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Ladies and gentlemen, welcome to the Centamin Q2 Results Conference Call. My name is Chade, and I'll be coordinating your call today. [Operator Instructions] I'll now hand over to your host Andrew Pardey, CEO of Centamin, to begin. Andrew, please go ahead.
Okay. Good morning, everyone, and thank you for taking the time to dial-in this morning to listen to this call.Joining me on this call is Ross Jerrard, our Chief Financial Officer; and Jeremy Langford, our Chief Operating Officer.Before I go into any of the details, it's important to note that our interim financial results, including interim dividend, will be published in less than 2 weeks on the 31st of July 2019, which will be followed by an interim presentation and webcast. So can you please hold your finance-related questions until then because we will not be able to address them at this time. This is entirely an operational update.On the 31st of July, we will also be publishing our near-term outlook on the same day. And the only reason for the delay has been, we've had Jeremy Langford joined us as COO, who I must say is making a very material improvement to the way we operate at Sukari; and John Singleton, who has recently also joined us as Head of Corporate Development. And with those 2 also joining the team, I wanted them to go through, review the model schedules, et cetera. And once -- that's almost complete and we will provide the guidance update for 2020 and 2021 on the 31st of July.Now turning to the quarter. As you know, we published our second quarter production results earlier this morning, which included significant exploration activities and material developments against our key ESG activities. Disappointingly, during the quarter, we did had 2 lost time injuries, which is below standard and unacceptable for us. On the positive side, we produced 118,000 ounces of gold, bringing the half year production up to 234,000 ounces, and this is in line with where we have guided on the H1-H2 split of 45-55 split in production. A stronger second half of year is scheduled. This is driven principally from the open pit contributing up to 2/3 of the ounces as the open pit grade is scheduled to consistently deliver in excess of 1 gram a tonne. Those of you who have followed the story for a long time will be aware of the Hapi Zone. Now Stage 4 West of the open pit will be mining through the Hapi Zone, which, if you also remember, back in 2017, the second half of 2017, that's when we had our record production periods, we had quarters of 154,000 and 156,000 ounces. That was contributing both from the underground and the open pit, but the open pit at that stage, the -- interim stage free pit was mining the top of the Hapi Zone. Stage 4 West is now advancing through that area. So we expect to see very good grades coming out of the open pit in the second half of Q2. With that, we reiterate our annual guidance of 490,000 to 520,000 ounces for the year.Taking a slightly closer look at the quarter, the open pit is performing well. It is the largest moving exercise, and I'm pleased with the continued improvements to productivity, particularly in the long hole. This is an area you might recall is speaking about last year with regards to visible cost per tonne savings, further training, greater focus, we're -- with further training, greater focus, we're seeing more improvements. This quarter, the tonnes were up slightly as we were doing the push back on the Stage 4 West and Stage 5. In July, the grades are tracking as we expect from the West wall and as we approach the top of the Hapi Zone. With the underground, the focus remains strictly on greater compliance to plant, great control drilling and dilution control. Q2 delivered improved stoping grades to plant of 7.22 grams per tonne, which was a 57% improvement year-on-year, which marked the peak of our dilutionary travel as you would recall this time last year in 2018. As we've discussed, 2019 underground plant called for greater waste development, as we -- we're developing new production levels to get development well in advance of production. In Q2, nearly half of our scheduled material has been reclassified as ore as it was carrying a grade of greater than 2 grams per tonne. This was driven up as development ore tonnes and subsequently driven down the development ore grade-driven mill. But I must reinstate, this is material that's been mined that is above 2 grams per tonne.Right at the end of Q2, in part of the underground mine, in the upper Amun, there was a localized geotechnical issue. It was a slumping failure on the contract between the porphyry and the sediment. Whilst this does not restrict access to the 4 stopes in this area, it is delaying mining of those because it has restricted secondary egress. And as you know, an important thing for us is the safety of our employees, so we have delayed mining of those stopes until we can reestablish the secondary egress. That remedial work is underway, and we expect to be back mining in that upper area of Amun during August.On the processing plant, the mill continues to perform well. We did have record throughput through the processing plant, but setting record is not a strong motivation. It's also ensuring we have profitable ounces coming through the processing plant. And whilst throughput record come through the processing plant, we did have a lot of spillage, so there was a lot of cleanup as well going on, so please do not expect the tonnes through the processing plant to continue to be increasing any further.On the exploration side, I'm again incredibly proud of the exploration work done by our team this quarter. The systematic drilling program across the Sukari underground returned solid results, supporting our target for year-on-year underground reserve replacement, while increasing our structural understanding of the geology and the future mine plan and future development of the Sukari underground. Importantly, the exploration program at Horus Deeps, which is 400 meters below the bottom of the existing underground and outside of any defined resources, has delineated multiple high-grade shallow-dipping structures. Obviously, a lot more work needs to be done on these before they can be classified into resources, but it is showing continuation of the underground 400 meters below our existing base of the current underground workings. This drilling, in conjunction with the seismic work that is also underway, is about fully understanding the scale and a true capability of the Sukari underground and the Sukari tenement for the future growth and resource expansion.I'm also pleased Doropo's drilling in Côte d'Ivoire has been predominantly focused on infill and extensional drilling on the Doropo resource area and that is all going to feed back into the model, so that we can provide a PEA update in the second half of the year. That is all going according to plan.Okay. With that, it was a quick summary. I will now hand back to the operator, and I hand back for questions and answers.
[Operator Instructions] So we have our first question from James Bell from RBC Capital Markets.
Just 2 quick ones on the underground. In terms of the localized geotechnical issue that you had, are you able to give a bit more color if this might affect other areas of the underground? In other words, all the other egresses, secondary egress is on the porphyry contact that maybe are concerning for you. And secondly, just in terms of thinking about grades for the second half of the year. Obviously, you've had quite a big variation Q-on-Q. How should we think about the balance of the year? Should we think about a recovery back to Q1 levels? Or do you feel like it's going to be at the lower end given that you've got that big upstep in -- grade in the open pit?
Look, first of all, secondary egress, secondary access to areas of stoping that is a safety area. And this is only in the upper Amun, which impacts access to 4 stopes. And when I say 4 stopes, those stopes aren't all mined at the same time, you mine them in sequence. So it's just delayed that sequencing until we can reestablish the secondary access. So just in case of an emergency, you can get people out. Lower Amun and Ptah are separate from this area. They also have secondary access as well. They weren't on the -- on that footwall contact. And at this point in time, we see -- we're not aware of any potential issues that could restrict access to those areas.
Okay. That makes sense. And then any -- are you able to give any spear on the sort of grades in terms of the second half of the year at this stage or not rather?
Well, underground -- the open pit grades are going to improve. The open pit grades are being fed to the plant. According to the plan we'll be above the gram. And the underground grades of Q3, we're delaying these higher-grade stopes from Amun slightly. Q3, I expect the underground grade to be slightly down. But then Q4, it will be recovering back to similar grades of what we saw in Q1.
Okay. That's great. And then just one quick one. Can you remind us when the next resource/reserve update is going to be? And can you talk -- sorry...
It will be at the end -- look, it will be done for December 31. Resource work is, in fact, this week, has commenced on-site with the geological consultants. So that work is underway. Then obviously following that there is the reserve work for the underground and the optimization work for the open pits that there will be an update provided for December 31 of this year.
Okay. That's great. And then could we expect to see any initial resource around Cleopatra at that time? Or is it still a bit early to see that coming into any sort of higher numbers?
We had another successful quarter of drilling in Cleopatra. It's really having those results come through. So there will be some small addition from Cleopatra, that results still coming through. We're getting close to that target, 11,000 meters of drilling and they want it done in Cleopatra. There'll be some resource, but it won't be huge. But that really depends how quickly I can get the results in.
Our next question is from Alan Spence from Jefferies.
Just one quick question on the open pit. I know you guided to grades above 1 gram per tonne. I'm just wondering if you'll be falling into the Hapi zone in Q3? Or will it have a greater sequential impact in the Q4 and we could see kind of step-up from Q4?
We will be...
Sorry, Q4 versus Q3.
We will be well and truly into it in Q4. We are already -- it's only early in Q3, but we are seeing the grade of the ore being fed to the processing plant from the open pit increasing.
Our next question is from Michael Stoner from Berenberg.
So a couple of quick questions from me. Strip ratio seems to be trending down. I guess ore mines was up a small amount. Is that something you're expecting to hold as the grades come through as well? Or will we see grades rise, but strip rise slightly too?
We'll see the strip rise slightly as Stage 4 is coming down into the Hapi Zone. Meanwhile, we're still stripping Stage 5, the Eastern Stage 5 North, they are predominantly low grade in waste. So you should see an increase in the stripping ratio.
Okay. And then on dilution, you've delivered an improvement this quarter. Does the kind of you and the technical team see opportunity to go further than this? Or are you kind of now broadly happy with where you're at on dilution?
I'm never happy with dilution, to be perfectly honest. Look, they're out there. Further improvement is further work that we can be doing in both the underground and the open pit. The open pit when it's in the core of the ore body, it's okay to mine at 10-meter benches, but certain sections of the ore should be mined at 5-meter benches. It's all about grade, and grade is king. With the underground stoping, again, you design a stope, you design your ring for blasting, doing the QA/QC checks on those rings, the depth, the drill through to the right area, and then the firing sequence, and then following the procedure, when you actually start bugging that is mining the material out of the stope, there's always room for improvement in those.
Okay. And then more on to exploration. You talked about drilling results, 400 meters below Amun and Horus. What depth is this program drilling to below Amun? Is it kind of holding around 400? Are you going significantly deeper?
They're pushing to that 400- and 500-meter type depth from the Amun part of the mine at one rig that's now focusing on drilling those holes out. I mean there is 3 other rigs also drilling away that are focusing on near-term and medium-term growth. Those are in Amun and Ptah, and then the other rig that is drilling away up in Cleopatra. Cleopatra drilling is really focusing on the Cleopatra, the Antoni and the Julius structures. In that area, Stage 7 of the open pit, it's also drilling through into that area for the future Stage 7 of the open pit as well with some long holes.
Okay. And then on Cleopatra and then separately Doropo, could you quickly remind me of the work programs and the kind of milestones we could expect?
Cleopatra is the important thing for me. The Cleopatra is getting at just over 11,000 meters of drilling completed, which will focus on the Cleopatra, Julius, and to a lesser extent, the Antoni structure. Once that drilling is completed and we've got the results in, we can then do the modeling, and we can develop, look at what we have there, what is -- it's -- the Cleopatra drilling gives us 2 options, underground mining in the short term on those structures; longer-term drilling on the contact, the eastern and the western contacts of depth; but there is also the open pit, a large part of Stage 7 in that area, the open pit is waste material in the model at this point in time because of a lack of drilling. This Cleopatra drilling is also going some way into potentially adding additional ore into Stage 7, which is inside the current life of mine pit shell.
Okay. And then the program at Doropo, sorry?
Doropo's drilling this year has really focused on extension of the resource area -- the main resource area and some infill to give us potentially more resource ounces and also more confidence in the resource, so that we can update that resource and then do an update on the PEA, which we will be doing in the second half of the year and that's other than with Sukari as well, that's one of the key things that Jeremy has also got his teeth into, and as we are all very aware, Jeremy is very strong at PEA-type work as well as operation.
Yes. Understood. Okay. So will we see that PEA in H2? Or will you be kind of working on it through H2? And...
We'll be working on it through H2. I would expect we'll be talking about it more early next year. Obviously, if we get it done sooner, we will get it out sooner. But I wouldn't plan on that. We'll get results out as soon as we can. The reality is something it will be Q1 next year. Resource updates are coming out first.
Our next question is from Nour Eldin Sherif from Arqaam Capital.
My questions have been answered.
Okay. So the next question is from Hunter Hillcoat from Investec.
Just a quick question. You mentioned that you'd be fully into the Hapi Zone in the fourth quarter. How long into next year would you expect to stay in the Hapi Zone?
We will be in that Hapi Zone for the pit for all of 2020.
[Operator Instructions] We have no further questions on the line.
Okay. All right. Thank you very much for taking the time to join the call this morning. I'll just reiterate. H1 was a solid operational half, and we now look forward to delivering the next 2 quarters. Our interim results, interim dividend and outlook for 2020 and 2021, will all be released on the 31st of July, and I look forward to speaking with you all again then. In the meantime, if you do have any further questions, please be in touch with myself or Alexandra Carse, and we will answer those questions for you. Thank you very much.
Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines. Have a lovely day.