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Hello, and welcome to the Centamin Q1 2022 Results Conference Call. My name is Emily, and I'll be coordinating the call today. [Operator Instructions] I'll now hand the call over to our host, Martin Horgan, CEO of Centamin. Please go ahead, Martin.
Thank you, Emily. Good morning, everybody. As mentioned, Martin Horgan, CEO. And I'm joined today by my colleagues, Ross Jerrard, CFO; and Michael Stoner, Head of Corporate -- Manager for us here at Centamin. As mentioned, this is our first quarter quarterly report. And I think the feeling is that it's a good quarter, very busy, lots of activity undertaken, but delighted with the execution of the plans we put in place. I think starting at safety, another good quarter with 0 LTIs reported. And obviously, remains an ongoing focus right our across operations from Sukari to exploration across in West Africa as well. I think the big thematic piece of the quarter was around the underground transition at Sukari as we've moved from the contract mining to owner operated. Obviously, a pretty significant change in the operation for us. Lots of planning went into the transition phase by the team, and lots of elements to that work, staff transfer, purchase of equipment and stock and spares from the contractor, inventory cataloging and maintenance of those and then re-commissioning and ramping up under our own steam as an owner-operator in the underground. But delighted to say that that process was executed without a hitch for that first period. And delighted now that as we've gone into March and heading into April, really building up a nice bit of momentum in the ground there as well. Naturally with that transition in the underground, the first quarter in terms of its gold production output was guided to be lower as we accounted for the transition phase. But I think with that successfully completed now, delighted to be able to reconfirm guidance for full year both in terms of costs, and importantly, production ounces as well. So a really good start to the year, and looking forward to building that momentum now as Q2 and Q3 has really been in the underground in terms of its productivity gains and cost savings and really start to take control of that as we expand the business going forward. I think away from -- the underground performed well, in line with where we expected. The waste contractor continues to perform well, Capital Group. And in terms of the processing plant, again, production in line with plan, and there the team performed well across the processing plant. Some interesting work being done there now with some optimization studies. Our new GM is in metallics by background and he's really sort of got his feet on the desk there. And some interesting work around gravity recovery of gold that will continue to progress through the year, and look to bring you updates on the second half of the year as we do that work as well. And more broadly, on the larger projects, it was a big quarter in terms of expenditure and good progress made across all of our major projects. TSF2 largely completed now. The paste fill plants well underway and progressing well. And of course, the vitally important solar project has progressed well over that first quarter as we get ready for commissioning in the second half of the year. Away from the project side, exploration and growth plans continue to be a focus. And again, still excellent progress being made. In terms of the main Sukari ore body, the work there continues to give positive results. Obviously, our depths extension as we continue to push down into Horus and Osiris and Top of Horus, but also those existing areas in Ptah and Amun continue to give us good encouragement. And of course, the bonanza-grade zones remain a real focus for the expert, for the MRM team, and with the idea of bringing those into resource category as quickly as possible and then looking to schedule those into the production profile as well. So good progress made on the main ore body. I think excitingly, we've got some of the work done around the surface work within the concession area. We did flag a 10,000-meter program testing newly identified drill targets last year. That program was completed during the first quarter, and we're getting the partial assay in right now. I'm delighted with some of the results that we're seeing there. It really starts to underpin and really sort of confirm our belief in our strategy to develop smaller satellite pits across the main concession area that will give us additional operational flexibility away from the main pit, and of course, provide additional ounces, both in terms of either annual production or extension of mine life as well. Airborne survey started -- largely complete, actually. The team made excellent work after their initial setup and commissioning work. And we should have that survey finished this month. And then, of course, through May and into June, we'll be processing that data and looking at where that comes out as well. But delighted how that work has gone. That's the first for Sukari and in fact a first for Egypt as well. So the team has done an excellent work to get that done. And across in West Africa, the Doropo project moves forward as planned. Drilling largely complete now to support the PFS. Some minor geotech and some metallurgical work to be done. But substantially, the main infill drilling has been done. So delighted with the progress there. We've got a few extra meters left in the tin and the team have identified a few areas where we believe there could be extensions to existing ore bodies within the main cluster of Doropo. And the team is going to use the balance of this dry season and those additional drill meters to start looking to see if we can get some gains around the Doropo project as well. Some excellent work done there. So I think some really good work across the sort of the growth projects in Sukari and the concession and West Africa as well. Just to note on the EDX, so far -- our new permits across the desert. Team largely in place now. Pretty much all the recruitment done. Offices organized, accommodation done, vehicles and just pending the final bit of paperwork within Egypt itself. And obviously, the ending of Ramadan by the end of the month. And I think the team will be into their program starting in the May to get moving on that usually exciting work across the Eastern Desert as well. So lots of updates on the exploration side and the growth side, and we'll look forward to giving you a follow-up date during the balance of this quarter as we outline our sort of latest findings and implications for the company and our growth plans as well. We remain watchful of cost across the quarter. I think inflation is obviously a headline topic for everybody, and we remain on a watching brief. I think delighted so far that the prudent approach we took to guidance back in December and on our cost base is that we sort of maintain our ability to reach that guidance. Obviously, continue to watch cost inputs, also the supply chains as well as ensuring that we have sufficient inventory levels to the continuing operations as well. The counterbalance of that, obviously, our [indiscernible] cost savings in Egypt continues, and we look to -- basically look to try and offset some of the inflationary pressure headwinds with the ability to take cost out of the business on an ongoing basis as well. So I think a very good quarter for the business. I think right where we thought we would be. So great ability to execute the plans by the teams across their various areas, and they're setting it very nicely for the balance of the year as we head into some really good momentum into Q2 and Q3 now. And I'll say delighted that we're maintaining after a very busy and potentially difficult quarter that was well navigated to maintain that annual guidance both in terms of cost and production as well. So that's a brief introduction. I'm happy now, Emily, to hand back to yourself for Q&A. And myself and Ross and the team delighted to take any questions we might have.
[Operator Instructions] Our first question today comes from Alan Spence from Jefferies.
Martin, just 2 for me. In terms of the underground owner-operator transition that was completed in the first quarter, how do you see that impacting the cost per tonne profile for the underground into the second quarter?
Yes. Look, I think what we're seeing now, of course, as we head into the second quarter is a couple of factors coming through. I think in terms of the actual sort of production as well, we've got the crews on board now. We've transitioned them into our own team, and we're really starting to see the team ramp up and hit what we believe should be the sort of the requisite levels of production both in terms of stoping tonnes and meters development as well. So we expect from a physical perspective to see the sort the volumes increase. That is also planned to coincide with some improvement in grades over the second and third quarters as we reach a better grade part of the ore body as planned as per the schedule, where we'll be religious in sticking to the schedule. We don't want to start robbing '23 or '24 in order to sort of help us through '22. We've decided that, obviously, as we've said in the past, that we want to sort of maintain our production discipline. But we are scheduled to hit some better grades through the underground in second and third quarters. So I think what we'll see is improved productivity in terms of tonnes and meters developed, and I think that will coincide with some better grades as well coming through. So I think on a cost per ounce basis, the underground will improve because of that fixed -- we should have a fixed -- a relatively fixed tonnage -- sorry, a relatively fixed dollar amount for the operation. But with increasing tonnes coming from the same dollars and increasing ounces coming from a combination of increased tonnes and better grades as well, we should see the underground performing quite nicely as we go through there. I would say that in terms of overall costs, we're still in that kind of ramp-up phase as we're bedding down the operations. We think about maintenance, supply chain around that side of life. The equipment itself is -- we bought it from Barminco. We think there's a couple of years of life in it left. We are looking at a fleet replacement strategy as part of the underground expansion in due course. So we're not dealing with the sort of the best, newest equipment there, but certainly we do believe we'll get some good benefits out of that as we go forward as well. I would say that I think as we flagged as part of the decision to move to underground sort of owner mining away from contractor, but the estimate that we have was an over a 5-year term we anticipated around about a $70 million saving between what the contractor would do versus what we could do as well. And it would be fair to say in the first year, it was relatively flat, and the majority of gains that we would make would come in the year sort of 2 to 5 effective from that as well. So I think on a total dollar basis, we expect it to be flat, but we expect on a unit tonne basis and a unit per ounce basis to see those improvements because of that increased volume and productivity. And it's next year that where we will start to see those benefits flowing through.
Okay. That's really helpful. And then my second one is just around the processing plant. There was a study launch looking at some potential improvements there. Is that something we'll get -- we'll hear more about at the updated life of mine review at the end of this year? Or is that going to be something that you'll be ready to share to the market before that?
Yes. So really, what we've looked at -- and there's a couple of things going on that the new GM has pushed on with. And I think there's some interesting sort of opportunities there. So first is around gravity recoverable gold, trying to understand the better distribution as we get these better grades from underground. And in fact, we're also seeing visible gold in the open pit in certain areas as well, obviously not as much as the underground, is that: "Are we capturing the full benefit of that? How do we sort of maximize our return on that as well?" So there's quite a bit of interesting work going on with -- around that. We just started to do some of the pilot plant trials -- sorry, some of the trials inside this processing plant, and looking at doing some pilot plant trials through the second half of the year. There's some contextual engineering studies as well. So I think there's a strong belief from what we've seen so far is that there is a good gravity gold element to the -- certainly the underground feed and we also think the open pit feed. We think the ability to take that out of the system early and then put the tail through to the usual processing route allowing the cyanide to work more effectively on a small amount of gold, we should see improvements there. I think the main challenge, Alan, is going to be around engineering. We have a lack of height in the processing plant, just the way it's been designed. And of course, on these gravity circuits, you do need to get the feed up there. So it's going to be a bit of engineering to get some steel work up to get the height within the system. I think that's probably the main -- it's not even a challenge really. It's just working at how we do that. But I think as we sort of progress those studies over the balance of the year -- we'll look at it in due course. And I think you should probably expect by the end of the year with that sort of operational review update that we plan to do probably in Q4. Then we'll have some further work on that basis as well. But certainly, the early work that we've done, the plant trials and the site lab work that we've done, we do think there's a good potential there for recovery gains from a gravity circuit to be implemented there as well. And look, these aren't big numbers from a CapEx perspective. As you know, these Nelson's aren't super expensive. I think it will be more around that steel to get sort of the circuit in place and get that height in place to be able to work from there as well. But I think it's pretty interesting. There's a couple of other things we're looking at. We're looking at sort of some of the steel pipe characterization around the sort of the oxygen uptake. We're also looking at some of the cyanide sort of technology as well. So there's a number of sort of these projects now that the GM is really starting to get his teeth into as well, which is great to see, because we think there's a -- I think we said repeatedly, there's a fair bit of, we believe, opportunity in the processing plant to improve that. And it's not quite free gold, but certainly at a 1% or 2% and get yourself towards that 90%, maybe even plus 90% recovery. That's a really nice bonus. And not any additional sort of operating cost from there as well. So we think it's some nice gains to be made there.
[Operator Instructions]
If there's no other questions...
[indiscernible]...
Sorry.
At this time, we have no further questions on the phone line. So I'll hand over to Michael to take any webcast questions.
Thank you. Okay. So to get us going, please, can you give us an update on the capital structure review and the potential to bring debt into the business?
Sure. No problem at all. And Ross, do you want me to take that one? Or do you want to take that one, Ross? You've been leading a lot of that work stream. I'm happy to if you want to take it, Ross.
Yes, Martin, I'm happy to take it. And if you want to add to it. So the process has been going well. We've been running the process with our advisers. And we've actually sent out requests to interested banks. And we've recently received those back and are continuing to assess them. So the work program that was initially scheduled to be finished by June, I think that's going to end up July, August time. But we're well on track, and it's been quite an active work stream that has been going well.
Thank you, Ross. Okay. Next question, just combining a few into one. So on the airborne survey, please can we get -- please, can we explain when we expect to share more information around this? And could we clarify the work that is near completion on the concession, when we hope to fly that more widely across the Eastern Desert Exploration ground?
Sure. No problem at all. So in terms of the airborne survey, obviously, this was the first one ever done in Egypt. So it's the introduction of a new technology. So there's all sorts of permitting and so on that we have to get through to get the equipment in and then sort of license. And then, of course, we have to marry the geophysical contractor to the airborne sort of contractors as well, the helicopter provider. So I think a lot of the work done second half of last year to get this done was that sort of contractual negotiation sort of partnership building between the sort of the 3 of us: ourselves as SGM and then the 2 other providers. And then actually the physical sort of getting everything in country, everything sort of lined up, connected and then test line and calibration. It's a new thing for Egypt as well. So a lot of the work done now, as I said -- well, it is all done and we've been sort of production flying for a good couple of weeks at this stage in terms of doing that work as well. So I think we should sort of be finished by the end of the month in terms of the -- certainly fly in the concession area. Then, of course, it's going to be a period where we look to do the geophysical interpretation of the various data sets that we've collected, cross-reference and collate those with the known sort of structural interpretations for soils and so on and mapping that we've done and really start to build that picture up as well. So I can imagine that the full sort of analysis of the concession area is going to be done through the second quarter and probably into the third quarter as well. The data that we get -- we receive in real time, effectively, it is slow and it all needs to be processed. But certainly as part of that sort of exploration or growth projects update that we'll do later this quarter, I think we'll certainly have some initial sort of feedback around the sort of the results from the Sukari concession as well. So certainly be able to potentially sort of share a little bit of a teaser around that first work that we see from there as well. I think -- just my own view is that -- look, I think this is really interesting from a Sukari SGM perspective. I think the real sort of benefit to Egypt, and more broadly Centamin, of course, is that by having done the hard work to get this system up and running in place in the first -- and that's the first sort of tick in the box. And then secondly, we've got a huge advantage over other groups in Egypt is that we're able to fly -- there's so much calibration flights over Sukari, understand how it reacts -- the ore body at the start of normalization reacts to these various data sets. And I think that's going to be hugely beneficial to the Eastern Desert Exploration activities as well. So I think pending the review of how things have gone in Q2 and then negotiations, discussions with the contractor is that I think there's a good opportunity that we could then start applying the same airborne technique to the balance of the EDX, sort of the Eastern Desert Exploration projects certainly through the second half of this year as well. Maybe not the full 3,000 square kilometers. That would be quite a large and expensive endeavor. But I think sort of already identified sub-blocks, where we believe we've got good prospectivity we could potentially start flying in those as early as the second half of this year as well. So I think a huge amount of work done -- I think successfully done so far. Data quality coming through is good. We'll be able to give a bit of an early look update as part of the Q2 update. And then obviously, as we balance through the second half of the year, we can continue to update as we process and understand the information. And as I say, I think we can certainly fly some sub-blocks at the EDX stuff over the second half of the year as well. So I think that probably answered -- that answers the sort of 3 parts, Michael, in terms of the sort of the question.
Absolutely. Thank you. So moving on to our project in Burkina Faso. There's a question here asking for an update on progress there and whether the project will be written off.
Okay. So look, from a pure process perspective, I think as we've highlighted on the last couple of various calls we've done with analysts -- sorry, retail shareholders or full year results and so on. Look, the process remains the same, that we've been seeking a strategic partner to come in and sort of look to take the project forward on a commercial basis. And then, of course, as part of that process, then looking to engage with government to sort of complete that process. And been somewhat frustrated or hamstrung by the political environment in Burkina Faso. So the process remains valid in terms of what we're looking to do with the project, to try and find that partner, trying to engage with what is now an established interim sort of government post the coup. Starting to sort of have some traction in Ouagadougou now with the various officials that have been appointed or reappointed and continuing to try to push that process forward as well. So certainly no change in the strategy of trying to find a home for the project and retain some economic benefit for Centamin shareholders. And again, that same refrain of slightly frustrated by what's happened -- the process has been -- frustrated by what's happened in the Ouaga. But we are now starting to see an administration that we can at least engage with and start to have those discussions as well. So continuing to push on with that. In terms of the write-down, Ross, I think from an accounting perspective, if I remember correctly, that was completed at year-end.
That's correct. So just to reiterate that all our greenfields exploration expenditures written off as incurred. So those are expensed as we incur those amounts. The residual portion that was historically held on the balance sheet was impaired at the December result. So we don't actually carry anything for accounting purposes on the balance sheet, notwithstanding what you've discussed in terms of, I guess, activity on the ground and the next [ set of ] -- but there's no accounting carrying value that we hold.
Okay. So the next question is about exploration on the Sukari concession. We've said that the ore body is not geologically constrained. Have we found kind of the strike and depth extent of the ore body yet? And what work are we doing to better understand this?
Sure. No, look, I think that sort of thesis remains valid. So I think at the main Sukari ore body itself, I think Craig Barker and his new resource team have been doing some excellent work. And I think the whole relog on 25-meter sections that we announced last year, that's been largely completed. That led to that new interpretational model of the geological sort of setting of the ore body, the boudinage model again that sort of Craig talked to the geological data that we did last year. So I think that now continues to be proved up after the potential sort of emplacement model. And therefore, where does that lead us from both the depth and strike perspective? So part of the work, if you like, that the MRM team are doing around the ore body specifically is with the balance of meters to be drilled. Some of those meters are allocated to grade control ahead of production and some of those meters are allocated to resource upgrade taking material from inferred -- up to measured and indicated so that they can be bought into a reserve. And of course, some of those meters are then also spent on ore body extensions. Can we find those depth and those strike extensions as well? So there is always a balance of allocation of meters that we can do. That has to be sort of tied in with the main plan. We have to sort of develop the exploration drill drives, drill cutties to allow us then to drill as well. So I think that very much the strategy this year and multiyear going forward is going to be sort of with a drill capacity of 80,000, 90,000 meters in the underground is striking the balance between supporting production around grade control, supporting further reserve growth through resource conversion and supporting further resource growth through those extensional sort of targets as well. So very much that's the strategy that we're employing with this concept of an extensional model. That remains very valid. We've got a slight sort of additional nuance there, where, within that overall framework -- clearly, bonanza grade zones in Bast and other areas are also priorities given the sort of the high value of them and their proximity to the existing infrastructure. So very much that the overarching strategy. And within that, we continue to test to depth and along strike certainly the underground ore body as well. So no change there and no change in both the philosophy and the strategy of execution about how we do that. More broadly in the concession area. As we know, we've done some additional soils and mapping, identified these new targets that weren't around previously. That has been the subject of this 10,000-meter program that we'll give the update to later in Q2. So I think we always sort of felt that the ability to put, say, 200,000, 300,000, 400,000 ounces of shallow higher-grade material from these smaller satellite pits around the concession area might give us some nice optionality and flexibility from a surface mining basis as well. And I think the work we have done around the mapping and the work we've done around the recent drilling continues to support the ability that we should be able to put together some of these sort of shallow ounce targets. They're not going to be life changing in terms of doubling the reserve base of Sukari. But if we can pull together a year's worth of open pit material from the smaller satellite deposit, that gives us some really nice options and flexibility around how we schedule the production as well going forward. And of course, the wildcard remains the ability for the airborne survey to pull something out of -- a rabbit out the hat, where there's a buried target that we haven't been able to find previously using sort of mapping and soil sampling techniques that comes up from there as well. Not entirely convinced that's going to be the case. I think part of the real value of the airborne survey will be calibration of that system for use across the EDX work in the broader exploration portfolio. But you never know. Never say never. Maybe something pops up quite nicely on that basis. But I think, as I say, we kind of internally view that as being the calibration exercise as much as anything else at this stage. So very much continuing to push the strategy of ore body maximization, main ore body and the broader concession area within SGM to try and sort of squeeze every last ounce out of the concession as we can.
Perfect. Thank you, Martin. That's it for questions from the webcast.
Okay. Well, thank you, everybody, for dialing in. As I say, just to reiterate, a very busy quarter in terms of work streams, one that a lot of planning and effort went into to make sure it went smoothly. Delighted it has done. And really with that work and that large piece of work behind us now, a good quarter. I know ounce is slightly down compared to other quarters, but very much planned to be so. And with that behind now, really building some momentum into Q2, Q3 and Q4. And as I say, reiterating that maintenance of annual guidance, both in terms of ounces and costs as well. So thank you, everybody, for the time. We remain as ever available for follow-up questions. If you want to reach out to Michael or myself or Ross, I'm happy to take it from there as well. But I wish you all the very best. And thanks for this time for calling in today and look forward to engaging with you in the future. Thank you.