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Hello, and welcome to today's Centamin third quarter report. My name is Bailey, and I'll be your moderator for today's call. [Operator Instructions]
I would now like to pass the conference over to our host, Martin Horgan, CEO with sentiment. So Martin, please go ahead when you're ready.
Thank you very much. Good morning, everybody. Thank you for taking the time to dial in today. As was mentioned, Martin Horgan CEO of Centamin, and welcome you to Centamin's third quarter results call.
I'm joined today by my colleague, Ross Jerrard, CFO. I'm delighted to welcome back after maternity Alexandra Barter-Carse, Corporate Governance.
Whilst I'm going to take you through a quick overview of the quarter. We'll have a look forward to the full year the direction of travel. We'll outline our next milestones, and then we're happy to take any questions. It's been a great quarter. And I think importantly, for us all, we continue to deliver into our plan. It's a strong quarter that fairly puts us on track for the midpoint of our production and the upper end of cost guidance, and we've also been able to progress our project pipeline where we're looking to maximize the value of our assets.
To start with, though, I think we hade 2 really notable milestones during the quarter. The mine 5 million down to gold in the quarter, which is an amazing achievement. I think is a testament to the operating team in country, many of them who have been with the company for a number of years. I also think it speaks to the quality of the Sukari ore body. Few operations get to achieve this milestone and I think it's amazing when we look at the remaining reserve life ahead of us, we're only halfway through the ore body at this stage. I think we still see further upside potential that's currently realized from the ore body. I think those 5 million ounces delivered some really tangible success both for Egypt and for Centamin. We've got a total workforce of 3,800 people in Egypt. 94% of those are Egyptian nationals. We've got 70% of our leadership roles held by Egyptians. 61% our procurement comes from local supply chain. We paid $803 million to government in royalty and profit shares. We've returned $777 million to shareholders through dividends.
I think that's a really sort of tangible success that we can all point to. And sticking with the number of $5 million earlier this month, and I do appreciate capacity at the end of the quarter, the site achieved its record of in excess of 5 million hours worked LTI-free. Safety I repeat is paramount, and I'm delighted with the work over 2022 in respect of health and safety as evidenced by the continued performance. [indiscernible] last week, we now the ramp-up to full operation of our solar project. which is providing about 36 megawatts of power and displacing 22 million liters of diesel a year. That saves us about $20 million in current spot prices and importantly, we moved 60,000 tonnes of greenhouse gas equivalents. It's a great story. I think it's at not just for Sukari, but also for the wider mining sector and how we also play our role in the fight against climate change.
We're also looking at a potential good connection for Sukari. We're currently evaluating offers we've received in connection with its exciting initiative. And that has very real potential to further significantly reduce the cost base and our greenhouse gas emissions. Of course, [indiscernible] production another excellent performance by the team to deliver into our plan for the quarter. Gold production was 127,000 ounces, bringing the year-to-date to 331,000 ounces, an all-in sustaining cost of $1,288 ounce per hour. It's a strong delivery and it places us very well to reaffirm our guidance for the year. And to be clear, it's the middle of our production range of 430,000 to 460,000 ounces while targeting the upper range of our costs towards $14, $25 per ounce.
Open pit performed well. We've achieved a record material movement for the quarter and we continue to see operational improvements from the stripping campaigns at multiple working areas now available to the team. Underground had a challenging period. [indiscernible] delivered against their plan. The team was hampered by equipment availabilities over the period. But despite these minor headwinds, they're able to deliver the ounce profile required to support the Q3 plan and ultimately for the full year. The good news is that our replacement underground fleet is starting to arrive, which would significantly improve availabilities and productivity from this end of this year and beyond. 4 trucks, 4 loaders, 2 sand victories are all being delivered over Q4. The Q4 plan for the underground will say as mining grades back in line with the ore body averages between 4.5 to 6 grams and with a focus on development as we prepare for 2023.
Processing team performed well and in line with plan. During the quarter, we processed some of the high-grade material combat as part of the gravity gold recovery Tesla program which contains high levels of clay materials, which can have an impact on recoveries. As a result, recoveries were slightly down in the quarter. I've already mentioned the solar plant and our other major capital projects to pace plan for construction continues and we plan to commence commission later this year into early next. The mineral resource management team have also been busy working with the mine planners and our external QPs to commence the resource and reserve update for 2022. This incorporate drilling up to the end of June '22 and includes those eye-catching results we announced in July. Updated resource and reserve statements we released in December this year. [indiscernible] expansions really progressed well during the quarter. We're now waiting on the final graph report, which we'll be able to share with you in November.
And with that now, I'll hand you over to Ross who will take you through the financials.
Thank you, Martin, and good morning, everyone. I'm glad to report that from a numbers perspective that we are on track across our metrics, both for the quarter, cash cost per ounce of $811 and all-in sustaining costs of $1,289 resulting in year-to-date numbers of cash costs of $885 an all-in sustaining costs of $1,386 per ounce.
A good result driven from the operations on ounces, but also the continued focus on delivery on cost savings initiatives by the team, which has gone a long way to offset the global inflationary pressures that we're all facing. As mentioned already, with the solar plant commissioning, we will see the full impact of this and our other initiatives dropping in the fourth quarter and beyond, which will continue to realize savings going forward. With the solar plant completed, we now have substantially finalized our discrete capital projects this year. It's the waste stripping program and the completion of the pace plant being the 2 ongoing major CapEx programs off of our normal sustaining CapEx.
Group free cash flow for the quarter returned to a positive $11 million for the period. This resulted in reducing our year-to-date number to a negative $14 million, again, ahead of where we had planned to be at this point in time. And looking forward to Q4, we hope to continue to improve that position. I would encourage you to look at the table in the announcement, where we have reclassified certain stripping costs from OpEx to sustaining CapEx. This has meant a reduction in the cash cost metrics and an increase in our all-in sustaining cost metrics. This is an accounting adjustment only and does not affect the actual cash expenditure. It is driven by a more granular approach on our mine plan and the way we model the strip ratios, which has changed the accounting. It is important to note that we still do for within our guided ranges for the year at both cash cost and all-in sustaining cost lines.
Lastly, we have made good progress on our capital allocation review, and are currently reviewing the options that we have being presented, balancing both growth and dividends with active engagement across various banks and advisers, we look forward to updating you on the outcomes of this review before the end of the year. And with that, I'll hand back to Martin.
Thanks, Ross. Maybe moving away from Sukari operations. Our Eastern Desert exploration team continued to implement their plans and they're currently busy completing follow-up soil sampling and mapping the priority areas identified in the Nugrus block, which is the exploration grounds [indiscernible] and Sukari. We also received permission for Sample export in the quarter. And we've now started to sample -- ship samples international labs for analysis, and we start their results to come through towards the end of the year and early into Q1 next.
Across in West Africa, the Doropo project continues along its PFS path. We look at results due for completion this month as part of the overall program. We'll update you on this in the coming weeks with some further interesting news on the direction of travel for Doropo. We also made a difficult decision to relinquish the Batie West project in Burkina Faso.
Back in 2020, we faced a difficult situation in respect of the permit license delivery period. There was very limited time under which the issued mining license to commence construction activity. This is particularly challenging, given the lack of study supporting a development decision on the technical financial outcomes that would support investments. We did manage to negotiate an extension of time, which enables to complete a technical economic evaluation of the project and then a very short window to try and find a partner as we did not believe the project was at the scale or quality suitable for Centamin. However, with the recent political security and security issues in Burkina Faso, we've not been able to secure a credible counterparty. And as such, we've taken a decision to relinquish the licenses in light of the cost to sense to hold the project and the lack of a clear time line to engage with any former government in Burkina Faso. As we've noted previously, we attribute no value to these assets in our accounts.
As we look to the fourth quarter and year-end, we've got a great pipeline of new slow coming, which includes an underground expansion study update at Doropo PFS update, the capital structure review touched on by Ross and our resourcing reserve update as well. I think this represents a really exciting series of releases and as a result of the work done over the last year or two we'll deliver the full potential of Sukari and our wider Group.
Looking ahead over Q4, we delivered into our plan that will see us target the midpoint of production of 430,000 to 460,000 ounces towards the friend of our enlisting cost guidance $1225 to $1425, given the inflation balance seen over 2022. I think we can reflect on a great quarter for the company. across numerous aspects of our work, but importantly, we put it behind us now. We refocus on Q4 to deliver 2022 as planned and keep pushing to fully maximize our portfolio in a safe and responsible way. And with that now, we'll open up for questions.
[Operator Instructions] Our first question today comes from the line of Marina Calero from RBC Capital Markets.
I have a question about your production guidance. You had a very strong Q3, and you're expecting production for the year to come at the mid of the range. How conservative is that assumption?
Look, I think if we sort of step back and think about how we thought about 2022, that's probably going to put a bit of context around for you around where we are. So towards the end of 2021, as we look into this year, we knew that during the first quarter, we were going to swap out from Barminco and the underground contractor. So we knew that we're going to have a softer quarter, and we planned accordingly for a softer Q1 to account for the inevitable disruption as they left side and we sort of gain control.
Second quarter, we thought -- we'd have a stronger quarter over Q1. We're still recognizing that we were going to basically be bedding down the operations and be on the older model in the underground. And then, of course, we felt that by midyear, we'd be in a pretty strong position then to be able to take to a strong second half of the year. So we always had a sort of a bias weighted towards H2 given the disruption to -- or potential disruption to the underground in H1 as part of the contract to swap out. So that was our sort of philosophy as we looked at the year.
We then further went a bit more granular than that and said, look, looking at H2, what I hate is where your fourth quarter is your biggest quarter to meet guidance? And then all of a sudden you find yourself heading into the fourth quarter, needing for everything to go absolutely perfect in order to meet guidance. And then a slightly slip-up that can occur, there can be a delay of consumable or a bit of equipment availability impacts or who knows what happens? But all of a sudden when you find yourself trying to rush to meet guidance in a challenging environment. So we very purposely decided to have a stronger Q3 where we're preferentially bringing some of the higher grade stopes into the third quarter, recognizing that during the first half that we get ourselves settled from an underground perspective.
Have big Q3 derisk year and then into Q4 back to a normal sort of mining rate in terms of grades where we said sort of 4.5 to 6 grams in the underground and then move into year-end. And then using that fourth quarter to then think about setting up for 2023 to make sure we have a good year next year. And I think the other thing to think about is that with that sort of big third quarter, if there were any issues that we faced, we still have then time to basically deal with those and they'd still make guidance for the year as well. So we very much plan the big Q3 this year, recognizing the Barminco situation. Not wanting to push all the risk into the fourth quarter and having to disappoint purposely sequenced the way we went on that basis as well. So I that how do we look at that? I think very much now looking at what we need to do to bring in Q4, that sort of midrange of sort of $440 million to $445 million. I think that's very much where we're looking at on our 9 plus 3 forecast, as I said, that midrange of the guidance.
I think it allows us then to think about getting ready for 2023 development in place making sure we're set up stock piles, inventory management and so on from there as well. So I think that not conservative, not aggressive. I think we've got a very clear plan to deliver into to make sure it's good this year and make sure we can start next year in a good way as we hope to deliver getting into 2023 from there as well. So I think it's, yes, as I say, it's just -- I think it's quite important just to understand what we did this year and why we did it for very good reasons. And I say delighted that the team were able to each quarter this year have actually delivered into the plan I set out in late 2021 for it as well I think which is great. So I hope with that, I don't know if that answers your question I'm not sure I'm just -- got a bit of a philosophy of how we looked at this year to basically sort of balance out the risk effectively, but also making sure that any short-term decisions we may fit in that medium to long-term plan context.
Alan Spence from Jefferies.
Just a couple of questions around the waste stripping. The first one, I just want to make sure I'm absolutely certain that your CapEx guidance is excluding that break-down you provided in terms of the weights that's been capitalized.
Ross, do you want to take it on that?
Yes, Martin. Yes, so that CapEx guidance we guided to apples with apples which in '25 excludes the waste stripping. So if you looked at that in that table that we've provided. Basically, the 2013 run rate year-to-date will go up to circa $285 million by the end of the year. And the bottom line, the $167 million will end up being the $225 million which is our CapEx guidance yesterday excluding the basically all in will be $285 million, including the waste stripping component, hope that makes sense.
Yes. So if I have that number right, then that implies around another $15 million capitalized in the fourth quarter?
Yes. So there's $50 million that's being capitalized then there's another 20-odd that will be the waste stripping component to.
Okay. I mean -- if I think about kind of bridge to your guidance, and I appreciate the fact that you talked about kind of having a more normalized fourth quarter but year-to-date you're running significantly below on cash cost guidance. And if there is going to be another 20-ish million in Q4 that's going to be differed -- not differed but put into CapEx as opposed to OpEx. I mean the kind of ask the previous question again, 1 different, how conservative is that? I mean it feels like the underlying cost assumption you're allowing to flow through is for a really, really big step-up quarter on quarter.
Highlights for margin I guess from a cautious.
Sorry, Ross, was -- you carry on that.
From a cost perspective, I think the key thing for us, yes, there is a step up but we are, in terms of our cost profile and how that all flows through. We've got some significant reductions in costs. So -- for instance, the [indiscernible] has just come through, we've just had that basically 1 month saving on that but the full impact on that is a further $6 million to $7 million that will drop in the fourth quarter that will help to offset and across the initiatives that go through. So -- and we're feeling pretty comfortable when we look at our 9 plus 3 acquiring anything that comes in the field, I think we'll hit those metrics other line is the fuel price. We did see a step up, Q2, we're running at sort of circa $0.99. We had an average of the Q3 of $1.08, and we've -- that's taken down. We're currently sitting back down at $0.93 So we feel that we have seen that peek coming into the Q4 and the runrate and the initiatives that we've got on track from a cost perspective, I think we'll be able to get in those ranges.
So you hit 1 of the key things that sorry, I think you hit 1 of the key things there -- sorry Alan, apologies. But I think that fuel price, who knows what happens in Ukraine, further disruption to that, how does that work? Egypt produces about 50% of its diesel onshore. It imports about 50% of its diesel. So I think in terms of sort of being prudent around that and recognizing what shocks could come over the balance of Q4 from certainly from just fuel prices expected alone I think we're just being guardedly cautious around that, recognize that Solar is coming on stream, some of the initiatives we are pushing through there as well. But yes, look, it's a big variable. We have no control over and we've got to be prudent around that.
Okay. So I won't put words in your mouth, but I guess my takeaway is that it sounds like you've left some room to potentially do better and what's the words on the paper that's my conclusion, not yours. And in other consumables, are we having -- do you think we are past the peak in that? Are we starting to see some deflation there?
I think from an in-country perspective, I mean, that the in-country run rate and inflation official inflation rate is 16% this last quarter going into the last month, it's actually the real rate on the street, we are seeing those pressures coming through that supply chain. We've factored that in as we go into the end of the year. There is pressure coming through. I think the good thing, again, these cost initiatives, we are able to -- we're seeing a -- it is kind of full offset, we're able to counter a lot of those headwinds that are coming through.
From a supply chain side, I think some of those shipping costs and things we are seeing coming down. So there is then some tempering, but I'll be totally honest sort of in-country inflation rates are still high, but we have factored those into our numbers.
There are no further questions posted on the telephone Online. So I'd like to pass over to Alexandra Barter-Carse for online questions.
Thank you, Bailey. Only a few online questions come through, starting with can you give us an update on the regional Sukari exploration program including the geophysical airborne survey that was done earlier in the year??
Yes, I'll take that one if it is okay. So look, we did fly the airborne survey, which was a sort of execution success that we're able to get the helicopter up, run the equipment and get the results back. So we received the imagery I think that came through in June. And then what we've done is then we've taken that imagery and we perhaps moved on to a third-party specialist geophysical contractor to do some further processing as well. So that remains a valid work stream. And moving forward, that's the B10, Z10 work that's being further the processed as well and obviously look to incorporate that into the exploration plan for 2020 -- end of 2022 and into 2023 as well.
So look, I think we can look back in with the sense satisfaction, did the first airborne survey [indiscernible] the metric results in further processing of the B10, Z10 coming through and then look to lay that in as well. So I think no earth shattering sort of discoveries we didn't find another Sukari sitting sort of 5 meters away from the main ore body unfortunately. What I think really interesting in terms of the structural setting of the ore body implications for areas for potential further sort of discovery of more minor scale around the concession area Yes, I'll take that one as do okay. So look, we did fly the airborne survey, which was a sort of execution success that we're able to get the helicopter up, run the equipment and get the results back. So we received the imagery. I think that came through in June. And then what we've done is then we've taken that imagery and we're passing it on to a third-party specialist geophysical contractor to do some further processing as well. So that remains a valid work stream.
And moving forward, that's the V100 work that's being further processed as well. and obviously look to incorporate that into the exploration plan for 2020 -- end of 2022 and into 2023 as well. So look, I think we can look back with the center satisfaction, did the first airborne survey magletric results in further processing of the V10 coming through and then look to lay that in as well. So I think no earth shattering sort of discoveries we didn't find another Sukari sitting sort of eats away from the main ore body import. What I think really interesting in terms of the structural setting of the orebody implications for areas for potential further sort of discovery of more minor scale around the concession area.
And I think a really interesting piece of work to explain and then extrapolate into the broader areas that are sort of exploring across the Eastern Desert work as well. So a really good exercise some good value information out of it and very informative for both Sukari concession and broader EDX. In terms of EDX, we have done the BLEG sampling. So that's that very sort of first stage early grassroots type approach to screening large areas. So we finished the BLEG on both Nugrus and the Um Rus block, which is in the North and Nugrus is the block around Sukari concession that both sets of the license areas have been at that proven BLEG. With the weather being particularly hot through the summer months, the match block, because that's a bit more in land, we're going to go back there in Q1 when the temperatures are cooler. So with the team having done BLEG sampling across matched and -- sorry, across Nugrus and Um Rus. The team has now gone back into the Nugrus area, which is the zone around Sukari. We're now doing a priority sort of follow-up both soil sampling and mapping in a more closer space within detailed bases across some priority targets that we've identified. And the idea there is to generate as quickly as possible some drill targets so we can get rigs into that concession start maybe poking a few holes in sort of early next year as we go forward as well. So that's in terms of the field work.
We have got our exploitation license now. The samples are being shipped from Egypt across to actually Perth, Australia, where we're now in the system. We expect to see results flowing through end of the year start of Q1 and start in the data results back from that phase of work as well. So the team has done excellent work. We're in the field. We're covering large areas and really exciting in terms of the progress being made and we'll pivot to the match block in Q1 once the save temperatures drop off as well. So team going very well. And yes, looking forward to seeing the results myself later this year and then sort of trying to work out if we can get a rig on there and start looking some of these priority areas from a drilling perspective.
Great A question on the capital structure review. If you do take on debt, please, can you clarify what it will be spent on.
Well, look, I think as we said a few times that sort of Sukari not having any debt on its balance sheet is atypical, I think within sort of the mining space. I think that the strategic rationale for looking at this now is not to basically have a burning desire to do something it is that we want to perform a relationship with a group of international banks and have a track record with them. And then such as we look forward to things like the RoFo, for example, is a good example, something we could sort of require some significant funding to develop. Having an existing bank group where you have a banking relationship to then engage with them around point drop just makes life a lot easier at that point as well.
I think if we saw opportunistic ability to do some additional CapEx expenditure at Sukari, for example, then that's something that we could potentially fund through debt. So it just gives us a lot more operational and strategic flexibility to have that bank group. One of the things that Ross and I have been calling about, though, is that if you think about our cost recovery model for capital expenditure at Sukari concession itself, solar plant is a good example. We spent $36 million on building the solar farm then we get to cost recover that on a 3-year basis. So we get $12 million each year, cost recovered to us. And Ross and I were chatting about the concept of things like a revolving credit facility where we would draw down at $36 million to fund the capital of say, the solar plant and then each of the subsequent 3 years as we get those $12 million back in priority -- payments to Centamin, they'd be used to retire that RCF as well.
So there's also an operational functionality. But if you wanted to go down that route, we could start to use that to fund some of the sort of the capital requirements at Sukari with that cost recovery model matching up to an RCF type facility. So at this stage, it's about forming a strategic relationship with a bank or a group of, I should say. It's about having additional sort of, if you like, sort of balance sheet strength and flexibility to allow us to react to opportunities. it's about thinking down the track of the repo to think about basically managing our sort of capital commitments to the Sukari concession as well. So that's what we're thinking. And of course, balancing all out. It just gives us an extra tool in our capital allocation framework when we're looking at balancing growth versus dividends in terms of how we are able to sort of navigate this pipeline of opportunity that we have while maintaining a commitment to the dividend as well.
And the final question is, what are your views on M&A? And how does that fit into the sentiment strategy?
Yes. Look, it seems to be the absolute favorite question of every journalist and I let to speak to these days everyone's very excited about M&A and I always ask us the question, and I always sort of have to answer it. And then it always seems to be the first point that's reported in any article as well, which is always a little bit amusing to me. Look, I think that as a business, I've said this in the various interviews is that we've got a huge amount of work done over the last couple of years. I think there's still a bit more work to do as we look to really optimize Sukari.
I think we've got a great opportunity at Doropo. I think the EDX work is really exciting as well. So we've got a really exciting pipeline that I believe can deliver a huge amount of shareholder value given our ability to execute and our financial position to be able to deliver in that as well. So don't position that we've got enough on our plate. We've got a lot to do and very sort of keen to get on with that continue this momentum that we've got now. Having said that, single assets in the jurisdiction risk is always a concern, the RoFo is a few years away from sort of from being in production. And while we're busy getting -- one should always be alive that there may well become opportunities to look at potential M&A even and when they arise. So I think that to say that we're not -- that we're completely close to M&A is not correct.
I think that we have an opportunistic watching brief, that if an opportunity arose that may tenanted then I think we should maybe consider that. But I think to be very, very clear, we're not proactively looking to go out and do things at this stage. We have a watching brief of opportunities. We're very happy with our own internal growth pipeline. And I think really importantly for us if you look at other transactions that are in the market right now where companies are saying, we have to do this transaction because we don't really have anywhere else to go. That's the polar where we have our sentiment. Lots to do, lots of generation of value to be done over the next 18 months, lots of focus to make sure we don't lose get distracted by these things as well. But be aware, opportunities may arise from time to time.
And as a business, if we can see a value-accretive transaction that makes sense for our shareholders, then I think we really have the duty to look at that if those opportunities arise. So that's the same answer I give sometimes is like to sort of set things up a little bit and it's like to sort of go out sent to me considering M&A. Yes, we are. If something makes sense there's there. But right now, very much focused on what we have strong pipeline to come. And I think I don't give any pressure to go out and do something that could ultimately unwind a lot of the good value that we've created by doing a silly deal that makes money for other people but our share I hope that sort of puts a bit of context around that and a bit more of a sort of direct sort of straightforward way, Alex.
I think it does -- and that's all the questions from me.
Thank you. Well, look, thanks all for dialing in today. Great quarter. I think the teams across the assets have done fantastically well. continue that sort of mantra around delivery into plan, and they've done that despite some challenging situations and continue to progress our sort of value maximization projects and really excited about where we can go. We put Q3 behind us. We're focused on Q4 now. We deliver year 2022 and make sure we set up to continue delivering into 2023 and beyond as well. So yes, look, I think something that we can look on with a sense of satisfaction, but maintain that momentum into Q4 and beyond. So with that, I'd just like to say thank you again, everybody, for dialing in and look forward to talking to you all soon.