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Hello, and welcome to today's Centamin Third Quarter 2018 Preliminary Production Results Call. [Operator Instructions] And just to remind you, this call is being recorded. So today, I'm pleased to pass you over to Andrew Pardey, CEO. Andrew, please begin.
Thank you. Good morning all, and thank you very much for taking the time to dial in to this call this morning. Whilst we recognize we have published our Q3 production results a couple of days early, we thought it was imperative that it would've been ready, to get them out and released to the market. As a general overview, in quarter 3, we produced 117,000 ounces of gold, importantly, 27% up on Q2 and bringing our year-to-date gold production to 335,000 ounces. Following what has been an operating -- what has been an operationally challenging Q2, we are pleased to deliver results today, which clearly demonstrates improvements across all the operating parameters. Firstly, I'm referring to the open pit, as we guided previously, we exited the transitional zone in Q3, and grades have lifted accordingly. From the start of the quarter, mine grades at 0.57; and exiting the quarter at mine grades of 0.74 grams per tonne. And we expect to see this continue towards reserve grades into the first half of 2019. On the open pit side, the team has done an excellent job getting through this transitional period and into the higher-grade sulfide material. Q3 has been characterized by month-on-month improvements. Going to the underground, we've had meaningful changes in Q2, introducing tighter control, personnel changes. And as a result, we have seen month-on-month improvements from the underground, although these have taken longer than we expected and would've liked. But overall, when we started Q3, mine grades coming out of the underground were just on 4.2 grams per tonne. We exited the quarter with mine grades coming out the underground at 7.4 grams per tonne. There's still more work we have to do in particular on the cascading stopes and the influence of dilution. While that has been reduced, we still need to do further work to ensure we do not have any fall, slipping back in -- with increased dilution. Importantly, with these tighter controls, improved grades coming from both the open pit and the underground, September, we produced 48,500 ounces, which is in line with where the carry should be. Bearing in mind we still have to work through and ensure that we can maintain this, and as such, we've taken a conservative approach to Q4 and maintain -- maintaining these run rates. And therefore, we've had to reduce our full year guidance to 480,000 ounces. That being said, this was a very positive quarter with the improvements across all areas. And on that point, I'd like to just hand it back to you and ask, will you open up the floor for any questions? Thank you very much.
[Operator Instructions] And we go to the line of James Bell at RBC Capital Markets.
I just want to talk a little bit about underground grade visibility. Obviously, we had the downgrade to the full year numbers of Q2. I just wondered if you could talk about what your expectations were for grades in Q3, versus the 5.18 that was reported? And similarly, if we look into 2019 and we look at your reserve grade of 4.5, is that the sort of grade we should be thinking about in '19 because it seems like there's an issue between sort of visibility on where we are? And what maybe the expectations are from the market side?
Well, James, first thing, with the underground, I mean, the biggest issue we faced with the underground was that the larger open stopes in the Amun area, the cascading stopes where we experienced higher levels of dilution than what we're aware of. Now within the team -- the underground team, the COO had been working on reducing that influence, getting tighter controls back into those stopes, and that's why we exited September in a total mine grade coming out of the underground is 7 grams per tonne. The expectation is we still got more work to do. We should be maintaining those sort of grades from the underground for the remainder of the year. As far as resource and reserve numbers are going, the teams are currently updating the resources, and that's underway as we speak. And then following on from that will be the reserve update. And the plan is for that to be released to the market with -- at the end of the year.
Okay. Just a quick follow-up. So what was the -- if you can share it, what was the planned underground grade for Q3 versus the 5.18 grams that was reported?
I was expecting the grade to come in closer to 6.2.
Okay. And then just in terms of, again, looking into 2019, are you able to give any color on what the internal plan is in terms of an underground grade there, even if it's just a range, just to give us comfort? Because obviously, we've seen a bit of volatility this year and in terms of getting comfortable with near-term production, I think it's kind of important to understand where we're going to come out or where we may come out next year.
Look, until the resources and the reserves are updated, I would expect the underground reserve grades to be coming in the vicinity similar to what they are. But obviously, the models need -- the resource models need to be updated, which is underway, and then stope designs applied accordingly. So until that time, until I've seen those numbers, I -- do I expect the numbers to come down? No, I don't.
We now go over to Michael Stoner at Berenberg.
I just wanted to check on utilizations, kind of maintenance, et cetera, through September. Was that a high month for utilization, a low month for maintenance downtime, just kind of to get a sense for how sustainable that run rate is? And then if I may, just on the development grades, you've generally run much higher development grades. You guided earlier this year that they were likely to be lower than some of the really impressive grades you delivered in the past. Do you think that these kind of 3.65 grams per tonne are really the numbers we should be modeling, kind of which are a bit below kind of our current expectations?
Look, first of all, on availabilities, have we got or have we had any equipment issues? No, we've had no equipment issues. I mean, earlier in the year, we had the long-haul drill rig that was damaged. That is back up and operational. All the other equipment is -- in both -- or in all areas, open pit, underground and processing plant, is all operating at expected levels. September wasn't -- it wasn't an extra special month as far as availabilities go. Development grades, I mean, the underground, with underground, there's 2 areas, obviously, stoping and development. We've done lower-grade development. We did more decline and access development over the quarter. And obviously, the main area for delivery of ore has been focusing on those stopes and ensuring those stopes are delivering the grades it has been designed at.
Okay, perfect. Can I now look at these dilution issues? So you said that dilution has kind of started to reduce, and you're working hard at kind of maintaining that and improving that. How much of that effect is kind of a genuine reduction in dilution? And how much is a lowering of the mix of cascading stopes?
Look, it's a combination on a month-by-month basis. The tonnes mined from production in the underground have actually come down. And as a result of that tightening up controls on stopes, the grade has increased accordingly.
Okay. And can we expect further reduction in -- I mean, you sounded cautious on guiding on kind of lots more improvements in dilution, but could we expect a lower mix of the cascading stopes in Q4 and then kind of H1 next year?
I -- look, I would like to think so. The team on the site is still working on those numbers, and that's why I'm being more cautious until I get 100% confidence that the amount of cascading stopes has reduced and will stay lower.
Okay. And finally from me, are we still looking kind of consistently for a 60-40 stope development ore split? Or do you think that evolves over time?
Look, it will be generally around 60-40. I mean, if the carry -- the underground reserve is in the vicinity of 3 to 4 years, so you want to make sure your development and your drilling continues. So you've got your development well in front of you are on production schedule.
We now go to the line of Dan Shaw of Morgan Stanley.
Actually, most of my questions have been answered, but if I could just ask one on Cleopatra since you're feeding some more tonnes from that through the mill. Can you give us indication of how that's tracking compared to your plan? And also, do you have any indication of kind of timing of the stoping tonnes and potentially what kind of grades we can expect sort of going into 2019 from Cleopatra?
Look, Dan, when we were not made aware of the effective dilution in the Amun/Ptah underground, I actually -- the team is still focused on Amun and Ptah and just keep one development crew up at Cleopatra just waiting on development and setting up drill cavities because, obviously, the existing underground is the main area of operations to ensure that gets back to what it should be doing. So there's just been decline development and drilling going on in Cleopatra. Again, we're in the process now of doing a resource update, which includes the Cleopatra area. And then from that, the appropriate reserves will need to be designed.
Okay. And if I could just clarify one thing just to understand, the exit -- if we think about the exit rate in September of around 7 grams per tonne, seemed quite a bit higher than the average for the third quarter, so how much of that is reducing the cascade mix, improving the -- or making operational improvements in terms of the execution on those cascade tonnes and how much is just purely [ drill ] driven in terms of where you were in the mine?
Well, it's a combination of reducing the influence from the cascading stopes, but we still have further work to do. And as we've said previously when we guided, we did have higher grades coming through from the underground in the second half of the year, obviously, but that was slower coming through in Q3 than when we have originally guided, and we -- so we've also got the impact of some of higher-grade stopes that we scheduled for the second half of the year now coming into production.
We now go to the line of Alan Spence at Jefferies.
The strip ratio in Q3 came in a little bit below my expectations. I'm just wondering what you're thinking into Q4 and, yes, kind of the previous guidance for -- I believe it was 75 million tonnes moved, we may come in a little below that. And then also, on the open pit into 2019,if you can remind us the grade you're expecting there and whether you expect much variability between each of the quarters.
Okay. As the pits now come through into the primary porphyry zone, the expectation at the time is the strip ratio will increase slightly, but I don't expect the strip ratio to go up much, much higher. It's not going to be a huge, huge jump up. As far as 2019 goes, again, as I've said before, we're doing a resource -- a global resource update and the reserve update. Once we've completed that, then we'll be able to give more -- at the end of the year, be able to give our guidance for 2019. But expected grades coming out of the pit should be in the vicinity of what the reserve grade -- reserve grade is fit to the part, which is, from the open pit, 0.95 grams per tonne.
So we go to the next question, which is a second question from James Bell at RBC Capital Markets. [Operator Instructions]
Sorry to come back to the underground again, but, Andrew, can you remind us how far development sits ahead of production currently? And in terms of the layout of the underground, is there any option in terms of you having more flexibility, so perhaps developing into an area where you don't have these cascade stopes and you have some higher grade materials to give yourself more flexibility? Or is this just a phase the underground is going through over the next periods until we get into the sort of where the underground has been historically?
Well, development is generally 2 -- for the stoping access mentioned, development is generally at least 2 years in front of [ the now in reserves ], reported reserves. With the carry, there's also a certain amount of development where you'll hit some big -- with the drilling, you'll hit -- you're drilling areas that weren't working full. And if they're nearby to the current access, we'll go and stope those areas sooner. But importantly, when we had these issues in the underground, we could've taken the shortcut and left some material behind, some stopes behind and gone straight into higher grade today. We chose not to do that. We'd prefer to defer that and mined where we were to ensure that we're not leaving all behind.
Okay. And then just in terms of looking at the guidance next year, how do you think -- or how are you going to get the market comfortable with your projections for underground given sort of the performance in the first 3 quarters.
Well, it's up to us to deliver it, and we've got to show consistency of delivery.
Currently, Andrew, at this stage, there are currently no further questions in the queue, so may I please pass it back to you for any closing comments at this stage?
All right. Well, thank you very much for joining us on this call this morning. If you do have any further questions, we will be available to be contacted via the telephone or email. With that, I'll hand back to the operator. Thank you very much.
Well, thank you, and thank you all for attending. You can now disconnect your lines.