Centerra Gold Inc. Common Shares

Greetings and welcome to the Sentara Gold second quarter 2022 results conference call. At the start of the presentation, all lines will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star 0. As a reminder, today's call has been recorded Wednesday, August 10, 2022. I would now like to turn the conference over to Toby Caron, Treasurer and Director of Investor Relations. Please go ahead.

Thank you, Carlos. Welcome to Sentera Gold's second quarter 2022 results conference call. Please note that presentation slides are available on Sentera Gold's website to accompany each speaker's remarks. Today's call is open to all members of the investment community and media in listen-only mode. Following the formal remarks, the operator will give instructions for each asking a question, and then we will open the phone lines to questions. Please note that all figures are in U.S. dollars unless otherwise noted. Joining me on the call today are Scott Perry, President and Chief Executive Officer, and Darren Millman, Chief Financial Officer. I would like to caution everyone that certain statements made today may be forward-looking statements and as such are subject to known and unknown risks which may cause our actual results to differ from those expressed or implied. Also, certain of the measures we will discuss today are non-GAAP measures. please refer to the description of non-GAAP measures in our news release and MG&A issued this morning. For more detailed discussion of the material assumptions, risks, and uncertainties, please refer to our news release and MG&A, along with the unaudited financial statements and notes in all of our other filings, which can be found on CDAR, EDGAR, and the company's website at centeragold.com. And now I'll turn the call over to Scott.

Thanks, Toby, and good day to everyone. As Toby mentioned, I'm just referencing the accompanying webcast presentation deck, and I'm just starting off on slide number four. So first of all, I'd like to start by highlighting our announcement on July 29th that we have officially closed the global arrangement agreement with Kyrgyz Altan and the government of the Kyrgyz Republic. This is a clean separation, and it has allowed us to significantly reduce our share count by approximately 77 million shares, or 26%. With this closing, the company is positioned to move forward with a renewed focus on our core operations, the Mount Milligan mine, the Oxet mine, our core Goldfields development project, in addition to our exploration and drilling investment programs at our Greenfield and Brownfield exploration projects. In the second quarter, the company continues to demonstrate that safety remains one of Sentera's top priorities. Notable milestones during the quarter was with Comess achieving three years without a lost time injury. Subsequent to quarter end, our Oxert mine surpassed one million hours without a lost time injury. Moving over to Oxert, Gold Room operations at the Oxert mine's ADR plant remained suspended due to mercury that was detected. Retrofit in the Gold Room is expected to be complete in late 2022 with operations recommencing as soon as regulatory approvals are obtained. The company has completed engineering work and has ordered equipment to retrofit the ADR plant to safe operations within the Gold Room. The capital cost of this mercury abatement retrofit is expected to be approximately US$5 million. You will note in today's release that at the Oxford mine we have initiated suspension of stacking and leaching activities as of August 10th. This is due to the company's inability to obtain approval from the regulators to use more activated carbon than what is currently allowed in the mine's environmental impact assessment permit. This change in operating practices means that the company has had to revise its consolidated 2022 outlook to reflect the the suspension of stacking and leaching activities at Oxford, the continued suspension of Gold Room operations in the ADR plant, as well as the impact of an assumed decline in copper prices and the impact that has on our Mount Milligan operation. We will speak to each of these in more detail later on in this webcast. In terms of our development projects, the advancement of the Goldfields development project continued in the second quarter. we have initiated a resource expansion and infill drilling program that targets some 65,000 meters of diamond drilling and reverse circulation drilling. Our plan here is to issue an updated resource estimate for the project in 2023, with a feasibility study shortly thereafter. With regards to the senior leadership, we are now in the final stages of recruiting a new chief operating officer, and we plan to provide the market with an announcement on that shortly. From a liquidity perspective, reflecting the strength of our balance sheet, the board again approved a consecutive quarterly dividend of Canadian seven cents per share. Lastly, in respect to our molybdenum business unit, evaluations for surfacing value, sorry, evaluations for surfacing value opportunities remain an ongoing work in progress item. Just moving to slide five, just in terms of our environmental social governance highlights. There's a lot of exciting environmental social governance updates on this slide, and I won't go through them all, but I do want to note that on August 4th, Sentera published its 2021 ESG report. This report demonstrates the great strides that we are taking to continue to strengthen our environmental social governance performance, and I feel it is reflected in several achievements noted throughout that report. Lastly, I just want to highlight the successful completion of our year two responsible gold mining principles assurance work. but the organization is on track to achieve conformance with the responsible gold mining principles before the end of 2022. Just moving to slide six, touching on Mount Milligan operating highlights now, I think it is important to note that our 2022 gold and copper production outlook for the mine has not changed. We are still on track to meet our gold production guidance of 190 to 210,000 ounces for the year and to meet our copper production guidance of 70 to 80 million pounds for the year. During the second quarter, Mount Milligan continued to deliver strong results, producing some 42,728 ounces of gold and some 17.4 million pounds of copper. In terms of the corresponding oil and sustaining costs on a byproduct basis at Mount Milligan, the result came in at $1,245 per ounce for the quarter, but was $641 per ounce for the first half of this year. The company's second quarter oil and sustaining cost result was impacted by the meaningful decline in copper prices, again remembering that copper is recognized as a byproduct credit. Second quarter copper credits were effectively reduced by some $560 per ounce in relation to a negative mark-to-market adjustment on our provisionally priced copper contracts that were open as at the end of the quarter. Darren, our Chief Financial Officer, will speak to this in more depth in the financial highlights section of this presentation. The Mount Milligan mine posted a solid cash flow result in the second quarter. We generated, in terms of cash provided by mine operations, we generated some $81 million, and in terms of free cash flow, the mine generated $58 million for the quarter. Mount Milligan's stage flotation reactors were commissioned in early May, during the second quarter, and we're expecting to see improved future gold and copper recoveries at the mine as a result. By way of example, the month of June actually had the highest monthly copper recovery that was seen in the mine's history. Lastly, Mount Milligan's life of mine planning work continues to progress with a focus on optimizing some meaningful life of mine extension opportunities relative to our go-forward equipment fleet capacity requirements, our tiling storage facility requirements, as well as some other identified opportunities and trade-offs. Just moving to slide seven. At Oxsert, as already mentioned, as of March 2022, our Gold Room operations remain suspended, and the company has initiated suspension of stacking and leaching operations as of August 10th, as a result of a lack of access to activated carbon. Mining and crushing are currently ongoing and the company is evaluating whether these activities should continue while we pursue an amendment to our environmental impact assessment permit to align permitted limits with current operational plans. As at June 30th, Oxfurt had stored golden carbon inventory totaling some 58,469 ounces. The weighted average cost of this inventory on a per recoverable ounce basis was approximately $444 per ounce. The ADR mercury abatement retrofit is expected to be complete by the end of this calendar year, and we do assume that current inventoried golden carbon will be processed in 2023, assuming the ADR plant resumes full operations with regulatory approvals in place. Meanwhile, we do continue to consider other alternatives to monetize the golden carbon. Oxfam is currently in the process of preparing a new environmental impact assessment application which will clarify the heat lead stacking capacity of the mine and the actual amount of activated carbon required for usage in our operations. We expect to be submitting this new EIA application by the end of this month, and we'll be pursuing its approval as quickly as possible. Just moving on to slide eight, just in terms of our guidance and our revised outlook, As I mentioned earlier, the company has revised its outlook for 2022 as a result of initiating the suspension of stacking and leaching activities at the Oxford mine, in addition to the continued suspension of Gold Room operations. This is also in addition to the changes that we've made to our assumed spot copper price moving forward. With regards to copper prices, we have conservatively reduced the second half forecast assumption from $4 per pound to $3.25 per pound. I would note that should copper prices stay at the current spot levels for the remainder of the year, the company's oil and sustaining costs as well as its cash flow outlook would see a positive impact versus this revised guidance. You will see we have offset production at 55,000 ounces for the year, and this really represents the actual Q1 production result. This is revised down from our original guidance of 210 to 240,000 ounces for 2022. In terms of the company's consolidated oil and sustaining costs on a by-product basis, our guidance has increased to $1,000 to $1,050 per ounce, which is an increase from previous guidance of $600 to $650 per ounce. And this primarily reflects the lower gold output contributions from OXA, as well as the reduced copper price assumptions at Mount Milligan. As already mentioned, guidance for gold and copper production at the Mount Milligan mine remain unchanged from the previous guidance. Likewise, consolidated capital expenditures, costs relating to the Melidibum business unit, and corporate administration costs also remain unchanged from previous guidance. Expiration guidance has been updated to $50 to $65 million, and this reflects the addition of $15 to $20 million in spending and investments for the Goldfields Development Project following the addition of this project to our portfolio in Q1 of this year. Just moving on to slide 9. Here on slide 9, this reflects the revised 2022 gold production guidance graphically on a quarter-by-quarter basis. The guidance is updated to include only year-to-date gold production at the Oxford mine of 55,000 ounces, in addition to Mount Milligan's full-year gold production outlook. As noted previously, Mount Milligan gold production guidance remains unchanged from the original outlook of 190,000 to 210,000 ounces. The company assumes completion of the mercury abatement retrofit at the Oxford Mine in late 2022, and this will then allow the restart of the Gold Room in 2023, subject to the relevant regulatory approvals being in hand. Just lastly on slide 10, just in terms of copper production, as previously noted, the company's copper production guidance is unchanged from the original outlook of 70 to 80 million pounds for the full year. With that, I'm going to pass the presentation over to Darren Millman, our Chief Financial Officer, and Darren will walk through some of the key financial highlights.

Thanks, Scott, and good morning all. For those following on the slide deck, I'll be initially speaking to slide 12. Sentera recorded $167 million in net revenue during the quarter, consisting of the Mount Milligan mine and the Libtham business unit. No revenue was recorded at the Oxford mine. At the Mount Milligan mine, gross gold sales and copper sales were $58 million and $71 million prior to the provisioning adjustment on the concentrate sales of a negative $32 million, which were made in the quarter. I will speak to this in more detail later in the presentation. In the quarter, Mount Milligan sold 41,597 ounces of gold and 18.9 million pounds of copper. Due to the suspension of the ADF plant, as noted earlier by Scott, the Oxford mine has no recorded sales or production a quarter. However, stored golden carbon inventory balance recognized at 58,469 recoverable ounces at June 30. The cost associated with the Oxford stored golden carbon inventory is approximately $444 per ounce. which has been capitalized as a current asset with no cost flowing through the earnings statement in the quarter. The total recordable cost as at June 30, 2022 is 26 million. The recorded costs will flow through the earnings statement upon the processing at the ADR plant for otherwise monetized at a third party facility. At the molybdenum business unit, 3.2 million pounds of molybdenum was sold. generating revenue of $68.6 million. During the quarter, the Mount Milligan mine operations average gold price realized was $1,335 per ounce and $2.19 per pound of copper. This incorporates the existing stream arrangements over the mine. It should be noted the 25% decrease in realised price from when comparing Q2 2022 to that of Q2 2021. Cash used in operating activities was $3.5 million for the quarter. As noted in the MD&A, the Matt Milligan mine generated $81 million in positive operating cash flow. This favorable variant compared to prior years was a result of the one sale shipment recognized in Q1 2022 of approximately $42 million, the cash only being received in Q2. This was offset by a reduction in gold sale and copper prices realized within the quarter with 19% and 25% respectively. decreasing in comparison to Q2 2022 and Q1 2021. Given no sales occurring at the opposite mile and a quarter with operations continuing, $51 million was used from Treasury This also included income tax payments of approximately $22 million to OXU tax authorities and $222 tax year relating to the 2021 tax year together with the annual royalty payment of $8 million relating again to the 2021 year. Free cash flow deficit from continuing operations for the quarter was $31 million, primarily driven by the $55.2 million current operational status, together with a $6.1 million deficit at the Malibu business unit, as inventory levels remained relatively high, with working capital reductions expected in the second half of the year. The net loss from continuing operations was $2.6 million in the quarter, with $36.2 million in adjusted net loss recorded. The earnings in the quarter attributable to operations were a minimal $2.7 million contributed from the Mount Milligan mine as a result of the mark-to-market adjustments from a historical recorded provision of copper and gold concentrate sales, together with the reduced gold levels sold and lower copper prices realized. This included the mark-to-market adjustments. Earnings also attributed were the $1.5 million loss from the Oxid mine, primarily from exploration costs, and the $3.4 million loss from the Melisandre business unit, For the quarter, there were three adjusting items. They were reclamation provisions, recovery at site, care and maintenance of $41.4 million, primarily a result of change in underlying discount rates used, compto-related legal and other costs of $3.2 million, and income and mining tax adjustments of $4.3 million. I'll now move to slide 13. Given the significant movement in previous issued oil and sustainable cost guidance, results. We prepared this high-level slide to note the three key factors. The removal of the oxide mine planned production and sales in Q2 has resulted in a higher oil and sustaining costs by $337 per ounce, given the planned 2022 low-cost profile of the mine. Secondly, the planned oil release timing at the Milligan mine which remains unchanged, have higher expected costs in the first half of the year compared to that of the second half of the year, specifically 90% of gold production planned in the second half of the year. This results in a higher cost profile in the first half of the year, as noted in the slide, of the $229 bearings. The company's fuel and Canadian dollar hedging programs has offset today any inflationary pressures together with initial higher inflation factored in as part of the 2021 budgeting process and included in the original guidance. The third point is the company treats copper revenue as a byproduct by the Mount Milligan mine. In effect, a negative cost when calculating oil and sustaining costs. Given this recent and dramatic movement in copper prices, together with unsettled provisional sales contracts, has resulted in an increase in all and sustaining cost of $468 in Q2 compared to the original guidance. I'm now moving to slide 14. At a high level, the company has seven to eight unsettled copper contracts at the end of each quarter. the rise in copper prices in 2020 and 2021 had seen a company benefiting from the provisional pricing, whilst this recent sharp decrease in copper prices has seen a reduction in revenue and cash receipts. As noted on this slide, the copper price of variability experienced for accounting purposes was a high of $4.75 per pound at the end of Q1 2022, to a low of $3.71 per copper pound at the end of Q2 2022. The mark-to-mark copper price adjustments made at the end of the quarter contributed to a $560 ounce of negative impact of oil and sustaining costs for the Milligan mine in Q2. The company's copper hedging program to date has focused on the company's production with zero-cost collars being the preferred financial instrument. To date, the collars pricing be within the ranges with no meaning for realized gain or loss. As we move into the second half of 2022, at these copper prices, the hedges are of value. It should be noted the company currently has 52.8 million hedged copper pounds, with a majority in the second half of 2022 and 2023, with average floor prices in 2022 at $3.65, in 2023 at $4, and in 2024 at also $4. Now, finally, in slide 15. I've largely covered off on most bullets in previous slides, so I'll just highlight the company has exited Q2 with a cash balance of $723 million and $1.1 billion in liquidity. The liquidity does not factor in gold and carbon with the current market value of approximately $100 million as the company will continue to pursue this initiative in Q3. Given our strong financial position, the board declared a quarterly dividend of $0.07 per share. With that operator, that concludes our final remarks. We would like now to turn it over to

For a question, please press the 1 followed by the 4 on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press 1-3. One moment, please, for the first question. Our first question comes from the line with Credit Suisse. Please go ahead.

Hi. Good morning. Thanks for taking my question. A point of clarification on aux suit. If the Gold Room retrofit is completed by the end of the year and you're able to recycle the activated carbon again, does the permitting still become a constraint in 2023 or is it no longer required?

So this is kind of real time, as you would have seen. We met with the Ministry of Environment effectively yesterday on August 9th, and in terms of the solution here moving forward, they have recommended that we file that new environmental impact assessment, and that's what's going to align our operations with our sort of required permitting moving forward. So assuming the ADR facility retrofit is all complete and we have the regulatory approvals in hand, that will allow us to continue regenerating carbon in 2023 or recycling the carbon. And so that would put us in good order, you know, vis-a-vis what we expect to be permitted under our new EIA moving forward.

Okay. And just as a follow-up, is the expectation now that in Q3 and Q4 there will be no additional inventory of gold and carbon? Is that the right way to think about it? Yes, that's correct. Okay, great. Thank you.

Our next question comes from the line of Trevor Turnbull with Scotiabank. Please go ahead.

Yeah, thank you. I just wondered if we could talk a little bit about the suspension of the 2023 guidance. I was just wondering what drove that, and I assume some of it has to do with maybe the permitting and the new EIA in general. But I was also wondering if it was related to looking for those enlarged grazing permits that were going to allow access to higher grade. Because as I understood it, some of the higher grades from those areas were part of the original 2023 plan.

Yeah, Trevor, I would put forward simply it's a combination of all those items you mentioned. And really what it comes down to is, you know, right here, right now, we don't have visibility you know, with a high degree of confidence in terms of when those regulatory approvals will be in hand. So, say, for example, the ADR facility, I think we're highly confident that that will be, you know, that retrofit will be complete by the end of this year. But then, you know, we have to make an assumption with regards to when the regulatory approvals for using that facility will be in hand. Likewise, in terms of the new EIA that we'll be submitting by the end of this month, we have to make assumptions in terms of when that EIA will be approved. And right now, we just don't have a high degree of confidence that would allow us to provide an outlook for 2023.

Sure, I understand. And just as kind of a follow-up question on what's going on in Turkey, I know that when you first had the issue and started you know, building up an inventory of gold on carbon. There was talk of having maybe a third party process that carbon for you. It seemed like a pretty straightforward plan at the time. And obviously, given the buildup and inventory, that doesn't seem to have been as simple as we thought. I just wondered, can you say anything about why that didn't turn out to be a very viable plan?

You know, look, Trevor, we continue to consider those alternatives in terms of looking to monetize the gold and carbon, you know, potentially off-site. But, you know, in terms of our discussions with the regulators and the agencies, I think, you know, what they've instructed us is their preferred approach is for us to, you know, remediate our facilities and to complete the retrofit of our ADR facility. You know, in terms of our operating license, we're not permitted to to transport or to export loading golden carbon off-site. That would require an amendment. And the discussions today, I think the preferred approach for the operation from the regulator's point of view is for us to remediate our facilities so that we can continue to produce Dore on-site. So we'll continue to engage in those discussions. But right here, right now, and as you're seeing in our guidance, we're assuming that we're going to have to complete the retrofit and that'll be the avenue or the main for producing gold dore moving forward.

Okay, yeah, I guess some of that permitting turns out to be a bit more rigid and narrow than we realized. Just one final question, if I could, on Mount Milligan, and that's just about the new mine plan. I saw that you had mentioned you wanted to assess the impact of capital and the tailings requirements. And I was wondering if the capital would be related to stripping costs, expanding the tailings or equipment, and if there's any permitting hurdles with respect to tailings that we need to think about as well.

The life of mine work is quite advanced, and I think what we're seeing here is a meaningful opportunity. to increase the conceptual reserved delineated asset life. So that's favorable, if you will. But obviously that's resulting in a larger PIP, which in the context of your question, more mining volume, there will be more capitalized stripping, if you will, in terms of sustaining capital. Likewise, the life and mine processing volume is going to be considerably higher than what we had in the previous life and mine plan. And so to your point, that will require that will require a larger tiling storage facility. And yes, if we look at the required height of that tiling storage facility, vis-a-vis what we're currently permitted to, we would require a permit amendment to build a larger tiling storage facility. Generally speaking, I'd want to put forward that that's kind of routine, that's part of the course in terms of how we run our business. But answering your question directly, yes, we would have to... you know, engage with the regulators, et cetera, to get a permit amendment for a larger tiling storage facility.

And, sorry, just one follow-up to that. When looking at an amendment for tailings, is that all in the hands of the province, or do you have to also engage with First Nations on that one as well?

Yes, we'd have to engage with, you know, First Nations and other stakeholders, but it's a provincial permit. Okay.

I appreciate that. Thanks for all the answers, Scott.

Next question from the line of Anita Soni with CIBC. Please go ahead.

Good morning, and thanks for taking my question. Scott, the first question is how much, with respect to AUX, you put some disclosure in there that you had stacked more than was permitted in 2019 to 2021. Can I ask for the volume that you stacked more than was and what the permitted amount was?

Sorry, Anita, I don't have that in front of me. And, you know, that was discussions that took place yesterday. So to be quite honest, we're still trying to clarify, you know, clarify the regulator's position on this. We're trying to make sure that we've understood and interpreted it correctly. But I don't have those numbers in front of me.

Okay, I guess what I was trying to drive at was with the suspension of operations, would that mitigate perhaps, you know, in their mind, well, you're not stacking now for six months, so will that make up for it?

I'm not sure, Anita. I can't speak on behalf of the regulator.

Okay, all right. So the second question, there was other additional disclosure that I just read in the MDNA about elevated mercury levels in nine of the employees. Is that something that one that, you know, Is it something to be concerned about? I think, like, what's the elevation level with respect to sort of what are the, you know, what's allowable mercury level elevation in someone if there is any? And, you know, would that have implications to this amended EIA?

In terms of the employees and the contractors, you know, the health and well-being of our employees is obviously paramount. You know, back when we first identified, you know, mercury or high levels of mercury in the ADR facilities, we had all of our employees and contractors that were working in that facility, you know, we had them submit samples just to, you know, ascertain whether or not they had elevated levels. And then any employees that we did identify as potentially having elevated levels, we actually had them sent to a specialized hospital just for further, you know, evaluation. And I'm pleased to report that, you know, Since all of this, all of the employees and contractors are fine, health, safe, and well. So all good on that front, albeit it was pretty concerning at the time, given our paramount focus on the health and well-being of our employees. In terms of does that have an impact on the EIA, I don't believe so. I think what we're focusing on here, again, is the retrofit of the ADR facility That is a change in our business model, if you will, in terms of the processing operations. And again, the regulators instructed us that the best thing for us to do is submit a new EIA to make sure that the EIA is aligned with our sort of go-forward operating profile.

Okay, that's it for my questions. I'll pass it back. If I have any more, I'll get back in the queue. Thanks.

Our next question comes in the line of Lawson Winder with Bank of America Securities. Please go ahead.

Hi, good morning and thank you for the, I wanted to ask about Mount Milligan and the economics around that. Would it be fair to say that in the current inflationary environment and given the tailings capacity limitations that there are some questionable economics on doing a life and mine extension?

No, look, again, as I said, you know, the report itself, it's in kind of its final stages. There was a number of opportunities, a number of trade-offs that, you know, we're considering. But, you know, on a preliminary basis, you know, what we're seeing in terms of the unitary cost profile or, you know, the productivity profile, I think it's quite similar to what you would have seen in the prior Life of Mine profile. You know, I think... When you look at Mount Milligan's performance, you know, over the first half of this year or even 2021, I think you've seen a significant improvement, you know, in terms of productivity, unitary costs, et cetera, even our recovery efficiencies. And I don't see any reason why that would be dissimilar to what would be in the new life of mine plan as when we release it.

Okay. And then along those lines, what are you guys thinking in terms of number of years for the extension?

I can't disclose that as yet.

No problem. Maybe could you disclose what you guys will be using for a gold price assumption and hurdle rate for that study?

I'm just looking at Darren. For the reserve itself and the gold price, I think we ran it at $1,350. And when we do release the lives of mine, typically we provide a cash flow section, and typically we provide a sensitivity. So there will be a whole series of gold prices that that cash flow will be run out. So it will be sensitized. You can pick the gold price that you want to assume moving forward.

And I think historically you guys have used sort of like a 15% after-tax IRR for projects. Would that be a fair hurdle rate for this one?

Well, this is kind of different. When you ask that question, I think that's more so in the context of what is our hurdle rate when it comes to making a construction decision on any sort of organic project we may have in the organization or maybe put differently if we're looking at inorganic opportunities. That's typically when we'd be looking at that order of magnitude sort of hurdle rate. But I think in terms of our existing assets, You know, again, I think the Lifeline report, I think, will be providing ultimately an NPV from memory. It's like 5%, 8%, and 10%. So we leave it with the reader or the user of the report to self-select, you know, their desired discount rate.

Okay, and then just one more. If I could on OXUTE, I haven't been through the entirety of your release. Were you guys flagging any write-down in the value of OXUTE, or is that still to be determined?

Yeah, no, given the high margin and temporary nature, there is no accounting or impairment adjustment in 30 June or expected in the future.

Oh, okay. Excellent. Thank you for your answers.

The next question comes from the line of Dalton Barreto with Canaccord. Please go ahead.

Thanks, good morning Scott and team. I'll start with Oaksuit as well. It sounds like the environmental regulators have been involved since May and that, you know, they've been looking at a much broader scope than just the ADR plant. And I'm just wondering what triggered a broader review of Oaksuit and is it realistic to assume that your EIA will get approved by year end or even early 2023?

I can't speculate or talk on behalf of the regulators, so I'd prefer not to answer that question. Obviously, you're aware of the challenges that we have had in our ADR facility and the retrofit that we're doing. As we mentioned earlier, that does require regulatory approval before we can actually commission that mercury abatement system moving forward. You know, in terms of the EIA, I mean, we've been in a lot of discussions with the ministry, and, you know, they have put forward that, you know, the solution here is to submit your new EIA that will then align your operating sort of activities and profile, you know, with that EIA and what's permitted. So that is well underway. I think, as we mentioned in our disclosure, we expect to be submitting that EIA at the end of this month. and it has been good engagement with the ministry, so I'm hopeful that it will be an expedited process moving forward, but I can't really provide any more clarity than that or any more visibility. That's just something we'll have to ascertain as we move forward here over the course of this year.

Okay, thanks for that. And then just kind of as an extension to that question, if the EIA approval does get, you know, delayed a little bit, your operating permit's expiring in January. When your EIA is eventually approved, will that trigger an automatic approval of the operating permit or will you have to then go through another process?

No, separately we would be, you know, expecting the extension of the operating license. And that extension application is already in the system. We've already filed that.

Okay, great. And then just switching gears, I think on the last call you had mentioned that you were going to wrap up some internal studies on the MOLLE business unit around this time. And I'm just wondering kind of what came of those, how you're thinking about that business going forward.

Yeah, look, I think as I mentioned earlier, we think there's some conceptual value surfacing opportunities within that business unit. It's something that we continue to study and evaluate, but I'd really characterize it as work in progress. Those studies are not completed yet, so it's really just a work in progress evaluation. So nothing I can really speak to in terms of any impact or any change in our outlook or our business model moving forward. It's really just a work-in-progress evaluation.

Okay, and then just one last one from me, if I may. Just given where your balance sheet is and the fact that you've got a clean break with the Kyrgyz right now, should we anticipate that some sort of a meaningful buyback or special dividend could be back on the table? Or just given what's happened with your portfolio, is M&A a bigger focus now?

I think, you know, In terms of the strength of the balance sheet and our liquidity profile, obviously that's something that we do discuss with our board of directors and we'll continue to have those discussions. But I'm not really in a position to provide any guidance in terms of go-forward capital return initiatives. Really the only thing I can speak to right now is our quarterly dividend distribution. But over and above that, we'll be having future discussions with the board when it comes to any sort of incremental capital return initiatives and whether or not that's warranted.

Great. Thank you for that, guys. Take care.

We have no further questions on the phone line. I'll turn it over back to you, Mr. Caron.

Okay. With that, I'd like to thank everyone for joining us on our call today. Thank you, everyone. Goodbye will be available throughout the day if needed, so please feel free to reach out to myself and I can answer any additional questions. Thank you. Bye-bye.

That concludes today's call. We thank you for your participation and ask you to please disconnect your lines. Thank you. music music Bye. you Thank you. Thank you. Thank you. Greetings and welcome to the Sentara Gold second quarter 2022 results conference call. At the start of the presentation, all lines will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star 0. As a reminder, today's call has been recorded Wednesday, August 10, 2022. I will now let you turn the conference over to Toby Caron, Treasurer and Director of Investor Relations. Please go ahead.

Thank you, Carlos. Welcome to Centera Gold's second quarter 2022 results conference call. Please note that presentation slides are available on Centera Gold's website to accompany each speaker's remarks. Today's call is open to all members of the investment community and media in listen-only mode. Following the formal remarks, the operator will give instructions for each asking a question, and then we will open the phone lines to questions. Please note that all figures are in U.S. dollars unless otherwise noted. Joining me on the call today are Scott Perry, President and Chief Executive Officer, and Darren Millman, Chief Financial Officer. I would like to caution everyone that certain statements made today may be forward-looking statements and as such are subject to known and unknown risks which may cause our actual results to differ from those expressed or implied. Also, certain of the measures we will discuss today are non-GAAP measures. Please refer to the description of non-GAAP measures in our news release and MG&A issued this morning. For more detailed discussion of the material assumptions, risks, and uncertainties, please refer to our news release and MG&A, along with the unaudited financial statements and notes in all of our other filings, which can be found on CDAR, EDGAR, and the company's website at centeragold.com. And now I'll turn the call over to Scott.

Thanks, Toby, and good day to everyone. As Toby mentioned, I'm just referencing the accompanying webcast presentation deck, and I'm just starting off on slide number four. So first of all, I'd like to start by highlighting our announcement on July 29th that we have officially closed the global arrangement agreement with Kyrgyzstan and the government of the Kyrgyz Republic. This is a clean separation, and it has allowed us to significantly reduce our share count by approximately 77 million shares, or 26%. With this closing, the company is positioned to move forward with a renewed focus on our core operations, the Mount Milligan mine, the Oxford mine, our core Goldfields development project, in addition to our exploration and drilling investment programs at our Greenfield and Brownfield exploration projects. In the second quarter, the company continues to demonstrate that safety remains one of Sentera's top priorities. Notable milestones during the quarter was with Comest achieving three years without a lost time injury, and subsequent to quarter end, our Oxert mine surpassed one million hours without a lost time injury. Moving over to Oxert, Gold Room operations at the Oxert mine's ADR plant remained suspended due to mercury that was detected. Retrofit in the Gold Room is expected to be complete in late 2022 with operations recommencing as soon as regulatory approvals are obtained. The company has completed engineering work and has ordered equipment to retrofit the ADR plant to safe operations within the Gold Room. The capital cost of this mercury abatement retrofit is expected to be approximately US$5 million. You will note in today's release that at the offset mine, we have initiated suspension of stacking and leaching activities as of August 10th. This is due to the company's inability to obtain approval from the regulators to use more activated carbon than what is currently allowed in the mine's environmental impact assessment permit. This change in operating practices means that the company has had to revise its consolidated 2022 outlook to reflect the the suspension of stacking and leaching activities at Oxford, the continued suspension of Gold Room operations in the ADR plant, as well as the impact of an assumed decline in copper prices and the impact that has on our Mount Milligan operation. We will speak to each of these in more detail later on in this webcast. In terms of our development projects, the advancement of the Goldfields development project continued in the second quarter. We have initiated a resource expansion and infill drilling program that targets some 65,000 meters of diamond drilling and reverse circulation drilling. Our plan here is to issue an updated resource estimate for the project in 2023 with a feasibility study shortly thereafter. With regards to the senior leadership, we are now in the final stages of recruiting a new chief operating officer and we plan to provide the market with an announcement on that shortly. From a liquidity perspective, reflecting the strength of our balance sheet, the board again approved a consecutive quarterly dividend of Canadian seven cents per share. Lastly, in respect to our molybdenum business unit, evaluations for surfacing value, sorry, evaluations for surfacing value opportunities remain an ongoing work in progress item. Just moving to slide five, just in terms of our environmental social governance highlights. There's a lot of exciting environmental social governance updates on this slide, and I won't go through them all, but I do want to note that on August 4th, Sentera published its 2021 ESG report. This report demonstrates the great strides that we are taking to continue to strengthen our environmental social governance performance, and I feel it is reflected in several achievements noted throughout that report. Lastly, I just want to highlight the successful completion of our year two responsible gold mining principles assurance work. but the organization is on track to achieve conformance with the responsible gold mining principles before the end of 2022. Just moving to slide six. Touching on Mount Milligan operating highlights now, I think it is important to note that our 2022 gold and copper production outlook for the mine has not changed. We are still on track to meet our gold production guidance of 190 to 210,000 ounces for the year and to meet our copper production guidance of 70 to 80 million pounds for the year. During the second quarter, Mount Milligan continued to deliver strong results, producing some 42,728 ounces of gold and some 17.4 million pounds of copper. In terms of the corresponding oil and sustaining costs on a byproduct basis at Mount Milligan, the result came in at $1,245 per ounce for the quarter, but was $641 per ounce for the first half of this year. The company's second quarter oil and sustaining cost result was impacted by the meaningful decline in copper prices. Again, remembering that copper is recognized as a byproduct credit. Second quarter copper credits were effectively reduced by some $560 per ounce in relation to a negative mark-to-market adjustment on our provisionally priced copper contracts that were open as at the end of the quarter. Darren, our Chief Financial Officer, will speak to this in more depth in the financial highlights section of this presentation. The Mount Milligan mine posted a solid cash flow result in the second quarter. We generated, in terms of cash provided by mine operations, we generated some $81 million, and in terms of free cash flow, the mine generated $58 million for the quarter. Mount Milligan's stage flotation reactors were commissioned in early May, during the second quarter, and we're expecting to see improved future gold and copper recoveries at the mine as a result. By way of example, the month of June actually had the highest monthly copper recovery that was seen in the mine's history. Lastly, Mount Milligan's life of mine planning work continues to progress with a focus on optimizing some meaningful life of mine extension opportunities relative to our go-forward equipment fleet capacity requirements, our tiling storage facility requirements, as well as some other identified opportunities and trade-offs. Just moving to slide seven. At Oxsert, as already mentioned, as of March 2022, our Gold Room operations remain suspended, and the company has initiated suspension of stacking and leaching operations as of August 10th, as a result of a lack of access to activated carbon. Mining and crushing are currently ongoing and the company is evaluating whether these activities should continue while we pursue an amendment to our environmental impact assessment permit to align permitted limits with current operational plans. As at June 30th, Oxford had stored golden carbon inventory totaling some 58,469 ounces. The weighted average cost of this inventory on a per recoverable ounce basis was approximately $444 per ounce. The ADR mercury abatement retrofit is expected to be complete by the end of this calendar year, and we do assume that current inventoried golden carbon will be processed in 2023, assuming the ADR plant resumes full operations with regulatory approvals in place. Meanwhile, we do continue to consider other alternatives to monetize the golden carbon. Oxsert is currently in the process of preparing a new environmental impact assessment application which will clarify the heat lead stacking capacity of the mine and the actual amount of activated carbon required for usage in our operations. We expect to be submitting this new EIA application by the end of this month, and we'll be pursuing its approval as quickly as possible. Just moving on to slide eight, just in terms of our guidance and our revised outlook, As I mentioned earlier, the company has revised its outlook for 2022 as a result of initiating the suspension of stacking and leaching activities at the Oxfam mine in addition to the continued suspension of Gold Room operations. This is also in addition to the changes that we've made to our assumed spot copper price moving forward. With regards to copper prices, we have conservatively reduced the second half forecast assumption from $4 per pound to $3.25 per pound. I would note that should copper prices stay at the current spot levels for the remainder of the year, the company's oil and sustaining costs as well as its cash flow outlook would see a positive impact versus this revised guidance. You will see we have offset production at 55,000 ounces for the year, and this really represents the actual Q1 production result. This is revised down from our original guidance of 210 to 240,000 ounces for 2022. In terms of the company's consolidated oil and sustaining costs on a by-product basis, our guidance has increased to $1,000 to $1,050 per ounce, which is an increase from previous guidance of $600 to $650 per ounce. And this primarily reflects the lower gold output contributions from Oxford, as well as the reduced copper price assumptions at Mount Milligan. As already mentioned, guidance for gold and copper production at the Mount Milligan mine remain unchanged from the previous guidance. Likewise, consolidated capital expenditures, costs relating to the Melidibum business unit, and corporate administration costs also remain unchanged from previous guidance. Expiration guidance has been updated to $50 to $65 million, and this reflects the addition of $15 to $20 million in spending and investments for the Goldfields Development Project following the addition of this project to our portfolio in Q1 of this year. Just moving on to slide 9. Here on slide nine, this reflects the revised 2022 gold production guidance graphically on a quarter-by-quarter basis. The guidance is updated to include only year-to-date gold production at the Oxsert mine of 55,000 ounces, in addition to Mount Milligan's full-year gold production outlook. As noted previously, Mount Milligan gold production guidance remains unchanged from the original outlook of 190,000 to 210,000 ounces. The company assumes completion of the mercury abatement retrofit at the Oxford Mine in late 2022, and this will then allow the restart of the Gold Room in 2023, subject to the relevant regulatory approvals being in hand. Just lastly on slide 10, just in terms of copper production, as previously noted, the company's copper production guidance is unchanged from the original outlook of 70 to 80 million pounds in the full year. With that, I'm going to pass the presentation over to Darren Millman, our Chief Financial Officer, and Darren will walk through some of the key financial highlights.

Thanks, Scott, and good morning all. For those following on the slide deck, I'll be initially speaking to slide 12. Sentera recorded $167 million in net revenue during the quarter. At the Mount Milligan mine, gross gold sales and copper sales were 58 million and 71 million prior to the provisioning adjustment on the concentrate sales of a negative 32 million, which were made in the quarter. I will speak to this in more detail later in the presentation. In the quarter, Mount Milligan sold 41,597 ounces of gold and 18.9 million pounds of copper. Due to the suspension of the ADF plant, as noted earlier by Scott, the Oxford mine has no recorded sales or production a quarter. However, stored golden carbon inventory balance recognized at 58,469 recoverable ounces at June 30. The cost associated with the Oxford stored golden carbon inventory is approximately $444 per ounce. which has been capitalized as a current asset with no costs flowing through the earnings statement in the quarter. The total recordable cost as at June 30, 2022 is 26 million. The recorded costs will flow through the earnings statement on the process upon the processing at the ADR plant for otherwise monetized at a third party facility. At the molybdenum business unit, 32, 3.2 million pounds of molybdenum was sold generating revenue of $68.6 million. During the quarter, the Mount Milligan mine operations average gold price realized was $1,335 per ounce and $2.19 per pound of copper. This incorporates the existing stream arrangements over the mine. It should be noted the 25% decrease in realized price from when comparing Q2 2022 to that of Q2 2021. Cash used in operating activities was 3.5 million for the quarter. As noted in the MD&A, the Matt Milligan mine generated $81 million in positive operating cash flow. This favorable variance compared to prior years was a result of the one sale shipment recognized in Q1 2022 of approximately $42 million, the cash only being received in Q2. This was offset by a reduction in gold sale and copper prices realised within the quarter, with 19% and 25% risks effectively decreasing in comparison to Q2 2022 and Q1 2021. Given no sales occurring at the Oxford mine in the quarter, with operations continuing, $51 million was used from Treasury. This also included income tax payments of approximately $22 million to OXU tax authorities and $222 tax year relating to the 2021 tax year, together with the annual royalty payment of $8 million relating again to the 2021 year. Free cash flow deficit from continuing operations for the quarter was $31 million, primarily driven by the $55.4 current operational status, together with a $6.1 million deficit at the Malibu business unit, as inventory levels remained relatively high with working capital reductions expected in the second half of the year. The net loss from continuing operations was $2.6 million in the quarter, with $36.2 million in adjusted net loss recorded. The earnings in the quarter attributable to operations were a minimal $2.7 million contributed from the Mount Milligan mine as a result of the mark-to-market adjustments from a historical recorded provision of copper and gold concentrate sales, together with the reduced gold levels sold and lower copper prices realised. This included the mark-to-market adjustments. Earnings also attributed were the $1.5 million loss from the Oxit mine, primarily from exploration costs, and the $3.4 million loss from the Melisandre business unit. For the quarter, there were three adjusting items. They were reclamation provisions, recovery at site, care and maintenance of $41.4 million, primarily a result of change in underlying discount rates used, compto-related legal and other costs of $3.2 million, and income and mining tax adjustments of $4.3 million. I'll now move to slide 13. Given the significant movement in previous issued oil and sustainability cost guidance compared to Q2 actual results, we prepared this high-level slide to note the three key aspects. The removal of the oxide mine's planned production and sales in Q2 has resulted in a higher oil and sustainability cost by $337 per ounce, given the planned 2022 low-cost profile of the mine. Secondly, the planned all-release timing at the Milligan mine, which remains unchanged, have higher expected costs in the first half of the year compared to that of the second half of the year. Specifically, 90% of gold production planned in the second half of the year. This results in a higher cost profile in the first half of the year, as noted in the slide, of a $229 variance. The company's fuel and Canadian dollar hedging programs has offset to date any inflationary pressures, together with initial higher inflation factored in as part of the 2021 budgeting process and included in the original guidance. The third point is the company treats copper revenue as a byproduct by the Mount Milligan mine. In effect, a negative cost when calculating oil and sustaining costs. Given this recent and dramatic movement in copper prices, together with unsettled provisional sales contracts, has resulted in an increase in all and sustaining costs of $468 in Q2 compared to the original guidance. I'm now moving to slide 14. At a high level, the company has seven to eight unsettled copper contracts at the end of each quarter. the rising copper prices in 2020 and 2021 had seen a company benefiting from the provisional pricing, whilst this recent sharp decrease in copper prices has seen a reduction in revenue and cash receipts. As noted on this slide, the copper price of variability experienced for accounting purposes was a high of $4.75 per pound at the end of Q1 2022, to a low of $3.71 per copper pound at the end of Q2 2022. The mark-to-mark copper price adjustments made at the end of the quarter contributed to a $560 ounce of negative impact on all the sustaining costs of the Milligan mine in Q2. The company's copper hedging program to date QP period with zero-cost collars being the preferred financial instrument. To date, the collar's pricing be within the ranges with no meaning for realized gain or loss. As we move into the second half of 2022, at these copper prices, the hedges are of value. It should be noted the company currently has 52.8 million hedged copper pounds, with a majority in the second half of 2022 and 2023, with average floor prices in 2022 at $3.65, in 2023 at $4, and in 2024 at also $4. Now, finally, in slide 15. I've largely covered off on most bullets in previous slides, so I'll just highlight the company has exited Q2 with a cash balance of $723 million, and $1.1 billion in liquidity. Liquidity does not factor in gold and carbon with a current market value of approximately $100 million as the company will continue to pursue this initiative in Q3. Given our strong financial position, the board declared a quarterly dividend of $0.07 per share. With that operator, that concludes our final remarks. We would like now to turn it over to

For a question, please press the 1 followed by the 4 on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press 1-3. One moment, please, for the first question. Our first question comes from the line of Farah Tariq with Credit Suisse. Please go ahead.

Hi, good morning. Thanks for taking my question. A point of clarification on aux suit. If the Gold Room retrofit is completed by the end of the year and you're able to recycle the activated carbon again, does the permitting still become a constraint in 2023 or is it no longer required?

So this is kind of real time, as you would have seen. We met with the Ministry of Environment effectively yesterday on August 9th, and in terms of the solution here, moving forward, they have recommended that we file that new environmental impact assessment, and that's what's going to align our operations with our sort of required permitting moving forward. So assuming the ADR facility retrofit is all complete and we have the regulatory approvals in hand, that will allow us to continue regenerating carbon in 2023 or recycling the carbon. And so that would put us in good order, you know, vis-a-vis what we expect to be permitted under our new EIA moving forward.

Okay. And just as a follow-up, is the expectation now that in Q3 and Q4 there will be no additional inventory of gold and carbon? Is that the right way to think about it? Yes, that's correct. Okay, great. Thank you.

Our next question comes from the line of Trevor Turnbull with Scotiabank. Please go ahead.

Yeah, thank you. I just wondered if we could talk a little bit about the suspension of the 2023 guidance. I was just wondering what drove that, and I assume some of it has to do with maybe the permitting and the new EIA in general. But I was also wondering if it was related to looking for those enlarged grazing permits that were going to allow access to higher grade. Because as I understood it, some of the higher grades from those areas were part of the original 2023 plan.

Yeah, Trevor, I would put forward simply it's a combination of all those items you mentioned. And really what it comes down to is, you know, right here, right now, we don't have visibility you know, with a high degree of confidence in terms of when those regulatory approvals will be in hand. So, say, for example, the ADR facility, I think we're highly confident that that will be, you know, that retrofit will be complete by the end of this year. But then, you know, we have to make an assumption with regards to when the regulatory approvals for using that facility will be in hand. Likewise, in terms of the new EIA that we'll be submitting by the end of this month, we have to make assumptions in terms of when that EIA will be approved. And right now, we just don't have a high degree of confidence that would allow us to provide an outlook for 2023.

Sure. I understand. And just as kind of a follow-up question on what's going on in Turkey, I know that when you first had the issue and started you know, building up an inventory of gold on carbon, there was talk of having maybe a third party process that carbon for you. It seemed like a pretty straightforward plan at the time. And, and obviously, given the build up an inventory that doesn't seem to have been as simple as we thought. I just wondered, can you say anything about why that that didn't turn out to be a very viable plan?

You know, look, Trevor, we continue to consider those alternatives in terms of looking to monetize the gold and carbon, you know, potentially off-site. But, you know, in terms of our discussions with the regulators and the agencies, I think, you know, what they've instructed us is their preferred approach is for us to, you know, remediate our facilities and to complete the retrofit of our ADR facility. You know, in terms of our operating license, we're not permitted to to transport or to export loading golden carbon off-site. That would require an amendment. And the discussions today, I think the preferred approach for the operation from the regulator's point of view is for us to remediate our facilities so that we can continue to produce DORE on-site. So we'll continue to engage in those discussions. But right here, right now, and as you're seeing in our guidance, we're assuming that we're going to have to complete the retrofit and that'll be the avenue or the main for producing gold dore moving forward.

Okay, yeah, I guess some of that permitting turns out to be a bit more rigid and narrow than we realized. Just one final question, if I could, on Mount Milligan, and that's just about the new mine plan. I saw that you had mentioned you wanted to assess the impact of capital and the tailings requirements. And I was wondering if the capital would be related to stripping costs, expanding the tailings or equipment, and if there's any permitting hurdles with respect to tailings that we need to think about as well.

You know, the life of mine work is quite advanced, and I think what we're seeing here is a meaningful opportunity. to increase the conceptual reserved delineated asset life. So that's favorable, if you will. But obviously that's resulting in a larger PIP, which in the context of your question, more mining volume, there will be more capitalized stripping, if you will, in terms of sustaining capital. Likewise, the life of mine processing volume is going to be considerably higher than what we had in the previous life of mine plan. And so to your point, that will require that will require a larger tiling storage facility. Yes, if we look at the required height of that tiling storage facility vis-à-vis what we're currently permitted to, we would require a permit amendment to build a larger tiling storage facility. Generally speaking, I'd want to put forward that that's kind of routine, that's part of the course in terms of how we run our business. But answering your question directly, yes, we would have to engage with the regulators, et cetera, to get a permanent amendment for a larger tailings storage facility.

And, sorry, just one follow-up to that. When looking at an amendment for tailings, is that all in the hands of the province, or do you have to also engage with First Nations on that one as well?

Yes, we'd have to engage with, you know, First Nations and other stakeholders, but it's a provincial permit. Okay.

I appreciate that. Thanks for all the answers, Scott.

Next question from the line of Anita Soni with CIBC. Please go ahead.

Good morning, and thanks for taking my question. Scott, the first question is how much, with respect to Aux you've put some disclosure in there that you had stacked more than was permitted in 2019 to 2021. Can I ask for the volumes that you stacked more than was and what the permitted amount was?

Sorry, Anita. I don't have that in front of me. And, you know, that was discussions that took place yesterday. So, to be quite honest, we're still trying to clarify clarify the regulator's position on this. We're trying to make sure that we've understood and interpreted it correctly, but I don't have those numbers in front of me.

Okay. I guess what I was trying to drive at was with the suspension of operations, would that mitigate perhaps in their mind, well, you're not stacking now for six months, so will that make up for it?

I'm not sure, Anita. I can't speak on behalf of the regulator.

Okay. All right. So the second question, there was other additional disclosure that I just read in the MDNA about elevated mercury levels in nine of the employees is is that um something that uh one that you know is it something to be concerned about i think like like how what's the elevation level and with respect to sort of what are the you know what's allowable mercury level elevation and in someone if there is any and uh you know would that have implications to this uh amended eia

In terms of the employees and the contractors, the health and well-being of our employees is obviously paramount. Back when we first identified mercury or high levels of mercury in the ADR facilities, we had all of our employees and contractors that were working in that facility, we had them submit samples just to ascertain whether or not they had elevated levels. And then any employees that we did identify as potentially having elevated levels, we actually had them sent to a a specialised hospital just for further evaluation. And I'm pleased to report that since all of this, all of the employees and contractors are fine, health, safe and well. So all good on that front, albeit it was pretty concerning at the time, given our paramount focus on the health and wellbeing of our employees. In terms of does that have an impact on the EIA, I don't believe so. I think what we're focusing on here, again, is the retrofit of the ADR facility. That is a change in our business model, if you will, in terms of the processing operations. And, again, the regulators instructed us that the best thing for us to do is submit a new EIA to make sure that the EIA is aligned with our sort of go-forward operating profile.

Okay, that's it for my questions. I'll pass it back. If I have any more, I'll get back in the queue. Thanks.

Our next question comes in the line of Lawson Winder with Bank of America Securities. Please go ahead.

Hi, good morning and thank you for the. I wanted to ask about Mount Milligan and the economics around that. Would it be fair to say that in the current inflationary environment and given the tailings capacity limitations, that there are some questionable economics on doing a life and mine extension?

No, look, again, as I said, the report itself, it's in kind of its final stages. There's a number of opportunities, a number of trade-offs that we're considering. But on a preliminary basis, what we're seeing in terms of the unitary cost profile or the productivity profile, I think it's quite similar to what you would have seen in the prior Life of Mine profile. I think... When you look at Mount Milligan's performance, you know, over the first half of this year, even 2021, I think you've seen a significant improvement, you know, in terms of productivity, unitary costs, et cetera, even our recovery efficiencies. And I don't see any reason why that would be dissimilar to what would be in the new life of mine plan as when we release it.

Okay. And then along those lines, what are you guys thinking in terms of number of years for the extension?

I can't disclose that as yet.

No problem. Maybe could you disclose what you guys will be using for a gold price assumption and hurdle rate for that study?

I'm just looking at Darren. For the reserve itself and the gold price, I think we ran it at $1,350. And when we do release the life of mine, typically we provide a cash flow section, and typically we provide a sensitivity. So there will be a whole series of gold prices that that cash flow will be run out. So it will be sensitized. You can pick the gold price that you want to assume moving forward.

And I think historically you guys have used sort of like a 15% after-tax IRR for projects. Would that be a fair hurdle rate for this one?

Well, this is kind of different. When you asked that question, I think that's more so in the context of what is our hurdle rate when it comes to making a construction decision on any sort of organic project we may have in the organization or maybe put differently if we're looking at inorganic opportunities. That's typically when we'd be looking at that order of magnitude sort of hurdle rate. But I think in terms of our existing assets, You know, again, I think the Lifemind report, I think, will be providing ultimately an NPV from memory. It's like 5%, 8%, and 10%. So we leave it with the reader or the user of the report to self-select, you know, their desired discount rate.

Okay, and then just one more. If I could on Oxsuit, I haven't been through the entirety of your release. Were you guys flagging any write-down in the value of Oxsuit, or is that still to be determined?

Yeah, no, given the high margin and temporary nature, there is no accounting or impairment adjustment in 30 June or expected in the future.

Oh, okay. Excellent. Thank you for your answers.

The next question comes from the line of Dalton Barreto with Canaccord. Please go ahead.

Thanks. Good morning, Scott and team. I'll start with Oaksud as well. It sounds like the environmental regulators have been involved since May, and that they've been looking at a much broader scope than just the ADR plant. And I'm just wondering, what triggered a broader review of Oaksud, and is it realistic to assume that your EIA will get approved by year-end, or even early 2023? Yeah.

I can't speculate or talk on behalf of the regulators, so I'd prefer not to answer that question. Obviously, you're aware of the challenges that we have had in our ADR facility and the retrofit that we're doing. As we mentioned earlier, that does require regulatory approval before we can actually commission that mercury abatement system moving forward. You know, in terms of the EIA, I mean, we've been in a lot of discussions with the ministry, and, you know, they have put forward that, you know, the solution here is to submit your new EIA that will then align your operating sort of activities and profile, you know, with that EIA and what's permitted. So that is well underway. I think, as we mentioned in our disclosure, we expect to be submitting that EIA at the end of this month. And it has been good engagement with the ministry, so I'm hopeful that it will be an expedited process moving forward. But I can't really provide any more clarity than that or any more visibility. That's just something we'll have to ascertain as we move forward here over the course of this year.

Okay, thanks for that. And then just kind of as an extension to that question, if the EIA approval does get delayed a little bit, your operating permit is expiring in January. When your EIA is eventually approved, will that trigger an automatic approval of the operating permit or will you have to then go through another process?

No, separately we would be, you know, expecting the extension of the operating license. And that extension application is already in the system. We've already filed that.

Okay, great. And then just switching gears, I think on the last call you had mentioned that you were going to wrap up some internal studies on the MOLLE business unit around this time. And I'm just wondering kind of what came of those, how you're thinking about that business going forward.

Yeah, look, I think as I mentioned earlier, we think there's some conceptual value surfacing opportunities within that business unit. It's something that we continue to study and evaluate, but I'd really characterize it as work in progress. Those studies are not completed yet, so it's really just a work in progress evaluation. So nothing I can really speak to in terms of any impact or any change in our outlook or our business model moving forward. It's really just a work-in-progress evaluation.

Okay, and then just one last one from me, if I may. Just given where your balance sheet is and the fact that you've got a clean break with the Kyrgyz right now, should we anticipate that some sort of a meaningful buyback or special dividend could be back on the table? Or just given what's happened with your portfolio, is M&A a bigger focus now?

I think, you know, In terms of the strength of the balance sheet and our liquidity profile, obviously that's something that we do discuss with our board of directors and we'll continue to have those discussions. But I'm not really in a position to provide any guidance in terms of go-forward capital return initiatives. Really the only thing I can speak to right now is our sort of quarterly dividend distribution. But over and above that, we'll be having future discussions with the board when it comes to any sort of incremental capital return initiatives and whether or not that's warranted.

Great. Thank you for that, guys. Take care.

We have no further questions on the phone line. I'll turn it over back to you, Mr. Caron.

Okay. With that, I'd like to thank everyone for joining us on our call today. Thank you, everyone. Goodbye will be available throughout the day if needed, so please feel free to reach out to myself and I can answer any additional questions. Thank you. Bye-bye.

That concludes today's call. We thank you for your participation and ask you to please disconnect your lines.