Equinox Gold Corp. Common Shares

ounces with cash costs of between $13.55 and $14.60 per ounce and all in sustaining costs of between $15.75 and $16.95 per ounce. These costs remain somewhat elevated as they reflect a full year of the increasing input costs that we saw over the course of 2022. That being said, we are working to mitigate this cost pressure through optimization opportunities at all of our sites. Looking beyond 2023, we also expect to see the benefit of lower costs and the overall increase in production from the Greenstone Mine and the Castle Mountain Phase II expansion as those projects enter production. With that, I'd like to hand the call over to Peter Hardy to run through our financial results. Thanks, Greg.

We're on slide five. Safety and environmental practices continue to improve over 2022. We ended the year with a 12-month rolling total recordable injury frequency rate of 2.12. and a 12-month significant environmental frequency rate of 0.63. I also want to add we had no LTIs in Q4. These are just great results, and it takes an effort by everybody, the whole company, and so we just want to say congratulations to all of our employees for making Equinox a safe place to work. It's really a great achievement for the year on safety. For the year, we sold 532,000 ounces. It was really an investment year. We invested $456 million in growth development. $328 million of that was at Greenstone. $49 million of that was at Santa Luz to complete construction there. And we also spent $43 million at Los Filos. That was primarily on Burma Hall underground development and preparing the Los Filos open pit for its next phase. The $139 million we spent on sustaining items was primarily deferred stripping in Arizona, Mesquite, and Los Filos. On slide six, as Greg mentioned, we had a good quarter. We had our second highest output for the company to date. We sold 149,000 ounces for revenues of $260 million and an average realized price of $1,733 an ounce. As Greg mentioned, cash costs, for the quarter were 1,223 and our own sustaining costs were 1,523 per ounce. The interesting thing we saw during the quarter in relation to costs is while our costs are up significantly, if you look at it on an annual basis, 2022 versus 2021, or on a quarter-on-quarter basis, i.e. Q4 2022 versus Q4 2021, costs are up significantly. The interesting thing that happened in the second half of the year, going from Q3 to Q4, is we actually did not see much by way of cost increases. In fact, costs stayed overall relatively flat. We saw some increases in consumables, such as reagents and grinding media in Brazil and the U.S., which were offset by decreases in fuel. So we're quite pleased to see that it looks like costs have peaked significantly. sometime in Q3 and at least remained steady for Q4. With respect to what that means for our financial metrics, we saw improvement in Q4, which we're, of course, happy about. EBITDA was $65 million, $75 million on an adjusted basis, net income of $23 million for earnings per share of $0.07, $7.5 million of income on an adjusted basis or $0.02 a share. Cash flow from operations also improved. Before changes to non-cash working capital, we had cash flow of 80 million or 26 cents a share, so happy with the quarter. With respect to liquidity and capital position, we ended the year with just over 200 million. We have 127 undrawn on our credit facility for total liquidity of 327 million. We did draw an additional 100 million on the revolving credit facility during Q4. The market value of our investments at February 17th was about $220 million. And I'll note that we realized proceeds during Q4, $52 million on Solaris share sales and an additional $20 million in the new year. Net debt increased due to that debt draw to about $630 million. And I just want to note a few other things, or at least during Q4, we did other things to improve our balance sheet resiliency. We filed the base shelf prospectus with the ATM supplement, I should say the at-the-market supplement. I will note we have used $25 million of that at-the-market supplement through the end of January, and we've paused that program since. Also, something we did in the new year to help with balance sheet resilience and cash flow funding, we did put in place a strip of hedge callers for 20% of our production through the end of Q1 2024. That represents about 150,000 ounces. The floor of those collars is $1,900 an ounce, and they have significant upside opportunity up to a ceiling of about $2,065 an ounce. Another thing we did in the new year is we worked with our lenders and just completed late last week to retool our covenants. on our revolving credit facility, which will take us through a Greenstone startup. And we, of course, want to thank our leads, Scotia, BMO, and ING, for working really constructively with us on that. On our next slide, page seven, what does that all mean for Greenstone funding? We think we've got about $340 million as our share to fund of the remaining budget, and that's going to be done through our existing cash of $200 million, our revolving credit facility, of $127 million. There is the $100 million accordion feature also in place on the revolving credit facility. We, of course, are using operating cash flows to help fund Greenstone. We have about a $200 all in sustaining contribution margin per ounce on that. And, of course, as we've shown with our Solaris share sales since Q4, we have our investments of $220 million as a lever that we can pull to help with funding. deem ourselves well funded to complete the construction at Greenstone. On to page eight, we have our guidance for the year. Greg has already touched on it, so I'll just highlight a couple of things. First of all, the midpoint of guidance represents about a 70,000 ounce increase over 2022 production when you pull out the 14,000 ounces attributable to Mercedes that we sold last year. On costs, our view is that inflation has peaked, but the costs will stay elevated through the year, and you can see that reflected in both our cash and sustaining costs. Our view is also that the Brazilian real and Mexican peso, which are two of the better performing currencies against the U.S. dollar, will continue to hold their current exchange rates against the U.S. dollar, so that's factored in. Seasonality will continue to weight production and cash flows into the second half of the year. And we'll just make a couple final notes on sustaining expenditures. The $137 million we have there includes really only essentials on tailings facility raises, deferred stripping, and equipment refurbishments that we need to do. And of course, the growth capital of $324 million is primarily greenstone at about $275 million of it. And with that, I will turn it over to Doug to kind of run through what we're expecting for the upcoming year.

Okay. In addition to the production guidance that we have, I'll also mention that all of our mines have been working on a program that involves continuous improvement as well as consumable reduction. and group purchasing initiatives, all of that is above and beyond what we've put forward for our production and cost guidance. We've also doubled down on our adherence and reconciliation of mine plans, benchmarking and productivity improvement work, which is all geared towards achieving and beating what we've put forward Looking at the individual mines, Mesquite and Q4, we were mainly in a stripping phase for Brownie and Vista East. That will ultimately contribute to the ore going to the pads in 2023. Due to the emphasis on stripping in Q4, that means we had a relatively low number of new ounces going under leach in that period. And for 2023, we have adopted a new mine plan that will see less stripping and smaller pits in order to reduce cost at Mesquite. We continue with exploration and permitting work at Mesquite for mine life extensions. In Castle Mountain, in Q4, we were running with both run of mine and crushing and agglomeration of the material going to the heap leach pad. The plan is that we should be all going through crushing and agglomeration, so we continue working on increasing our crush and agglomeration throughput. At the same time as working on the phase one, we have been advancing our permitting on phase two and met test work in support of the phase two work, and I'll come back to that later on. At Los Felos in Q4, we had a production impact related to a shortage of explosives that was caused by a strike at our explosive supplier. We also had some of the ore that was coming from the Guadalupe open pit It had a higher copper content, which meant that it had a reduced recovery over the leach cycle. So we're now separating that to be able to leach that separately from the rest of the ore feeds. As we look at 2023, we continue mining in Guadalupe open pit and Los Felos open pit, as well as the Los Felos underground with 20% of the tons coming from the open pits. We will be suspending Bermahal Underground. That's given the prolonged development period and the lower productivity than anticipated. Just to put it in context, we have developed down to the central zone, Zone 5 of Bermahal Underground. We've accessed into it and we've been mining from it, but we need to do significant additional development in order to have enough stopes in production at the same time to be able to achieve the 1,500 to 2,000 tons per day. So in the meantime, we'll be looking at plans to be able to improve overall productivity and reduce the costs. And we'll also look at the timing for this higher grade ore to eventually be fed into a CIL plant. In Arizona, we had a longer than normal rainy season in 2022, and we relied on stockpile material more than usual, which meant lower grades go into the plant over an extended period. By the end of the year in Q4, We had an increase by our contractor of their mining fleet with an addition of nine triple sevens and an additional six articulated dump trucks. And so we had a higher total tons being moved as we worked towards returning back to our mine plan. In addition to the expanded mining fleet, we're also bringing in a second contractor who will come with 14 articulated dump trucks so that we continue mining at a higher level through the rainy season and have a stronger start once we come out of the rainy season this year. And we want to build up our stockpile significantly during the course of 2023. In Fazenda, the mine did very well in Q4 and for the year. Open pit mining contributed higher grades and tons overall and offset the lower production that came from the underground mine this year. throughput and plant recoveries at Fazenda were both above the overall plan. And our exploration work at Fazenda continues to work on resource and reserve replacement. We also continue the exploration program in the greenstone belt between Fazenda and Santa Luz. At RDM, we were processing low-grade dump material in Q4, but we suspended processing in mid-December as we waited for permitting of the additional material for dump material at RDM. In January, we've restarted the in-situ mining and we're using owner-operated equipment. We also completed the TSF raise and we've begun permitting for a filter tailing storage facility at RDM. Looking at Santa Luz, Q4 was difficult. We had lower throughput due to the hardness of the ore. We also had a high sulfur content in some of the ore that impeded our recoveries, and we also had to deal with the thiocyanide impact on the resin, which related to overdosing with cyanide. Each time that happened, it happened twice. It takes the system several days to be able to recover from that, and we have to regenerate the resin activity so it can perform properly again. So I will note the resin and leach plant is achieving higher recoveries overall than were possible by previous operators using carbon and leach processing. So it is working, but we still are working through some of the issues. By December, we changed our blending strategy, and we also adopted a new fragmentation plan in the open pit, and that's enabled us to achieve a higher throughput. And also since year end, we've seen an increase in stabilization of recoveries as we've come through January and February. Moving on to Greenstone. Ultimately, Greenstone's going to become the cornerstone for Equinox, one of the largest gold projects in Canada. It's got a 5.5 million ounce reserve, annual production of 400,000 ounces, and first production coming in the first half of 2024. On to the next slide. We are on budget and on track. The project is 70% complete at the moment, and the team has just passed two and a half million hours with no lost time injuries, so a good record. They've also had great progress, as you can see in the slide, with several of the buildings being fully enclosed. Mining started in Q3 with four trucks and one shovel, and we now have four additional trucks coming and getting ready for use. And a second shovel will be added in the second half of this year. We're 54% complete on the capital spend at the end of the year. And if you move to the next slide, you can see several more of the buildings. Four of the buildings are enclosed and heated, and next week we expect the last two buildings to be enclosed. The HPGR building, is one of the two buildings that was just being finished off this coming week, as well as the East End Mill building, which I'll note already has the roof on and a lot of the cladding is already done in the photos I saw as of yesterday. So it's progressing really well. So just moving on to the next page, upcoming milestones for Greenstone. The main ones are the buildings being closed this quarter, commencement of the ball mill installation will start, In Q2, mechanical piping and electrical installation will be happening as we move inside the buildings. And all the equipment will be on site in Q2. In Q3, we're looking at pre-commissioning of the power plant and the crushing circuit. And by Q4, we're completing the TSF and the highway relocation will be completed. And the first half of 2024 will be in commissioning and first gold pour. And moving on to the next page, our other expansion projects include Castle Mountain, where we'll see an increase in stacking to over 45,000 tons per day going to the leach pads and production of around 218,000 ounces a year over a 14-year life. We submitted the permit application in March. We continue working through the process of permitting. We'll see environmental review and public scope happening in the first half of 2023. For Arizona, we're working on the feasibility study, which involves mining from both the Piaba Underground at the same time as we're mining from open pits. That feasibility study will be wrapped up in Q2. As Greg noted, we have received permits for three portal locations. We have selected one for the initial ramp location. And we would look at establishing a exploration ramp that ultimately will allow us to touch into and mine on ore. At the same time, we would also be able to establish a series of exploration cutouts so that we can do a drilling program from underground. And there would be dimensions so that it ultimately could also serve as a production decline. On Los Felos, we delivered the updated feasibility study for the construction of a 10,000 ton per day CIL plant. Reserves in that study were increased 44% after depletion was taken into account. But as we've noted previously, we will wait on making a construction decision while we're in a high CAPEX period for Greenstone, and also while we work on our operational efficiencies and having stability with local communities. I'm going to pass it back to Greg.

Thanks, Doug. I'd like to briefly just acknowledge the Equinox team. We had some challenges in 2022, but the team has been doing a great job at navigating those challenges. We're in solid shape to fund the completion of construction at Greenstone, on budget, on schedule, and a year from now, we expect to be commissioning one of the largest gold mines in Canada. We're also working hard to progress our growth projects, as Doug mentioned, manage our costs, and improve our operations, and we're looking forward to continuing that through 2023. I think I'll conclude there and pass it back to Relynn for Q&A.

Thanks, Greg. Operator, can you please remind people how to ask a question?

Certainly. Once again, to join the question queue, you may press star, then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then 2. If you are participating through the webcast, you can submit a question in writing by using the text box in the lower left corner of the webcast frame. We will pause for a moment as callers join the queue.

Thank you. And while they're queuing up, Scott, we've got an exploration question for you. I can see from your MDA that you drilled about 30,000 meters of Arizona this year, and it looks like you're going to start the underground in Q4. When will we see those results?

The 2022 program in Arizona had three components. We did drill just under 30,000 meters. The first component was a few deep holes on Piaba itself to support the feasibility study that's been mentioned a couple of times on the call so far. Those holes were looking at converting big areas of resources to indicate it to support the reserve growth and also to address some geotechnical questions. deep in the deeper portions of the mine so those results will funnel into the feasibility study that will be released mid-year q3 the other two components included a regional program approximately 7,000 meters on a number of targets across the thousand kilometer square land package but the majority of the effort was focused near mine looking to hit targets both east and west of cabot itself within the main trend to support mine life extension, targeting the shallow open pit targets, the multiple targets that we have there. So those results we'll look to release here probably in Q2, early Q2.

Perfect, thank you. Operator, we'll take questions from the phone, please.

Thank you. Our first question comes from Wayne Lamb of RBC. Please go ahead.

Oh, good morning, guys. Just wondering, at Greenstone, Can you give a bit more detail on what you see as the bottleneck items and the large items left to spend? And where have you seen some of the savings optimizations? And I'm just curious, given the independent assessment completed last year, how does that reconcile to date and how much of the contingency has been utilized so far?

So in regards to bottleneck items, I'd say we always knew what our critical path was going to be. It's getting through to building enclosure and then starting in on the east end plant, east end of the process plant building for ball mill installation. We're four buildings done. The last two buildings finished off this week and then we're starting in on installation. I would say going forward, that remains our critical path for most of this year. Obviously, productivity is going to be the issue as we move to the more detailed piping and electrical inside the buildings. But the team's been very good at being able to adapt and compensate for where we have delays in one area. They'll turn around and work out how to... adjust the program to be able to compensate for it. Really, we're pushing through this spring to be able to maintain our schedule as we come into the summer where we're most productive, and then we get back into areas such as the TSF and some of the other Earthworks projects that we don't progress as much during the winter months. Overall, I'd say very good against our overall schedule with minor things that they've been adopting and compensating for elsewhere within the overall construction.

Yeah, it's probably worth mentioning we expect to do another quantitative risk assessment. It's currently scheduled, I believe, Doug, for around April. So we're looking forward to doing that, getting an update from an independent party on schedule and budget. With respect to your other two questions, Wayne, savings optimizations, one of the bigger ones, frankly, is foreign exchange. The Canadian dollar, unlike the peso on the Brazilian, the Mexican peso on the Brazilian real, the Canadian dollar has been a little weaker against the USD. That's helping. That's probably one of our main areas. With respect to contingency, through the end of last year, we've used about $120 million of it.

Okay, great. Thank you. And then maybe at Mesquite, I'm just curious, how should we think about the mine beyond this year? Is it kind of a case of a mature asset approaching depletion given the short reserve life or How should we think about the future potential for reserve additions once you have greater capability to reinvest in the capital stripping there?

So for Mesquite, essentially, yeah, quite right. It is a mature asset. Every year you'll hear us talk about a stripping program, and then we get into the ore. So it's essentially diving down into particular areas where we – have to strip to get down to be able to mine the ore and that's been cyclical and this year is no different where we were doing our stripping in the latter part of 2022 and then we'll benefit from that ore during this year. We continuously are doing drill programs and looking at revised models to be able to improve the mine plan. It just happens that this year we have a lower number of ounces being produced while we work through revisions to the mine plan to see what we can do to be able to put more on the table as we go forward?

Yeah, you know, down in the U.S., we had a, like everybody, pretty significant increase in costs. And so, when we looked at the mine plans for Mesquite in 2023, it made sense to go with that smaller pit scenario to maximize cash flow over that period of time. And so, As we progress through 2023, we'll have drill programs on Mesquite and then working to extend that mine life 2024 and beyond, but that requires some additional drilling.

The other thing is, obviously, permitting is always something that we're doing at Mesquite, and we currently have two heat bleach pad expansion permits that we're working through, which we expect to get in the next couple of months. So those obviously give us the opportunity to be able to continue to stack more. So it's always add more pad space while at the same time develop and permit additional resources so we can be able to convert them to reserves. So it's a never-ending process.

Okay, great. Thanks. And then maybe just last one, you know, just looking at the upper end of cost guidance across the operations, It seems like a few of the mines have relatively elevated costs near break-even, especially in the first half of the year. As part of the optimization review, is there any scenario where you might see improved economics for, say, putting Castle Mountain on pause and reopening that with Phase 2, or maybe putting Los Feliz on care maintenance and reopening that with the CIL construction, just given the higher cost of those mines?

So, It's something we discussed, but there's more than one reason why we do phase one at Castle Mountain. Obviously, coming into operation while we're in the permitting process is a good thing for us. We wanted to be back into production during that process, so we were present and working through everything that... that our operation ultimately needs. It also means that aside from having our footprint there, we're also able to move the essentially dump material from previous operators and to be able to leach the gold out of that. So it actually works as a pre-stripping for us for the phase two. So it's a good outcome when we get that moved during this process. And then the third one is we did want to get in and try the run of mine versus crush and agglomerations. So we got an opportunity to be able to do a larger scale test by virtue of doing the phase one operations at Castle Mountain.

Yeah, I think you also asked about those fields, Wayne. And, I mean, fields is a large mine. You know, it's very expensive to, you know, shut down a mine, restart a mine like that. I think it's fair to say our focus right now is trying to improve that operation and we're working hard to do so. We've reduced some of the capex at Philos in the near term with the suspension of Berm Hall underground, but that doesn't mean we're not very focused on the Guadalupe open pit and the Los Felos underground mine. I don't think that that's on the table at all and not something we're considering at this time.

Okay, great. Thanks. That's all from me. Congrats on the quarter and nice to see things going well at Dreamstone.

Since we're talking about Filos, I'm going to jump in quickly and ask a question from online. Would you consider selling those Filos since it's consuming so much capital?

I mean, the quick answer is no. I don't want to speculate on any individual mine. We've got no plans in process. Obviously, in the past, we've been commercial on certain assets in the portfolio. We have sold mines in the past, but You know, the challenge with Filos, I think we addressed this in Q3, it's a huge deposit, you know, a huge reserve resource, lots of exploration potential, permitted infrastructure. I mean, that type of a deposit is incredibly rare. And so, you know, parting with something like that would be pretty challenging. I think, again, our focus is working to improve that operation and optimize that operation and turn it into a long life, very valuable operation for the company.

Thank you. Operator, we'll take more calls from the phone lines, please.

Our next question comes from Anita Soni of CIBC World Markets. Please go ahead.

Good morning. Thanks for taking my question. So I just wanted to address first, you mentioned that you had retooled your covenants for the revolving credit facility. Could you give us an idea of what changes were made?

Yeah, Anita, it's Peter. Mm-hmm. The covenants reflect more, I guess, what you would call a company in development phase. So we effectively took a very conservative case scenario, had it a full turn, and adjusted accordingly. We're not going to disclose exactly what they are, but we're quite comfortable that there's plenty of room in covenants to see us through greenstone construction.

Okay, so you mentioned some of the deferrals that you've had, and I think Greg mentioned that the sustaining capital that you are doing in 2023 is the essentials only, tailings lists, et cetera. So would we expect to see a catch-up in sustaining capital in 2024 and 2025? Is that fair to say?

I think, I mean, some of the bigger, chunkier areas where we've deferred capital is... you know, Bermahaw Underground at Los Filos, that's a big one. And then, you know, to a lesser extent, stripping at Mesquite. And those are probably the two largest areas where we've retooled the mine plans to reduce near-term capital. And so with Filos, yes, I mean, eventually, our intention is to get back into the Bermahaw Underground. We obviously want to develop that. It's a big part of the future of Los Filos. So that is capital we will eventually spend. In the meantime, we're going to work to retool that program and increase the productivity and reduce costs. So we will be back in Birmingham underground. Exact timing of that is to be determined, but definitely at some point. Mesquite, same thing. We've got drills going and continuing to operate that mine will involve stripping. I don't think we're working toward a giant catch up in 2024 that's going to be crazy or anything. We're trying to smooth that out over time. But you're always going to have that at Mesquite, stripping, as Doug mentioned, to get down to the ore. But otherwise, I don't think that we've carved out anything critical that we're going to have to be spending a whole bunch of money in 2024. Always looking at capital allocation decisions. And with Greenstone coming online next year, that obviously frees up some funds for additional capex. I think personally, I want to see us go underground in Arizona, and that would be another area where we haven't budgeted in 2023 for any sort of a portal construction or decline. But on the basis of the feasibility study, as we move into Q4 this year, once the pit reaches the appropriate level in the West End, that's an area I think we'd like to start spending money on next year and even later this year. There's stuff that will come, but it's not a situation where we've carved out a bunch of necessary stuff and kicked it down the road.

Sure. So Bermahal Underground, though, that was in development capital, right? Not sustaining.

It was a mixed primary development.

Okay. I guess I'm saying capital generally. Yeah.

Yeah, capital general, yeah. I was just wondering if there was anything sustaining that I should be thinking about that might need to get done in the next two years if you're not doing it this year. And then just in terms of Santa Luz, what kind of recovery rates are you assuming when you guide it for this year? I just want to understand where you think the recoveries are going over the course of the year.

So for the budget, we backed it off to focus on getting stability. We were looking at achieving a minimum of 65% in the first half of the year, 70% in the second half of the year. As we came through December and changed the blend, we were at 62% in January and we're over 70% in February. But the key is stability and a big The key thing to that was ensuring our makeup water coming back in from a water storage dam was zero or less than 0.5 ppm cyanide, which is a real hindrance to activity of the resin. And now our system's working properly with all the detox, and so we saw that that was really helping to be able to establish a good activity on the resin.

Okay, and then just last question was reserves and resources. Did I miss that last night? Did you guys update it yesterday or is that coming later on?

No, we did not update our global resource reserve statement yesterday and looking forward throughout the course of the year, there won't be a single consolidated update. They will be updated as available and as studies are complete. most of our projects are in a steady state versus a steady state.

Consistent with what we've been doing over the last number of years, Anita, I think at some point in the future we do want to get to a one-time annual global update, but what we've been doing is as and when those updates come available, we report it, we integrate it into our consolidated reserve and resource summary on the website and And that's what we've been doing and probably will be continuing to do for another year or so until we get to the point where we've harmonized everything and do an annual update.

Okay, thanks. I was just calling from the context of a lot of people are updating their gold price assumptions and then also cost assumptions. So it would be good to have a sort of reset on that. And then can you just let me know what the interest rate right now is on your floating rate debt?

Combined, it's about 7.5%.

Is that fixed and floating or just the floating?

Sorry, that's just the floating. Pardon me.

Okay. All right. Thank you very much.

Our next question comes from Kerry Smith of Haywood Securities. Please go ahead.

Thanks, operator. Scott, just to follow up on Anu's question about the reserves and resources, would you just generally as a ballpark, would you expect that you replace depletion in your reserves and resources overall for the company on a year-over-year basis? Are they kind of unchanged or do you think they're going to be down a bit or up a bit? How would you generally point us directionally?

Yes, the primary goal with the exploration and drilling has been to replenish reserves as, again, a primary goal. Secondarily, a lot of our assets have been undercapitalized over the last three, five years. So there's a real need, real push to build up the resource base. So the exploration has been pretty aggressive in that respect in Santa Luz, Bahia, sorry, Pezenda, and so forth. So there will be a lag before we're kind of getting beyond replacing reserves, resources on an annualized basis. But the hope is that with the significant exploration expenditures that we've put into the ground for the last three years now, that two, three years from now, that will be paying off with substantive resource and reserve growth.

Okay. Okay. Okay. And just on the – this is for Doug, actually. On the Castle Mountain Phase II permit application, given that you're now switching over to 100% crushing agglomeration for phase one. Is there any thought that you need to revisit the assumption in the phase two feasibility, which only looked at run of mine? Or are we expecting that at some point maybe you may have to add some crushing agglomeration? Or are you pretty confident that phase two will just be a run of mine operation?

No, Kerry, we're quite confident that we get better performance overall through the crushing agglomeration for the material that we're currently processing. But remember, we're dealing with dump material, and we're doing a lot of work to metallurgical modeling on Castle Mountain and lots of additional test work. for the in situ material. So, if it were all the same material, we would be doing crush and glom for phase two. But that's why we're doing the additional network, the geometallurgical modeling, because we want to make sure that as we look at in situ material that we're treating it the right way. So, it is part of the work we're doing in the background. We don't anticipate it will change anything in regards to our footprint overall, but we're looking at all opportunities to be able to see whether we can optimize and also prove out everything that we've done in previous test work and concepts.

Terry, recall that in that feasibility study, you do have a portion of the material reporting to a small mill in the highest grade material. And so we are looking at potential scenarios where you would ditch that mill, not be required to triage the different ore grades, and just put it through one circuit. And so that is something that we are kind of looking at and doing some trade-off studies on. If there's an opportunity to simplify the overall operation and flow sheet, reduce some capital, that's something that's pretty interesting to us. So there is some work being done on that, nothing confirmed, and that'll progress over the course of the year. I can confirm that our permit application does contemplate pretty much any sort of modifications we want to make to that flow sheet. We would not have to go back and do any re-permitting compared to what we've already submitted.

Okay, okay. So that's all covered off in that application then?

Yes.

Gotcha. Okay, okay. And the other question I had was at Mesquite. you reduced the separation of 2023 to lower the cost just to help with the cash flow in the short term here. Does that impact 2024 mine plans? And what sort of in-house mine plan do you currently have for the life of mine for Mesquite? Do you guys model three years or two years? How do you actually model it internally?

We continuously remodel it. The mine plan that we have in the budget is already We're already working on a revision to that. What can I say? It's building in the latest information as it comes in from expiration and as we get permitting. I know it will change from the budget mine plan.

I think it's fair to say we're working on a mine plan for next year that would bring production back up to... to previous levels, but there's work to be done on that, Kerry. We had to adjust the mine plan this year. In the United States especially, we saw really significant increases in diesel, cyanide, explosives, all the major input costs at Mesquite that have an effect on production there and cost of production there. And so this year kind of takes that into account. And internally here, we're working on what can 2024 look like Given the current cost structure and this year's mine plan, what will that do for next year? We don't have guidance on that yet. That'll progress over the course of the year. Later this year, we should have some more information.

Would it be fair to say that the operating team at the site at Mesquite have a three-year mine plan that they're working against or Is it one year then? Is it like just 2023?

I mean, if you didn't have any permitting timeline constraints, then it's very easy to model out a multi-year mine plan, you know, and I'll just throw, you know, five years plus out there. But there is timing differences, you know, in terms of leach pad expansion, eventually proceeding to the west, right? There's a highway there that we'd want to move, or sorry, to the east. And... You know, and other areas of the site that would need some permitting in order to continue on a plan that would utilize all the resources that we currently have. So a constraint is not really the deposit itself. It's actually the permitting timelines around some of that expansion opportunity at Mesquite. So, you know, when you model that out, you can kind of play. And the goal for us is continuing with the permitting that we need to do and want to do while filling in those gaps as best as we can. So it's, as Doug said, it's kind of a continuous process at Mesquite, and has been since we bought it. I mean, Mesquite's been a great mine for us. Since we acquired it in 2018, it's made us money every single quarter, I think, except one. We've recovered our acquisition costs well above our acquisition costs. It's been a great mine for us and continues to be. So it's important for us to see it continue. And that's kind of been our, our process all along, you know, just with a mature asset like Mesquite that requires additional permitting.

Okay. Okay. That's helpful. And the, and the kind of the same question at, at Los Feliz with the deferral of the Burma Hall, the shutdown of the underground Burma Hall, does that impact the long-term plan there in any significant fashion?

Well, it doesn't actually, I mean, essentially because Burma Hall would have been a pure net investment. for this year, it actually alleviates some of the cash drain that Los Feliz would have this year. Deferring it gives a couple opportunities. One, we need to change our productivity there to be able to make it so we can get to the 1,500 to 2,000 tons per day that we need. It's just prolonging the pain by doing the development at such a low productivity rate. The cost per ton were just coming in too high as we were mining in the initial stoves. It also gives an opportunity for the tire grade material to be able to go to a CIL. We know that by sending it to a heap leach, it means that certain material you have to leave behind because it's not suitable for going to a heap leach, but you can process it in the CIL. That approach for us just means that we'll push it off, and then in the meantime, we'll look to restructure how we'll deal with Bermahal Underground.

The near-term effect is you have a bit of lower production because we're not mining those ounces, but we actually save on free cash flow at Filos because of the deferral of capital. Longer term, as I said, we're going to go back into Bermahal Underground eventually, and the long-term plans for the mine, of course, include Bermahal Underground. And as Doug said, if that material is going through a CIL plant, you're obviously getting higher recovery than you would just on the heap itself. And so there is an economic trade-off study to deferring it where you're going to get those higher recoveries once you put that CIL in place.

Right. Okay. Okay. And this last question for me then quickly. This explosive strike that your supplier had at Feebles, I assume that's behind you now. And I just wondered if you could maybe give a little bit of an update on the pulse of the three communities and how all of that's been going, Greg?

Yeah, that explosive strike was long past. I mean, it affected the earlier part of Q4, so that's done. Pulse in the communities, we're doubling down on our efforts to be in dialogue with the communities and obviously Burma Hall Underground will be another point where we'll be talking to all of the communities. I mean, we've tried to make it clear that it is a partnership, it's a dialogue that we need to have and we need to be able to work collectively on our relationship and be able to see what can be a bright future at Los Felos, but it involves everybody working together.

We've increased and strengthened, I would say, our community relations team at Los Felos, including in the last few months. The informal feedback we're getting is that communication has improved quite a bit, just coming from the communities. It's been... It's been a good five or six months so far, and we're putting a lot of effort into that relationship, that communication, and as Doug said, making sure that everyone acknowledges and recognizes that we're partners in this project. So it's been good so far, Kerry, but we've had those challenges in the past, and I can't necessarily say they won't... manifest in the future, but we're certainly working hard with the communities to mitigate that.

Okay. And I'm assuming, Greg, that the communities were told a while ago that the Bermahoe Underground was going to be shut down, so there were some jobs that were going to disappear. So that's not new news today for them, right?

It's officially news today, I suppose, but there's been more informal conversations around the cost profile at Phelos and that it can't persist indefinitely under this basis and that some changes are going to need to be made, and so action is going to need to be taken.

Okay. Okay, I got you. Okay. Thanks, guys. Appreciate it. Great quarter.

Our next question comes from John Skoldnik of Desjardins. Please go ahead.

Hey, thanks, guys. And, yeah, most of them have been answered, so just a couple from me. Impressive gold collar contracts and just wondering what changed your stance on gold hedging and if there was maybe a push from the lenders and finally if Mubadala was good at that.

It's Peter. Good question, John. At the end of October, in October, gold was below $1,700. It had, as we all saw, a very rapid rise right through the end of January. We have a capital-intensive year again this year, especially to fund construction at Greenstone. And with the way gold had continued to rise through January, as a management team, we just wanted to take an opportunity to lock in some cash flow. So that was the change in the thinking. And particularly given... the floor and the quite high ceiling, and that was just kind of a function of the curve as a result of three months of steady uptick in gold, I suppose. So given that large spread that allowed us to or will allow us to enjoy a higher gold price through the end of Q1 next year with those callers, we just thought it was a really prudent thing to do and a fiduciarily responsible thing to do. With respect to lenders and with respect to Mubadala, they, of course, were quite supportive. Generally speaking, they like to see hedges in place during capital intensive periods.

I think, John, if you kind of look back over the last four months or so, it's just one more action we've taken of many maybe incrementally smaller actions, but collectively designed to ensure that we've got enough resiliency in our cash flow profile, our balance sheet, to absolutely ensure we get across the line on Greenstone and get to commercial production next year. So we've done a number of different things. That's one more part of it. You know, it wasn't without consideration. We had just rolled off all of our hedges from the legal transaction and we're kind of high-fiving on the back of that and gold was going up. And then, you know, when we looked at what that collar looked like, you know, and rationalizing it, we're like, well, listen, if we put this in place and gold runs, then hurrah anyways, right? It's going to be great. And if it doesn't, at least this introduces some risk mitigation and cash flow and EBITDA protection over the next year and a half. while we complete this build. So that was kind of how we rationalized it. It was opportunistic. I think if we had waited one day later, we would have got maybe a slightly higher collar. But since that day, we kind of printed the top of that recent bump and are sitting here pretty happy that we put those in place.

I know it makes sense. Great levels to get in at. That was impressive and nice risk mitigation there. Last one for me, just at Castle Mountain, just curious how long kind of the status for the phase one operation could continue before additional permits are required?

I mean, probably 10 years plus. Because you could just keep, once you get through the dump material, you can get into in situ. It's a pretty small operation given the size of the overall resource there. So we've got plenty of headroom. I think in the past we've communicated around nine years or so, but We have no intention of riding it out that long. Again, it's impossible to pin down exactly the timing of receiving that permit. I like to say mid-next year, plus or minus six months. Maybe it's more plus six to eight months than the minus, but we're certainly pushing and trying to target having that permit sometime in 2024 so that we can get busy on expanding that line.

Right, okay. Okay, that's great. I appreciate you taking my questions.

Our last question is from Mike Parkin of National Bank. Please go ahead.

Hi, guys. That actually brings up a bit of a good question is how would you rank order your project pipeline in terms of assuming this kind of gold price environment? Where would you look to deploy capital after GreenStorm first? Is it Castle Mountain Phase 2 or something else?

Yeah, I mean, it does come down to, you know, capital allocation decisions. And so in the context of the gold price and cost environment in the future, you know, we've made those decisions. But it's pretty fair to say, you look at our portfolio, you've got some smaller assets, and then we've got some bigger, longer life, chunkier assets. And that would include Greenstone, obviously, Castle Mountain Phase II, Arizona, especially with the addition of the underground and, of course, Los Filos. And so, as mentioned earlier, we're very keen to get underground at Arizona and start to build out that mine, and that's something I think we're actively working on being in a position to start. After Greenstone is back up and running, or is up and running, Castle Mountain absolutely is one we want to get into the expansion of. The only one that is probably ranked lower right now is Philos. It's a big nut to crack. It's had a higher risk profile, and we've got to do more work there, as we've continued to say, before we're ready to start investing heavily at Philos. Greenstone's happening. Castle Mountain I think will happen as soon as we get the permit.

and uh arizona subject to results of the feasibility study and where we stand in terms of available capital by the end of this year is something i think we'd like to get into as quick as we can okay uh maybe just one last question uh back to los kilos with the burma hall underground suspension does that impact any of the three communities far more than the others

Yeah, it would affect Carrizalillo more than the other two communities.

Thank you. That's it for me.

Okay. Thank you, everybody. We're actually out of time and didn't have a chance to get to any of the online questions, unfortunately, so we will get back to you later today by email. My apologies for that. Greg, do you have any closing remarks?

No, I think just thanks again, everyone, for attending the call and for the well-considered questions. And again, you can always reach out to any of us by email or by phone if you have additional questions or comments to make.

Thank you very much, everybody, for joining us today. Operator, you can now close the call. Thank you.

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.