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Thank you all for joining us this morning. Before I turn the call over, I need to advise that certain statements made during this call today may contain forward-looking information and actual results could differ from the conclusions or projections in that forward-looking information, which include, but are not limited to, statements with respect to the estimation of mineral reserves and resources, the timing and amount of estimated future production, cost of production, capital expenditures, future metal prices and the cost and timing of the development of new projects. For a complete discussion of the risks, uncertainties and factors which may lead to actual financial results and performance being different from the estimates contained in the forward-looking statements, please refer to Yamana's press release issued yesterday announcing fourth quarter and year-end 2017 results, as well as the management's discussion and analysis for the same period and other regulatory filings in Canada and the United States. I would like to remind everyone that this conference call is being recorded and will be available for replay today at 12:00 p.m. Eastern time. Replay information and the presentation slides accompanying this conference call and webcast are available on Yamana's website, at yamana.com. I will now turn the call over to Mr. Peter Marrone, Chairman and CEO.
Thank you very much ladies and gentlemen. Good morning. I'd like to mention that with me here today is Daniel Racine, our Chief Operations Officer. We have also Jason LeBlanc, Senior Vice President of Finance and Chief Financial Officer; William Wulftange is here along with Henry Marsden. Henry is a successor to Butch, who is retiring from the company. Henry has been with the company for now more than a year, and it was part of an orderly succession. We thank Butch for his service at the company, and we thank Henry for having stepped into the large shoes that need to be filled with Butch. We hope that this is perceived as an orderly transition, and that when it comes time to discuss our reserves and resources and exploration opportunities, and there were several of those, we will bifurcate the discussion between Butch on what has happened to date, and what Henry plans to do going forward. We also have our operational management here. Yohann Bouchard and Gerardo Fernandez, who report to Daniel, so that to the extent that there are any questions or comments, they can help you with any answers to those questions. We've have already reported on this, but let me highlight that our gold, silver and copper production met or exceeded our expectations. We increased our gold guidance a couple of times last year, silver guidance once, copper as well. We exceeded not only our guidance several times for gold and for silver and copper, but we also exceeded our budget expectations. We've said before in prior calls that we risk adjust our budget to determine what we think is a reasonable estimate of production for guidance. And I'm very happy to report that last year, we produced a level of metals that was not only in excess of our revised and improved guidance, but also in excess of our budgets. If we move to Slide 5 of this presentation, I want to highlight a few points. Clearly, we talked about the increasing -- increases in production and meeting or exceeding guidance. We did that at costs that were at or better than guidance. We -- you see here the operational and financial achievements of the company. Clearly an important one is Cerro Moro, and that's advancing very well to start up in the next several months. I want to highlight a couple of points on the financial flexibility, financial achievements and balance sheet improvements. That $300 million deal, that we did at the end of last year, the senior note deal, enhances our financial flexibility and ensures cash flows and free cash flows in the next several years are available for purposes other than debt repayment. And that's important from a shareholder perspective and from an overall financial health point of view for our company. The copper prepay of $125 million that was done post the year-end, but is significant and was planned and worked on during the course of 2017. This is a balance sheet friendly structure. The balance cash flows improve our financial leverage over the course of 2018. We show here that we raised more proceeds through the sale of some of our investment in Brio. We'd always wanted to be below 50%. We are very happy to report that this morning Brio and Brio Gold announced a consensual deal. As a result of that transaction, we will no longer have to consolidate our operations, and financial disclosure will be significantly simplified. We will hold in the range of 22% of the shares of the combined company. And we will maintain a significant interest in a high quality company. Our investment in Brio got much better with the critical mass, size and scale that has been created, or will be created as a result of this transaction. On the strategic side, we've discussed before the right sizing of operations for the purposes of optimizing not only production, but also cash flows and free cash flows. That may not be immediate, but over the course of time. The rightsizing of our portfolio. Let me highlight that in addition to all the things that you see on this page of the strategic developments, one important one is the exploration successes. As we have said before, we adopt a rolling approach to reserve and resource increases. Exploration successes ultimately must lead to resource and reserve increases. We have applied a more stringent criteria last year to estimate reserves and resources to increase their reliability. This year we expect to reap many of the benefits of those exploration discoveries that were made over the course of 2017 that were matured in 2017 toward resources and reserves improvements. Our reserve mine life has increased in the last several years, and we are poised for more improvements. If we move to some of the strategic objectives for 2018, clearly the -- one of -- a critical one is the ramp-up and the startup of Cerro Moro. We expect to deliver a significant change in free cash flows that will begin with the completion of the ramp-up of Cerro Moro, so for the second half of 2018 and more significantly, in 2019 and 2020. We are advancing and continue to advance several studies relating to a range of opportunities at Chapada. Chapada started with a 17-year mine life in 2007. It continues to have more than a 15-year mine life in 2017, 2018. And we have new discoveries that are now being matured down the path toward ultimately determining what is the true potential of that Chapada Complex. These include Suruca, on the oxides and the sulphides, Sucupira, which is at the perimeter along with Baru, and we're also looking at a plant expansion that would increase copper production and maintain or improve gold production as well. On the mineral reserve front, I touched on that a few moments ago. We expect to see increase this coming over the course of this year and into the next several years. And Butch and Henry will provide us with the details on that. Now one of the things that is important on the change in philosophy of this company, as you see on this slide of the presentation, is that we are placing more emphasis on the maximization of cash returns on invested capital. We recognize that we have a disproportionate portion of our portfolio in nonproducing assets. And this has the effect of reducing our cash flows and free cash flow returns. Our intention this year is to improve on those returns. And that would require us to look at portfolio rationalization and also looking at what are the strategic alternatives for some of the assets that are non -- presently noncash flow generating. In some cases, we may bring those to cash flow generating. We may deliver production plans and others will look at other strategic alternatives. And in the end, that will provide for further and continuing balance sheet improvements as well. As you see in our production guidance, we're showing production guidance in 2 ways. One is with gold production and silver production and of course, copper, and also on a gold equivalency basis. So gold production is expected to increase by just over 5.6% in the next several years to 970,000 ounces. We're not including Gualcamayo in this, as we have designated that as an asset held for sale. Silver production will increase a whopping 37%. And so we see that very significant production both -- for both of our precious metals. And copper will stay comparatively flat at about 120 million pounds per year. That silver production is very significant. Now I recognize that we reduced our 2019 silver forecast. We plan to more gradually increase silver production so as to reduce development costs, and the risks of development that are associated with any asset. And that leads to an emphasis on cash flows. Our production guidance then on a gold equivalency basis is expected to grow from 892,000 ounces last year to over 1 million ounces this year, and increasing to 1.15 million ounces by 2020. As significantly, if we apply copper as a credit, we're able to do that at a by-product cash cost per unit produced of under $480 per ounce, and an all-in sustaining cost basis of below $750 per ounce. And with that ladies and gentlemen, as an introduction, let me pass it to Daniel on our operations.
Thank you, Peter. Good morning, everyone. We continue the trend of strong performance in the fourth quarter of 2017. We produced 259,000 ounces of gold, 1.2 million ounces of silver and 34.7 million pounds of copper. We were able to delivered fourth quarter production at the by-product all-in sustaining costs of $829 per ounces of gold, and $11 per ounces of silver. As Peter mentioned, our full year co-product cash cost and co-product all-in cash sustaining costs were in line with expectations for all metals. On the by-product basis, full year gold production was delivered at a cash cost of an all-in sustaining cost per ounces at $561 and $820, respectively. Looking forward, we see increase in gold and silver production in 2018 as Cerro Moro comes into production. We expect to produce 900,000 ounces of gold, 8.15 million ounces of silver, and 120 million pounds of copper. Overall, the approach and parameter used for budgeting are consistent with those used in 2017. As Peter highlights, we also provide GEO guidance to help give us a better census of the size of production platform. If we look on a gold-equivalent basis, we are guiding approximately 1 million ounces for 2018. Total gold production is 10,000 ounces above the sum of the mine-by-mine expectation, as we have not allocated these ounces to a specific mine at this time. For our existing mine, we expect to continue the established trends of delivering stronger production in the second half of the year compared to the first half of the year. Going back to 2010, we have seen a first half to second half split of 46% to 54%. In 2018, we expect approximately the 47% of the gold production and 46% of the total copper production to be delivered in the first half. For Cerro Moro, we expect opportunitively 25% to 30% of gold mined in the first quarter of 2018 -- first half of 2018. It's important to note that the guidance of 900,000 ounces excludes Gualcamayo. At Gualcamayo, we are expecting approximately 110,000 ounces of gold in 2018. Looking at 2018, gold and silver costs, we are expecting to deliver at a lower costs and all-in sustaining costs per ounce compared to 2017. Certainly, the addition of Cerro Moro and its low-cost structure is the main driver for cost decreases. We will also continue to pursue productivity and cost containment efforts across our existing operations. However, local currency appreciation compared to the U.S. dollar and rising input price are expected to impact our cost in this -- in the year, partially offsetting the planned reduction in total cost per ounce. That being said, we still expect to deliver precious metal production at an impressive by-product all-in sustaining costs between $725 and $745 per ounces of gold, and at $10.50 and $10.80 per ounces of silver. If we go to the operation, higher development in the second half of 2017 provide us support for 2018 production expectation. I would like to provide some commentary of the outlook for each of the operations. At Chapada, we continue to have significant opportunities available to us. The cleaner circuit expansion that we commissioned in 2017 is supporting higher recoveries, and we expect the positive impact to continue in 2018. We will continue looking at other initiatives to further enhance recoveries. We are also looking at opportunities for plant throughput increases, and the broader Suruca Complex. At the time, we are evaluating plans for Suruca and then Sucupira and Baru, which are immediately adjacent to the existing pit, and the potential to bring forward production from these deposits. As part of this evaluation, we are looking at opportunities to expand the mill capacity to treat ore from Sucupira and Baru and potentially low-grade ore stockpiles, which are expected to grow by 15 million ounces -- 15 million tonnes in 2018. We continue to advance development effort at the Suruca oxide project, while considering recent drill result from Suruca Southwest and Suruca sulphide, which is located beneath the existing oxide deposit. At this point, we are assessing a broader Suruca Complex. We expect to be in a position to provide additional detail on the range of development opportunities, and related plans for Chapada in the second quarter. In 2018, we expect similar seasonality at what we have seen in the past from Chapada, so about 44% of gold production and 46% of copper production is expected in the first half. At El Penon, we expect continued strong performance. In 2018, we expect the operation to continue delivering based on the successful rightsizing we completed in 2017. This is allowing us to more efficiently mine our ore vein. The increased development we completed in the second half of 2017 provided -- provides support for the 2018 production. On the cost side, we are going to continue targeting productivity improvement and commitment initiatives such as internalizing, mine development and ore haulage. Exploration remains our significant focus for El Penon, and we will advance our plan into core mine and district, while we look to develop new targets. The rightsizing has been a success, and we are maintaining a 3-year production guidance of approximately 145,000 of gold per year at an all-in sustaining costs below $950 per ounce. Canadian Malartic delivered record annual production in 2017, and we expect to exceed that in 2018. The extension project formerly Barnat is advancing according to plan and we expect to spend approximately $37 million on expansionary CapEx on this project in 2018. Additional CapEx is expected at Odyssey and East Malartic, including developing and exploration ramp to access certain zone of Odyssey. I would like to clarify one point about the planned production gold at Canadian Malartic. Barnat is expected to contribute some production late in 2019, but doesn't ramp-up until 2020 and 2021. In the meantime, increased production is a result of higher grade out of the main pit. At Jacobina, we are continuing to see the benefit of change we made to the mining method and other efforts related to cost containing and improving productivity. We continue to have about 8 to 10 months of inventory developed underground, and we have added flexibility with a surface stockpile of about 50,000 tonnes. 2018 guidance reflects the 2017 run rate current and positioned the operation well as we continue to target the strategic objective of 150,000 ounces per year. At Minera Florida, we are advancing the transformational strategy we began last year. We are projecting lower sustaining capital and exploration expenditure in 2018. As previously planned, expenditures are expected to be spread across a number of years. We are expecting lower production in the intermediate terms, while production is expected to increase to 120,000 ounces of gold by year 2021. We will be spending $18 million of expansionary CapEx in 2018, which will support the completion of the land acquisition we previously entered into as well as mine development in new ground, including Hornitos and Pataguas tunnel. The longer-term strategic production objective at Minera Florida remains at 130,000 ounces of gold per year. Last but not least is Cerro Moro. We advanced the project according to plan in 2017, and it remains on schedule as we began mill commissioning this quarter, we then expect the ramp-up operation to commercial production in the second quarter. This year we are expecting 85,000 ounces of gold and 3.75 million ounces of silver. Relatively, a lighter silver production is a result of our effort to optimize mine sequencing and deliver the optimal mix of gold and silver production. We are now expecting a higher proportion of production to come from gold-dominant stock, which will provide additional flexibility to maximize gold production. There is about $61 million in construction CapEx expected this year as we finished our development, and we currently plan to spend $9 million on exploration as we look to increase the value of this project by achieving our targets of adding 1 million ounces of resources in the coming years. As you can see in the top right, this is expected to be a low-cost operation with an all-in sustaining costs of approximately $650 per ounces of gold, and $915 per ounces of silver. We are excited to bring Cerro Moro online and it will be a significant contributor to cash flow, starting in the second half of this year, but more meaningfully in 2018. Thank you. And I will now turn the call to William and Henry to discuss our resources estimate and exploration.
Thank you, Daniel, and good morning, everyone. This first slide depicts the mineral reserve and mineral resources as a comparison of 2017 numbers to 2016 gold category totals in bar graph format with copper and silver totals listed below. In the 2017 bar graph, you can see the movement of inferred mineral resources into the measured and indicated resources in preparation for a reserve -- placement into reserve categories. It is important to note that economic mining criteria, such as top cuts and minimum widths have been rigorously applied to all of the resources at all the mines and all the mines are using a mine-stope optimizer program for the reserves. Also not all of 2017 exploration successes are reflected in these totals. Yamana is evaluating results from Suruca Southwest at Chapada, [indiscernible] into mineral resources and mineral reserves. And the drilling results at the Veronica vein in Cerro Moro continued into December -- continued to be received into December. So the results there were received too late to be included in the reserve and resource tables.Next slide, please. So what did we accomplish in 2017? Chapada, we saw a reserve growth with significant additions to resources at Suruca Southwest and expect to add more there. At Canadian Malartic, we added 1.2 million ounces growth in inferred mineral resources at East Malartic with additions to inferred mineral resources at Odyssey as well. At El Penon, we placed production -- we replaced production and applied the mine-stope optimizer to all structures to come up with the new mineral reserve numbers. At Cerro Moro, we discovered the 1.5 kilometer Veronica structure adjacent to its existing infrastructure. So this should most likely be placed into reserves in the coming year. At Jacobina, we replaced production and saw a strong increase in mineral -- measured and indicated mineral resources. At Minera Florida, we replaced production and grew reserves with a very strong growth in measured and indicated mineral resources. So in all, 2017 was a very strong year for Yamana exploration, and will -- the results will provide a good foundation for work in 2018. I will now turn the presentation over to the new SVP of exploration, Henry Marsden.
Thank you, Butch. 2018 exploration program is fairly straightforward. We will continue to build on the successes of 2017. All of the programs at the mine sites are designed to meet our life of mine plans. So will be designed to replace production and replace reserves. And also to replace depletion and conversion in our resource categories. The only variance really from that program this year, we have 2 projects, Chapada and Jacobina, in which we have very long-term reserves. And the focus in 2018 will not be on replacing those reserves as much as increasing grade and the quality of the overall mineral resources. We also have a large discretionary budget available to us in 2018. This will give us great flexibility to follow up and improve on programs, and hopefully further increase resources in projects like Cerro Moro.
Thank you, Henry. Turning now to our financial performance. We delivered $1.8 billion of revenue in 2017. This is up slightly over last year on higher copper sales quantities and higher metal prices. Net loss attributable to Yamana shareholders for the year was $194 million or $0.21 per share. The loss was impacted by a noncash impairment of Gualcamayo and related Argentinian exploration assets. This is partially offset by an income tax recovery related to a tax rate change in Argentina. These items are included among other adjusting items totaling $0.28 per share to attributable earnings during 2017. Cash flow before taxes and working capital changes was $594 million for the year. Looking closer at cash flows, we saw the generation of free cash flow increase over the course of the year in line with the seasonality of our gold and copper production. We generated approximately $107 million of free cash flow during Q4, and $252 million over the year. With the completion of construction and startup of Cerro Moro this year, we expect our overall net free cash flow to increase given the step change contribution from our newest operation.In anticipation of the construction wrap up at Cerro Moro, we have put in place commodity price protection for both copper and gold to ensure we would generate steady cash flows during this important time when we're investing more heavily in our growth. Combined with the steady performance of our operations during 2017, you can see that this consistency of our traditional H1, H2 annual splits in cash flow generation held up during the year. We have this previously mentioned price protection in place through the startup of Cerro Moro. With the step change in cash flow generation from Cerro Moro, we transitioned from an investment cycle to a cash flow harvesting cycle bringing this year, but more pronounced into 2019. During 2018, we'll see our traditional weighting of production and cash flows, slightly more geared to the second half of the year because of the timing of startup at Cerro Moro during Q2. Recently, we've taken several steps to improve our balance sheet and financial flexibility and better balance our cash flows. A copper advanced sales program was completed in January that aimed to better balance our cash flows during the final spending on Cerro Moro in the first half of 2018.Also, during Q4 last year, we issued $300 million of new bonds at attractive rates in anticipation of $110 million of debt maturities this year during Q1 and Q2. In January this year, we also completed the early redemption of $181 million of debt, originally due in December 2019. We've now extended our debt maturity profile and improved flexibility, as no further debt maturities are due until 2020.This quarter, we all -- we will also close on the sale of our jointly owned exploration properties of Canadian Malartic Corporation for $162.5 million in cash. With these efforts, we'll continue to improve our balance sheet and progress towards our leverage objectives. New contributions from Cerro Moro, among other mines, at a time when our overall expansionary capital will be decreasing will further support these objectives. I'd also like to cover off some other guidance items. We expect sustaining capital to total $170 million, a little higher than last year with the addition of Cerro Moro. A large portion of our expansionary capital budget, $51 million (sic) [ $52 ] million and $37 million, respectively, relates to Cerro Moro and the Canadian Malartic Extension project. We also have expansionary capital being invested at both Jacobina and Florida in anticipation of higher production levels at both of those operations in coming years. Capitalized interest of about $10 million is also included in the total expansionary number. With the startup of production at Cerro Moro, DD&A will be higher year-over-year at around $450 million. Over our guidance period we expect steady annual growth in our GEO production, first from our newest mine Cerro Moro, but also from contributions at Malartic, Jacobina and Minera Florida. Silver production is growing more significantly from Cerro Moro and also drives the GEO increases. We'll produced this at very favorable cost, and especially when considering the benefit we get from by-product copper credits at Chapada. All this leads to improving margins and cash flows, and with the drop in expansionary capital, growing cash balances. And now with some last thoughts and takeaways. First, I think it's clear that Yamana has a substantive and growing precious metals production platform. Cerro Moro is a large part of that growth, but we also have other important contributors. On this base, and with cost margin improvements, we'll be increasing our cash flow and free cash flow generation. And lastly, we'll be generating this net free cash flow at a disproportionate rate to our current market capitalization. We think that's a compelling value proposition.With that, I'll now turn the call back over to Peter.
Jason, thank you very much. So ladies and gentlemen, that's our formal presentation, and if we can open the call up to questions.
[Operator Instructions] The first question is from Dan Rollins of RBC Capital Markets.
Peter and team, I have a just a few questions here and maybe just to get us to start off on Cerro Moro. Just looking for a little bit more color on how the mine sequencing has changed. Looks like the gold equivalent production for 2018 is down by about 5,000 ounces, but seems to be a bit heavier drop in 2019 with only 6 million ounces of silver versus I think 9.9 million you were looking for last year. What's changed with the mine sequencing? And how should we envision this sort of steady state throughput? When is the top out versus prior expectations? Because the '19 level seems to be a significant haircut relative to previous estimates?
Dan, this is Gerardo Fernandez. Well, the sequence change in the [indiscernible] for cash flow. And the previous plan did maximize silver and brought in 2 mines that were richer in silver early on in the development of the project. After reviewing of our plans and after drilling, we concluded that in order the de-risk the execution of the project and also to maximize the cash flow generation in the first 3 years, and also foreseeing the results in exploration, it was worthwhile to delay those 2 mines, wait for the results of exploration, for instance, Veronica that's rich in gold, high-grade, it's an open pit, doesn't require the development of 2 more ramps. And it can be quicker and, I would say, less capital intensive in the next 2 years [indiscernible] for the life of mine. It's not included in the plan yet because we just discovered it. We are drilling it and we need to develop it. Most likely it will be an open pit high-grade mine that will replace in the position the 2 silver rich mines that were in the plan. So our strategic objective for Cerro Moro is to get a stable platform in cost, cash flow and production. Gold, we're trying give [indiscernible] 130,000 ounces per year, and silver will float a little bit. That float, it will be between 6, and 8.5 to 9 million ounces, depending on the grade and contribution of this one.
Okay. So I take it, basically what you're doing is you're going to rightsize this project to start off with and sort of looking to rightsize it down the road given the lessons you've learned at El Peñón and of some of the other assets. So it's really more of a stable asset going forward which allows you more time for exploration success? Is that what how should we read into it?
Yes. And also taking a -- we're taking a look at what we can do in terms of optimizing the cash flow generation in the first years. I think you guys are aware with -- Cerro Moro is an open pit and an underground mine. Open pit is something [indiscernible] or mining method very well-known in that area in Argentina, Santa Cruz. Successful mines are in the area with a lot of knowledge and the ground requires more training at ramp up. So we are establishing a strategy where we rely more on open pit in the first couple of years so we de-risk execution of the project. And we built our strength for underground development of mining based on our experience in Gualcamayo and El Peñón, but with a lower-risk profile. So we don't have to rely on high-graded stopes to get rich silver at the beginning, we built that capability. We don't -- we are not betting on having contractors for underground. We'll develop our own work force. We're doing that. We started doing that 2 years ago. And that we think is the best proposition in terms of cash flow generation for the medium and long-term.
Okay, perfect. And then Peter, maybe you can touch base on Gualcamayo. Now it's an asset, held for sale, it won't be in the guidance. But what does the current sales process look like? How far are we down the road? When do you expect to have an announcement on the divestment of that asset?
Well, under accountancy principles, and Jason can speak to this better than I can, but under accountancy principles, an asset is held for sale for a year. We believe that within that period of time, we will execute on our transaction relating to the sale of Gualcamayo. The best I can say at this point, Dan, is that you should anticipate that over the course of this year, that's where we will be.
Okay, perfect. And then and maybe, Butch, you could just comment. I noticed that the gold price assumptions used in reserves were up a little bit at some of the mines. Just provide a little bit of clarity on what's -- what the rationale behind that was?
It was just to help better identify the -- and confine the mineral resources that we have at the mines.
Dan, the line went funny a little bit. So I hope that we heard the question correctly. But if you are referring to our resources and reserve estimations, we're applying more stringent criteria, minimum widths on reserve estimation. Even in our inferred resources, for example, at Jacobina, we're now applying economic parameters. So I think this is an important point. That isn't to say that the resources aren't there. We're just saying we're reclassifying them, at least for now, so that we can do more drilling, better assess the economic criteria, as we're mining it. For example, at Canavieiras South and Canavieiras Central, we'll have a better sense of what to expect. And that will give us a better impression of what should be classified as resources inferred to start, and then coming into proven and probable reserves. Those more stringent criteria have been applied across all of our operations. So in some respects, if I then take it to El Peñón, it is a bit of a comparison of apples to oranges to say what was our reserve estimate at the end of 2016 to the reserve estimate at the end of 2017 because we have applied these more stringent criteria. And we also have -- because of the -- the width of the veins, in applying those criteria we have reclassified some of the areas that were considered to be reserves to reflect what we can actually mine, and that number has come down. So interestingly, internally, if we said -- for a moment disregard what we said at the end of '16 and look at what we did in February of '17 with the new mine plan. Throughout the course of 2017, we actually saw an increase in reserves from what we saw internally to what we saw at the end of the year. And so that's what I believe is giving Butch and Henry the confidence that, that approach will give us increasing numbers into 2018.
Okay. So just continue moves from last year to sort of reset the bar and allow you to basically, add more stability to production going forward and convert resources into reserves with a lot more confidence?
Correct. And again without mentioning this point, I think it's an important point to address. By applying those more stringent criteria, we also are in a better position to plan our production. And as you know, it is a stated objective of this company, it was true last year, it's true this year that we want to be mining our reserves. So that creates more certainty in terms of what to expect from our production platform on a year-to-year basis.
The following question is from David Haughton of CIBC.
Just back to Gualcamayo, quite a reset of expectations, 150,000 ounces last year, 110,000 ounces for this year. Can you just walk us through the way that you've rationalized that production? Is it through lower mining rates or a lower grade? And with the higher costs, does that also reflect the fact that you've got lower volume going through?
This is Gerardo. This is volume adjusted. It's the throughput from the open pit, it's just the one that reduced. We keep the underground mine at 1.1 million tonnes, and the throughput of ore going through the crusher is reduced. That allows us to reduce the settings and get a little bit more recovery in the process.
Okay. So if the underground is maintaining the 1.1 million tonnes per annum with the material going from the open pit. Would that be around the 3.5 million to 4 million tonnes per annum sort of thing?
Correct.
Okay. And with that you just have an improvement in your recovery. That's just a longer leach cycle that you're looking at there or how's that working?
Well, the -- there are 2 parts with the recovery. One is that crushing finer will give us a couple of points in recovery, and the other, we're in the process of -- is not fully proved yet, but we are seeing a [indiscernible] in order to support even finer crushing and increase the recovery further.
All right. And with the reset of the Florida plan, we were on-site mid-last year and saw that you have done some rejig on the way that you're thinking about the future of that mine. It's also dependent upon the tunnel ultimately going into the main portion of the ore body. What's happening over the next couple of years? Can you just describe what we're looking at?
Okay. It's probably linked to what we see in exploration. And we're having some surprises -- good surprises that have impacted our decision on how to execute the development. When you were at site, we showed you the Hornitos tunnel. And after that, we continued drilling Pataguas, and we came up with an idea that could access the high-grade core of that vein from the existing infrastructure and start developing early on and reaching the ore earlier, like a year earlier than we thought from Hornitos. So we gave priority to that development, but it's within the mine, but very close to the exit, it doesn't impact the core mine, but it's much, much shorter to get to the high grade at the right elevation. And that allowed us to do exploration in that elevation as well. The other surprise we had is the [ PBS ] or [indiscernible] stope, which is on the same trend but the other side of the creek. You probably remember those slides and I think it's in the presentation. Those corridors go across the property. So exploration late last year also discovered mineralization there. PBS is in the resource now. There are other 9 to 10 veins who haven't included in the results, we're not ready, we need to drill them, but they were discovered. So they're -- and that is -- in the other side of the mine, we can connect the infrastructure to the existing infrastructure. So the plan -- the overall plan -- long-term plan remains the same. We are developing the new zones as we are finding them. Hornitos will be developed, we don't have to develop it right now because we have these new zones that are closer to existing infrastructure. And we think we can bring them into production with high-grade earlier. So our plan is to keep developing Pataguas, developing PBS and resume the development of Hornitos in 2019.
Okay. And the development CapEx that you've got there of this year, I'm guessing would be 10-plus million dollars? Is that a reasonable ballpark?
Yes, in terms of $60 million. It's more or less flat for the 3 years, and we do have full investment on the plan as you know with the improvements we need to do.
Okay. And one last question, I know I'm taking a bit of time here. You'd mentioned about the underground workers at Cerro Moro. What sort of mix should we be thinking about as far as tonnage from the open pit versus the underground for the first few years at Cerro Moro?
First year -- this year is 70% open pit. Next year, it goes down to about 60% open pit. And then we start going up in the underground to the opposite 70% underground, 30% open pit. That is in the current plan. As I mentioned in the first question, based on the results of an exploration, we may have -- I think, we will have a higher proportion of open pit as the new veins are discovered. New high-grade will be probably be replacing some of the stopes underground and bring in ounces -- cheaper ounces sooner.
The following question is from Steven Butler of GMP Securities.
Jason, could you tell us what's your carrying value is on Gualcamayo at this point?
It's the $150 million, Steve, that we disclosed in the results, that includes working capital as well.
Sorry excludes?
Includes working capital.
Includes, okay.
Yes.
That's fine. Butch, on your Veronica vein or the Veronica vein at Gualcamayo -- at Cerro Moro, what is the approximate drill spacing that you've outlined this vein on? You talked about 1,500 meters of strike. I'd like to know maybe its average width and depth extent? And what sort of grades are you realizing?
I'll jump in and answer that one. We initially tested it at 240 meter centers. We are now down to 120 meter centers on the entire vein. We've only taken it down to about 120 meters depth at this point. And we've infilled some of the higher grade zones to 60 meter centers at this point. We seem to see -- we definitely see 2 high-grade shoots within the structure and possibly a third that we're still trying to outline.
Okay. And what's the approximate width of the vein?
Average width is over 1.8 meters, considerable variability. We have some very wide sections that include the part that we're hoping to open pit. And average grade at this point is about 7.7 GEO.
Okay. Daniel, do you have a sense of timing of various optimization studies that you're working on at Chapada in terms of telling the market a bit more?
Yes. Steve, we -- I think we mentioned that we are going to come in Q2 with a plan for Chapada. So we are going to -- in the Q2 report, we're going to speak about our expansion plan at the main mill operations, and what we're going to do with the Suruca Complex, the Baru and Sucupira pit. So next quarter, you'll have all these answers.
[Operator Instructions] The following question is from Anita Soni of Crédit Suisse.
I just wanted to get a better understanding of what prompted your decision to put Gualcamayo for sale? As another analyst had mentioned that it seemed to produce rather well last year at 150, and this year it's just 110?
Yes, Anita. The part of it is philosophical. We're trying to maximize and focus on operations where we have more immediate prospect, larger -- potentially larger prospect. Gualcamayo has a number of years of mine life based on proven and probable reserves and an allocation of resources to reserves. It has a significant number of exploration targets for oxides that can extend that initial mine life. It will require effort on exploration for those targets. And it will also -- it also has deep carbonates. But deep carbonates we see as probably 6 years out. Somewhere in the range of 6 years out. As we said in prior calls, deep carbonate is already more than 2 million ounces of resources and it's open in every direction, so there's a high probability that it will increase in size and scale. And it would require significant capital to put that sulphide deposit into operations with the new plan. So we're looking at Gualcamayo and saying, well, if we were to optimize -- say if we were to look at the portfolio of assets that we have and the quality of assets, which is generating better cash flows, better free cash flows which has the prospect of generating those? We're not looking at it only from the point of view of number of ounces. Which of our assets requires more effort, and in concentrating on assets that require more effort, you may not be concentrating on efforts -- assets that can deliver better returns and better results with less effort. The result of all of that is that we concluded that Gualcamayo was probably better suited for a sale rather than a continuing development. Now that isn't to say that we're not going to continue to mine it and mine it effectively. That isn't to say that we're not going to continue to optimize that 110,000 ounces in our guidance. Last year, we guided 140,000 ounces and we produced 154,000 ounces. So we're going to continue with the efforts on production. We're going to continue with the exploration effort. And clearly, we're going to continue to evaluate the quality of deep carbonates, that sulphide discovery. But at this juncture, we have so many other opportunities in the company that deliver, what we think is more immediate and better value that we should be deploying our time. The Gualcamayo falls into a category of lesser priority for us than other assets. And it still has enough optionality that it makes it interesting for a potential sale.
So in terms of sale value, I know some -- is there any thought or idea to putting, I guess, a optimized plan together for this -- for the buyers? I know some of your competitors have done that when they've done asset sales and have gotten pretty good multiples [ 10 PB ] on it.
Yes, so we've taken that approach. And so we've looked at how -- what does it look like on a base-case basis. What does it look like on an optimize basis. And we're now engaged in a process of what is the optimal price that we can get for that asset. So you're quite correct, that's the approach that we're taking. But we also recognize that how much one sells an asset for is, as much a function of what a buyer -- who is the type of buyer? What tolerance they have for a particular jurisdiction? That often narrows the scope of the number of buyers that would be available and the type of buyers and that goes to the purchase price. But we're confident that we can deliver a transaction on Gualcamayo. But the equally important point is that it doesn't mean that we're not going to continue to look at what are the opportunities in the meantime. There have been several examples, as you're aware, where a company considers that something should be sold, and then you discover -- you've make that discovery. And with that discovery, something changes in the parameters and the views. For now, we're thinking that within this year, and as I answered to Dan's question, we're going to be selling Gualcamayo. But we'll continue to evaluate what are it's opportunities in the meantime.
Right. And then a last question. You didn't give any update on -- can you give anything on the Leagold/Brio transaction at this stage?
Well, they announced this morning, a consensual transaction.
You said that in the start.
Yes, so -- we think that, that's very encouraging and very positive. We let lone -- we provided our support to the original takeover bid concept that Lea had put forward. We are very pleased and the 2 boards have agreed to this consensual deal. And we're pleased with the consideration that is being offered. I have to say, Anita, that we're particularly pleased, with the company that it creates. So the company that creates has critical mass, size, scale, quality of assets, what we think is excellent stewardship through the management of those assets. The result of all of which is that we think that our investment will be worth a heck of a lot more than it is today. And as you're also aware, in 2016, when Brio was taken public, we saw an opportunity for business combinations to create critical mass, particularly in that size of company. Now clearly, one of our hopes was that Brio would be the consolidator. The share price didn't perform according to our expectations through 2017. But the fact that it's not a consolidator, it doesn't mean that it doesn't make sense to consolidate. And so we think this consolidation of the 2 companies is excellent. And as a collateral benefit, we also get to clean up our financial reporting, our operational reporting, because we're no longer consolidating the operations and financial performance of Brio Gold.
The following question is from Josh Wolfson of Desjardins.
Two quick more financial oriented questions. First, in terms of capital spending guidance, is there Chapada stock com movement included within that figure or would that be in addition to it if there is any guided for this year?
No, it's not in the capital, Josh.
Okay. So what should we be expecting this year for that?
Well, there would be an inventory move. It will go to long-term inventories.
Okay. I think last year we saw on the order of $20 million or so, is that something we should expect this year again?
Yes, that's about right.
Okay. And then for the Gualcamayo book value of $150 million, and this might be too granular for the call, but is there any proportion of that or any inclusion of what the deep carbonates could be or is that based on the existing reserves?
No, we can't delineate it that way.
Thank you. There are no further questions registered at this time. I'd like to turn the meeting back over to Mr. Marrone.
So let me conclude, ladies and gentlemen, with a couple of pickups on some of the questions that were asked. The -- one of the first questions was about Cerro Moro. We should highlight that we're also in our current plan for production in '19 and '20. We are estimating that the amount of processing would be below the design of the plant. So we're roughly at 80%, 82% in 2019. And if we were -- that's more to blend out through 2019, 2020. And to see -- to have a look see on what Veronica and other vein structures look like. If we were to go to full-plant capacity then that silver production would come up, the gold production would come up much more significantly. And we'll provide more guidance on that throughout the course of the year. And certainly, when we have our mine tour -- our first mine tour with investors in early March. The second is on Chapada. And on Chapada, what we said the second quarter, my hope remains that before our shareholder meeting, which is in early May, we'll be able to say, "here's the focus on Chapada, here's this big complex." We have Sucupira and Baru at the pit perimeter, how do we do a pushback of that pit that allows us to be able to capture some of those higher-grades that we reported in our results into -- through our plant. The second is Suruca as a complex, the oxides were continuing to advance that for heap leaching, but the sulfides represented an excellent opportunity for a significant production. We're not talking about 40,000 to 50,000 ounces per year from the oxides. It's a significantly larger number than that, potentially a multiple of that. And we're also looking at the plant. We've discussed that we're creating the stockpiles. So part of what we're looking at now is how do we increase the plant capacity that allows us to be able to capture some of that into production. Gold production would be expected to stay comparatively flat from the ore coming from the pits, but copper production would increase very significantly. So sometime in the second quarter, our hopes remains by the time of our shareholder meeting in early May, we'll be able to say, here's the focus of this big complex of opportunities, and what we're going to be pursuing over the course of the next several years to maximize production for gold, production for copper, but also to significantly increase the cash flows generated from that very robust asset. Ladies and gentlemen, with that, thank you very much for participating in our call, and we'll look forward to the next call with you.
Thank you. The conference has now ended. Please disconnect your lines at this time. We thank you for your participation.