, 3.2 meters at 13.6 grams per tonne, 1.8 meters at 25.9. You've got Horus Deeps, which is below the existing production areas. You've got 1.6 meters at 5.7. You've got 1.3 meters at 14.6 grams per tonne. You've got 1.8 meters at 10.3 grams per tonne. You've got 1 meter at 68.4. All highlighting and showing further growth below the existing underground areas. Ptah Deeps is continuing to return a series of successful results. And in Cleopatra, drilling as well as the earlier stage, but it's now, with the drilling that's been done, it's starting to deliver medium-term results as well. Okay. The Horus Deeps, I touched on that briefly. Early-stage but very, very exciting results, again, showing further longer-term growth to Sukari underground outside of our existing resources and reserves at the operation. Cleopatra, I'm finally happy with the progress that has been made on both the development and the exploration at Cleopatra in Q2. We've had over 2,000 meters of decline development. And we've had over 3,000 meters of drilling completed. So we're really -- with the decline development that's being done and the drill results, we're going to be able to provide a lot more information over the coming quarters on the results coming out from the Cleopatra area of the operation. Again, Sukari Deeps, the regional upside, I won't go into the detail of it again. The seismic program to construct a robust district 3D geo-seismic architecture, that program is underway. And again, over the course of the year, we're going to be able to provide you with more details, more results from what should be a very successful exploration-driven program for the future. Advanced exploration at Doropo, drilling in Q1 has demonstrated significant potential for further near-term resource growth, and this drilling is important to align with the CEA studies that will be coming out in the second half of the year for the Doropo Project. Again, Doropo, [ insteps ] have included, over the quarter, 9 meters at 2.4 grams per tonne, 10 meters at 3.3 grams per tonne, 16 meters at 1.9 grams per tonne, all within the existing resource area in that the 7-kilometer radius for the current over 2.1 million-ounce indicated results for Doropo. Greenfield exploration, ABC, much earlier stage, but again, drilling is -- drilling -- early-stage drilling in Q1 has also returned encouraging results, 2.9 -- 3 meters at 2.9 grams per tonne, 3 meters at 2.4 grams per tonne, 9 meters at 1.2, 13 meters at 0.8 grams per tonne. Importantly, all new surface in oxide material. Then moving on, corporate and social responsibility. We take our operating seriously and continue to make good progress on our key initiatives. Good health and well-being, access to water and sanitation, education, clean energy and economic growth in the local areas. Sustainable development goals. 94% of our group workforce is locally employed. 22% of the workforce, excluding Egypt, are female. And 58% of our supplies, to Sukari our Egyptian suppliers. Investment case. In summary, our investment case is robust, underpinned by strong fundamentals. We have a clear corporate strategy, a reliable dividend stream, established foundation, robust financial strategy, growth through the value chain and responsible corporate citizens. Our near-term milestones: delivering on performance; continuing to optimize performance at Sukari, including stringent cost management; unlock value from our organic growth pipeline; and strive to achieve the highest standards of corporate governance. With that, thank you for your time. We'd like to now hand back to the operator to reiterate how you can submit any questions you might have from the conference call or webcast. Thank you.
[Operator Instructions] So our first question today comes from James Bell of RBC Capital Markets.
Just 2 quick questions. Firstly, Ross, just on the cost front. Can you remind us what inflation expectations you've got baked into your guidance are and how that kind of compares to what you were seeing in Q1? And on the fuel and reagent consumption being below budget. Can we -- will we see that sort of catch up through 2019? And then the second question is on the 3-year outlook which you've committed to in Q2. Any more information on sort of timing? And secondly, just with that, a quick production and cost profile?
Okay. I'll just quickly jump in, James. First, on the 3-year outlook. We just had Jeremy Langford join us as Chief Operating Officer. And the import thing for myself, Jeremy can get in there, understand and really get familiar with the operation, which I do not expect will take very much time for Jeremy. And I would like to think we will have the 3-year outlook out by mid-Q2 at the very latest.
James, in terms of the ore cost question, there's a [ 3% to 7% ] increase in terms of inflationary that we've built in there. We're actually doing very well against those metrics in the first quarter. So we are pleased with our results, but we also don't want to jump the gun in terms of resetting the bar. So we're continually managing that, but we're quietly confident that we're going to able to reduce that cost profile down further. And it's really going across that local cost base where we're seeing the inflationary pressures coming through in terms of our local supply chain, and that's one of the key initiatives that we're trying to push in terms of cost reduction strategy or initiative.
Okay. Just maybe what's the local inflation running at versus that -- in Q1 versus that [ 3% to 7% ]?
It's probably about 12% that we're seeing through. The primary position is the local fuel, so that the fuel and the subsidized price on the street that we're not held to for, for the mine. But all our service providers and transport costs are flowing that through the supply chain that we see. So early days and it's hard to measure just on an isolated quarter. So we'll see how that unfolds as it goes forward. And then the fuel we had in terms of volume. We don't expect that to -- in terms of catch-up, we don't -- so the gains that we've seen in first quarter, we certainly don't want to give those back going forward, so that's not a catch-up type position, but we're actively monitoring it. And the fuel burn rate was a very important consideration in our budget, where we'd increase our volumes of actual [ seasonal ] fuel that would be [indiscernible], yes, or [indiscernible].
Okay. That's great. And just a quick one on Cleopatra, it sounds like we're going to be getting quite a few drilling results this year. In terms of moving towards a resource or considering how this might come into the mine plan, is that something we should think about in 2020? Or is that something you think we could get a bit of an update on it this year?
The intention is that the drilling -- the development and the drilling that we completed in Q1, and the drilling is continuing today, we're going to be able to provide a lot more detail and information on Cleopatra over the course of this coming year.
The next question on the line comes from Alan Spence from Jefferies.
I've got 2 questions. Firstly on the underground. You noted in Q1 that it beat your internal expectations. Is there a risk we see a weaker contribution from that in the second quarter? Or should that be kind of the new base we think about moving forward for the rest of 2019? And then secondly, more broadly on the group production level. Can you help us frame the type of quarter-on-quarter pickup we should be thinking about? If I was to simply take the midpoint of the 2019 production guidance and integrate the 45/55 assumed split, so it actually implied Q2 is down around 111 ounces. What do you think is the potential increase quarter-on-quarter you could achieve?
Okay. Look, without going into detail of quarter by quarter, we've said the production profile would be a 45/55 guidance production profile for gold production. We have had a strong -- Q1 came in slightly better than what was originally forecast, and we expect that trend to continue through. I'm expecting Q2 to be slightly stronger and then Q3 -- and growing through Q3 and Q4. As I said, we're going to be coming out -- later on, we'll be coming out with an update on production profiles for 2020 and 2021. So we're going to be able to provide more information on the medium-term guidance, production and costs plus the carry.
Okay. That's helpful. And on -- can you address the question about underground performance problems?
The underground -- look, the important thing with the underground has been operational controls and compliance to plan. Look, we had the issues with the cascading stopes in part of Amun. Now look, cascading stopes are still there, they're still in place, but it's management of those particular stopes. And my expectation and what I'm expecting from the team in site is that the improvements we've seen, we'll continue to see those improvements. And the underground will be back performing the way as people expect the underground to have performed previously. It's really adherence to plan and following that plan. And with the key personnel that we have at Sukari, the underground manager, the planning engineer -- medium-term planning engineer, the operations director, there is a very, very strong focus on ensuring the plan is followed. And managing -- where there is dilution, that dilution is managed.
Our next question on the line comes from Michael Stoner of Berenberg.
If I could quickly start on the plant. So you've pretty consistently delivered improving volumes at the plant. Is 95% kind of a sensible utilization rate to expect going forwards? Could we see maybe utilization hold, but you can debottleneck a little further and drive throughputs? Or kind of is the focus broadly keeping it here and kind of running the mining side of the operation harder to deliver better grades?
Michael, it's running the mining side of the operation harder to ensure we can maximize the grade that is delivered to that processing plant. I mean the processing plant doing around 13 million tonnes per annum. I mean the initial plants were basically 5 and 6 million tonnes per annum type plants. We're well and truly above the nameplate capacity. It's all about consistency for you there. And then, the operations of maximizing the grade that can be delivered to that processing plant.
Okay. So is the focus of the plant going forward now really just driving recoveries to the kind of best of your ability rather than any more volume increases?
Yes. That is correct.
Okay. And then on the undergrounds. Just to get a feel for -- I mean, you've talked about mining to plan or stricter compliance. But how much of the improvements -- or how much of kind of this quarter, next quarter is it going to be moving away from cascade stopes or them becoming a lower part of the mix underground? And how much is it dilution focus from the cascading stopes, if that makes any sense?
Look, the cascading stopes are in 1 part of Amun. They weren't across the entire underground. Amun has obviously been the main production area, but the cascading stopes, they were only about 40% of the production from the Amun area. And obviously, some of those had the higher grades, it's managing those plants. Ptah has no issues with cascading stopes. And the other stopes in Amun also didn't have the issues with cascading stopes. It is really strict compliance to the plan and following the plan. We haven't moved away into different areas for mining. We have continued to mine in the same areas, but we've just done it better and we've complied, and we've stuck to the plan that has been in place.
Okay. Perfect. And is there any transition away from any of those areas through this year? Does it become a lower part of the mix and kind of effectively derisk dilution? Or it's kind of going to stay around here?
Look, in some of these areas, it's a round-trip period of time. It's around for another 12 to 18 months. You can't just move away from an area. But importantly, as you would have seen with the decline development going further on, we can look at different stoping methods. But also importantly, in the second half of the year, the fill plant becoming operational. And we should really expect to see benefits from that fill plant late in Q4 and more so coming into the following year.
Okay. Perfect. And one for more Ross. So the appointment on supply chain management. Do you think there's kind of material improvements you can make to process and potentially costings there? Or is it already a pretty efficient system?
We've made good progress on that. But I am confident that the appointment that there's some big numbers that are -- we saw working through with contracts and the supply chain that I think we can pull that down further.
And then, Andrew, do any of the appointments, I mean, particularly Jeremy, point to -- or do they create or kind of point to any change in strategy? Does it make a West African development kind of ever more likely, subject to the economics coming through well?
Look, Jeremy, as well as being a good plant builder, which everyone gives him a lot of credit for, Jeremy is also a very good operator as well both in an open pit and an underground environment. So Jeremy's adding strength to the executive team with Ross and myself.
[Operator Instructions] We have no further questions on the line. So I'll hand back to the speaker.
Okay. Great. Thank you very much for joining us today on this webcast and call. If you do have any further questions please feel free to contact us. Thank you very much.