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Ladies and gentlemen, hello, and welcome to the Centamin Q1 2020 Results Call. My name is Maxine, and I'll be coordinating the call today. [Operator Instructions] I will now hand you over to your host, Martin Horgan, CEO, to begin. Martin, please go ahead when you're ready.
Thank you very much. Well, good morning, everybody. I hope everybody is well, and thank you for taking the time to dial-in and listen to this first quarter update results from Centamin. As mentioned, I'm Martin Horgan, CEO of Centamin. I'm joined on the line today by my colleagues, Ross Jerrard, our CFO; and Alexandra Carse, who's Head of Corporate Communications. And this morning, as you note, we published our first quarter results. I think as you may recall me saying of the last quarter at the Capital Markets Day before that back in December, what we really aim to do at Centamin go forward is to map out what we believe are robust high-quality plans and then consistently delivering to them. I think that today's results are the first step along that path. I think the first quarter was another excellent operating performance from the team. I think it marked a really good start to 2021. On production, we produced 104,000 ounces, which was in line with plan. And operationally, our focus remains on improving mining flexibility and delivering improved operating efficiencies and productivities. We continue to make good progress across all areas of the operation. In terms of COVID, I'm pleased to report that we have still not experienced any material disruptions from COVID to production sales or our supply chain. Obviously, it remains an evolving risk and one that we take very seriously. We've got strict health and safety measures in place, and we expect to keep them in place for the foreseeable future. We're carefully monitoring staffing levels, rostering and fatigue management. It remains a key focus for us. especially given the light of ongoing international travel restrictions from certain jurisdictions. From a financial perspective, the performance is strong as well. Total cash costs of $733 per ounce and all-in sustaining cost of $1,091 per ounce sold. Total revenue generation of USD 190 million, which led to free cash flow generation of USD 9 million, which is up to $37 million of Capital and $27 million distributed in profit share and royalties to our local Egyptian partner, EMRA. That note, we finished the quarter with $331 million of cash and liquid assets and no debt and no hedging on the balance sheet. As we look forward to the balance of the year, guidance remains unchanged, and we can provide a little more granularity today. Production remains between 400,000 to 430,000 ounces for the year, and that's split approximately between the first and second half of the year. Marginally in favor of the second half. Now so the second quarter production is expected to be in the range of 95,000 to 100,000 ounces. Cash costs for the year remain in the range of $800 to $900 per ounce and all-in sustaining cost of $1,150 to $1,250 per ounce. CapEx remains unchanged at $225 million for the year, with the spend weighted towards the second half of the year, approximately 45%, 55% split between the first and second half of the year. And that's driven really by the project time line such as solar and [indiscernible] plants, which will really kick off second half of the year. We continue to have discussions with the government with respect to the Egyptian bid round. The West African review is close to completion, and the planning with regards to Phase 2 is progressing well. After a challenging 2020, I'm very much looking forward to 2021 and beyond, as we continue to unlock the full potential of Centamin on behalf of all of our stakeholders. And with that, I'd like to hand back to the operator and open for any questions. Thank you.
[Operator Instructions] Our first question comes from Alan Spence from Jefferies.
Two questions from my side. So I'll just take them one at a time. The first one, Martin, the strip ratio in the open pit was relatively low compared to the kind of the full year number you provided us. But should we be thinking that kind of that number from the 5% just accelerate into the coming quarters, so we average out? Or can you give us a bit of a sense of how that will move.
Yes. Sure, Alan. Look, I think on the strip, I think a couple of things to consider around that. So that strip ratio is adjusted for the reallocation of waste terms below grade as well. So that does have the impact of visually to lowering that strip ratio from a terms basis. What we found in Stage 5 North and in other areas of the pit is that as we grade control certain areas that we defined as waste, we are actually picking up grades -- zones of low-grade [indiscernible] They can then -- they're not -- they're above the stockpiling grade, they go straight to [ run ], but if not they're placed on stockpile. So of course, as you can imagine, that reduces waste and increases all tonnes, and it has a sort of double impact on the strip ratio. So that number that you see there published today does account for that reallocation of these waste tonnes to low-grade tonnes as well. I think from a compliance, if you like, volumetric perspective, we're exactly where we want to be. It was of our own fleet for the quarter. So we've moved the volume, if you like, from the locations that we planned to. So I think if you take away the variance or the grade control reallocation of the low grade -- waste to low grade, that's closer to 8. And importantly, for us as well, Capital has made an excellent start to their life [indiscernible] and the waste stripping contract as well. So they mobilized early and have got moving early. And in fact, they're slightly ahead of the curve as well. So I think as we look at the balance of the year, clearly, as Capital come on stream, continue to sort of ramp up from this great start that they've had, we will obviously -- second half waiting to the stripping as that continues. But certainly, in terms of our plans from our own fleet, we had record productivity out of our own fleet this first quarter. And Capital ramping up. We're certainly where we want to be, and in fact, slightly ahead of where we thought we would be at this stage because of Capital really start as well. So yes, it will increase over the course of the year, but we're certainly not behind where we thought we'd be. In fact, we're slightly ahead of where we we've been in this first quarter. So I'm really, really pleased with both our own performance, but also Capital as well it's gone up.
Okay. So if the grade and kind of the waste ends up being a little bit better as you continue to expect, maybe visually, we end up below 8%, but a material move is in line with expectations. Is that kind of a simple conclusion to what you said?
Yes, that's right. So look, when we look at sort of the strip ratio and monitoring that from a pit compliance perspective, we look at it volumetrically, we've got to move a certain amount of dirt from a certain area. Have we moved that volumetrically? Yes. And then within that sort of volume, is it waste more than was planned? Or we'll be seeing more raw above cutoff and less waste because of that reallocation. So we look at it both ways. Volumetrically, we're in compliance And then it's the auto ratio that's slightly changed because of this reallocation. But yes, we're where we need to be. It's not something -- as you can imagine, it's a key focus for us, and it's something we're watching quite carefully. So no, that's very happy with where that's going at the moment.
Okay. Great. And then Ross, one for you. Costs were really good, especially if we consider kind of the run rating at production of your guidance, the cost well below the lower end. I did note there was a comment about kind of a benefit from movement in inventory. Can you perhaps quantify that if you have that available?
Alan Yes, I don't have the exact numbers in front of me. But certainly, from a cost and a per ounce perspective, we've come in nicely and on track in terms of where we sit. I would caution from a working Capital perspective, we have had a slightly increased sort of investment into working Capital as a number of these programs have sort of rolled out. I guess a lot of it's in terms of timing in terms of what was budgeted and what is actually hit in the first quarter in terms of how that comes through. So some of the lightweight truck trades, for example, we put in the order. We've actually invested in that earlier in terms of how that's come out. But a consequence of sort of unit costs have helped that ounces per the absolute cost type number have certainly benefited and we're on track, but it's that working Capital that we've got to watch and monitor as we go forward and make sure that that's released as planned.
Okay. I appreciate you don't have the exact numbers in front of you, but I mean is it fair to assume that the majority of the -- let's call it, out-performance just relative to full year guidance. But the majority of that was just kind of underlying performance rather than one-offs?
Yes. Yes. So in terms of the -- yes, in terms of absolute costs, we're hitting those metrics in terms of our operating efficiencies and underlying performance There's no one-off thing that I can highlight to say, well, we're over or down at that particular operating cost element. And then from a CapEx perspective, we are behind in terms of our CapEx spend versus budget, but that's really around the profile of some of the projects that they actually delivered.
Our next question comes from Kevin Kerdoudi from Bank of America.
So you said that like you mined in Q1, Stage 5 north of the open pit. And you ended up with more low grade than -- more low-grade ore than expected. How much confident are you with the information that you have from this part of the open pit? Because I believe that this is a part of the open pit that drove the production downgrade 2 years ago or so. Am I right?
Kevin. Look, obviously, I was in Senegal 2 years ago, so I should let -- I should probably Alex and Ross on that. Look, what I can talk to, though, of course, is one of the things that we've identified, Kevin, is that certain areas of the pit we have less drilling than we would like, obviously, the more drilling, the better. And what we do, of course, is that we infill those areas ahead of production as well. So that is a function of the topography when the orebody was first drilled and sort of led to difficult drill platforms from tricky to rain. So when we look at that, we do know there are certain areas that we need to sort of -- we will drill off on grade control before we get into it. And the Stage 5 North is one of those areas. I guess what we're seeing is the general buyers on the upside where we're finding more low-grade zones. So areas that weren't captured in the drilling refining that sort of the bias is the upside that go down to and get more ounces than planned. But what we're seeing is that the areas that were sort of drilled off are performing relatively well. So that is really a focus of the sort of geological review that we're doing. And we flagged a number of times now with just sort of the reinterpretation there of making sure that we can better sort of plan in terms of the geology for underlying mine planning. But as I say, we've had this, if you like, sort of persistent bias with the low-grade material in there as well. So look, I think that we recognize that Stage 5 North is just generally a low-grade area than say, Stage 4 West and Stage 4 East at this stage. But actually, in terms of our reconciliation where we are, it's performing in line with expectations, as I say with the slight upside to the bias around the lower grade material being more of it than we thought. I can't comment on the situation a couple of years ago, whether that was part of the driver for that point. But certainly, We're comfortable with our plans for Stage 5 at this stage. We -- and I don't think we there's any over concerns around the grade at this point as we move through that area of the pit.
[Operator Instructions] Our next question comes from Tim Huff from Peel Hunt.
Yes, I just had 2 follow-up questions. Just regarding a couple of statements that you made. The first one, obviously, you've talked about the stripping being ahead of schedule, which is great news. But I was just wondering if that's just because Capital started early or even since they started a bit on the early side, have you guys made any additional gains in the stripping, in the rate of stripping itself?
Yes. Well, absolutely, Tim. So that was one of the questions the Board posed. So they always like to make sure management don't get ahead of ourselves. So the question was, "Oh, you just got more trucks on site. " So well, yes, we have got more trucks on site. So in part, absolutely, we said for the first quarter budget, we set a record material movement target for the operation. Now we split that down, part of that is due to Capital. So Capital have gone on site, ahead of schedule got moving. Our teams are working very well together, and they're working -- they're doing an excellent sort of staff to their life the waste stripping. So delighted with how that's going. And they are ahead of where they thought they would be, both in terms of mobilization and dirt moved. So certainly, some of the out-performance is around Capital. But I'm also really pleased with the -- we've been looking very carefully at productivity for our own fleets and actually within our own operations, non-Capital. We've also hit a record number of tonnes moved for the quarter. So in terms of the number of issues we looked at, we looked at fragmentation, and we've looked at sort of how we're blasting and controlling that better. And with better fragmentation, it means we're getting better productivity out of the shovels, better productivity out of the fleet. And actually, that's been a big contribution to record movie. So actually, within that overall sort of out-performance for the first -- or record movement for the first quarter, Yes, in part, Capital, but with our own fleet as well, we've actually sort of had a record with their own fleet. So really delighted with how that's going. And again, part of this sort of I was going to say marginal gains, but given what's happened to sky cycling recently with all the medical things. I don't think I'll move away from the March or gets analogies to day frail. probably not the best one to you in this context. But in terms of those sort of -- we've talked about those marginal gains in there. This is one of the examples where a focus on fragmentation that's led to better digging, better productivity from our own fleet and that record material movement in the first quarter as well. So it's a bit of both. But yes, both sets of teams are going well. And the GM at sites actually sort of warned the our guy. He said, "look, Capital outperformed you. I'm going to bring Capital into all the open pit work boys". So the pressure is on that. So there's a bit of healthy sort of fun competition we see the Capital boys versus our own fleet to see how they can get on against each other.
That's good to hear, actually. Okay. Well, that's fantastic. And then the only other question I had was one on the underground. You also noted in the release that you're dealing with the contractors with the reduced staffing levels underground. And I was just wondering, I don't know if you could give us a little bit of color around how significant the reduced staffing is. And if there are, I guess, what are the challenges? I mean, besides the obvious one, are there specific challenges that you were just dealing with during the quarter? Or do you expect to be ongoing throughout the whole of 2021?
Yes, sure. So look, we clearly under COVID have been working closely with all our contractors and certainly, obviously, Barminco from the underground side. And as you can appreciate, sort of Australia and New Zealand has a pretty strict quarantine requirements of travel and 2 weeks in isolation on the way back and so on. So look, we've been working quite carefully with Barminco to make sure that we can sort of meet -- or they can meet their staffing quota requirements and therefore, allow us to sort of lead our production targets. So this is something we've been at for the last year at coordinating with them. And over the first quarter, obviously, we've got our COVID sort of PCR monitoring, the screening program in place before people get to site as well. So really just -- it's something that we've proactively been managing for the last year. During the first quarter, we had a little bit of a blip. There was a -- we had a few less problems on seats than we would have ideally liked. That led to a little bit of reduction in tonnes for the first quarter on the underground. We were able to -- we talk a lot about operational flexibility, and I'm really pleased that we've been introducing that over the last year and recognizing where we were with Barminco. We actually sort of also [ altered ] the sequencing slightly that allows us to basically work our way to the first quarter without any disruption. And then we're working closely with Barminco now for, if you like, a catch-up plan for the balance of the 3 quarters to basically make up that little bit of a shortfall in the first quarter on that as well. And so that includes sort of staffing up from Barminco and rolling out there as well. So look, I think it's business as usual, I would say, in the sort of COVID context. This is -- the situation is there. We've worked closely. We've managed it. We've got ahead of ourselves in terms of being able to deal with it, and we've got a continuing plan to the balance of 2021. So to me, it demonstrates some flexibility and operational redundancy in the mine planning and our operations, flexibility around sort of working with our contractors and that partnership approach to making sure we know where we need to be as well. So just an everyday issue with -- in a sort of a coexisting with COVID world and navigated well by ourselves and Barminco going forward. So yes, as we mentioned, something that we look closely at all the time and make sure that we can navigate it.
That's great. Yes. I was just trying to identify whether it was external logistics, which it is or whether there were specific underground issues, which it doesn't...
No, no, but I think the technical [ expression ] is b*** on seats with the -- and my conversation with the CEO of Barminco. He said, I'm looking and chatting. It's not a -- that's not an SGM issue, a Sukari issue. I think that's -- anyone that uses Australian and Kiwi expats now. It's a challenge to just -- those travel logistics in and out there and so on and so forth.
Our next question comes from Raj Ray from BMO Capital Markets.
Just a quick follow-up question on the underground. So it was good to see the grades go up during the quarter. What should we expect in terms of the underground grade volatility for the remaining 3 quarters in 2021?
Raj, congratulations, by the way, as well. I've not spoken to you soon. So congratulations on the news. I think as flagged sort of the guidance last year. Look, for the year, the forecast is still just a shade on before, so about 3.9 to 4 grams for the balance of the year basically. That's our base case. Look, as we mentioned in the 2020 results as well is that, obviously, we're looking to target near mineralization to existing infrastructure. And that work is going well as well. So base case is at 3.9% to 4%. But where we can identify near-term available better grade material from that new resource drilling campaign that we can always potentially try and follow that in there. But I think it's safe to assume that 3.9 to 4 grams is the target for the year.
And for Q1, that 5.84 , is that -- as per mine plan or was it above -- better than you had expected in the quarter?
We had a couple of high-grade stopes in the plan for the quarter and higher-grade stopes come in sometimes certainly at Sukari, high grades coming higher. So we find that sort of a nugget effect in some of these areas as well. So they were in there for this past schedule, and they came in with a nice surprise to the upside. But that tends to happen with the way you've got a higher grade and stope from time to time, it does come in higher than planned as well. We don't get affected on how that goes right as well. But that was scheduled.
Yes. Okay. Okay. And then just wanted to get a sense of what to expect for the upcoming exploration strategic review and also you can provide any visibility on the new concessions that Sukari that you got post the auction?
Sure, sure. So look, within the current element, as that continues to go well, I think as we flagged the 2020 results day. Look, the underground exploration program continues to go well. Look, I think that's a focus on sort of targets close to existing infrastructure as well as the longer-term depth extensions. And that's starting to bear some real sort of falls as well as we highlighted back on last month. Concession wide on the surface, that -- sorry, in pit, the up work continues to fill in some of those areas where we think this got upside with an existing pit shell. And then obviously, on the concession wide area that work rolls on as well. So I think we flagged that last month, and that continues to progress. In terms of the broader bid round, yes, still in discussion with government. looking to try and finalize the last few terms around how we take that forward. Look, we've made some good progress through March and into April and yet we continue to push on with that as well. So hopefully, we can get that button down. I think we're ready to go from our side in terms of the field program, staffing and also funding for that. So we're just looking really to try and get that finalized with government, get those signed up and then sort of get moving to that as well. So yes, look, it's I think we're all impatient to get moving with it, but obviously got to get these things right because obviously, these are long-term agreements. And if we are successful, we want to make sure that we have everything mapped out in the event that we successful in finding satellite to the new stand-alone operations as well. So yes, so it's still progressing and sort of ever-decreasing circle as they say.
We have a question registered by Tyler Broda from RBC.
I was trying to get out of the -- I had questions -- were asked by Tim and then Raj. So yes, all good from my side.
[Operator Instructions] We have no further questions if you'd like to continue.
Thank you very much. Well, look, thank you, everybody, for taking the time to dial in. I appreciate it's a busy day with a few companies reporting. So I appreciate your time, won't take anymore than that. And look, any further questions or comments, please feel free to get in touch with us and myself and obviously, Alex is available. And look, we're looking forward to getting out of strategic review of the West African work probably into May now. We'll be able to update the market, looking forward to that. And then obviously, we've got our [ wider ] asset Phase 2 and the exploration update as well later this year as well. So thank you, everybody. Stay safe. Have a good day. I look forward to talking to you all soon. Thank you very much.
Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.