Oceana Group Ltd

Good morning and afternoon, ladies and gentlemen. Welcome to the Oceana Gold 2021 First Quarter Results Webcast and Conference Call. At this time, note that all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. And if at any time during this call you do require immediate assistance, please press star zero for an operator. Note that this call is being recorded on Thursday, April 29th at 5.30 p.m. Eastern Time. And I would like to turn the conference over to Alyssa Howell. Please go ahead.

Good evening and good morning. Welcome to Oceana Gold's first quarter 2021 results webcast and conference call. I'm Alyssa Howell, Investor Relations Manager for Oceana Gold. I am joined today by Michael Holmes, President and Chief Executive Officer of Oceana Gold, along with Scott McLean, Chief Financial Officer, and other members of the executive team, including but not limited to Jim Whitaker, Executive GM of Hale, David Wei, Executive GM of Asia-Pacific Region, Craig Seabury, our EVP of Exploration and Development, Karen Flynn, EVP Sustainability, and Sam Pazuki, Senior Vice President of Corporate Development and Investor Relations. Before we proceed, note that references in this presentation adhere to international financial reporting standards, and all financial figures are denominated in U.S. dollars unless otherwise stated. Also, know that the presentation contains forward-looking statements, which, by their very nature, are subject to some degree of uncertainty. There can be no assurances that our forward-looking statements will prove to be accurate, as future results and events could differ materially. I refer you to the disclaimers on forward-looking statements in our presentation. Michael, over to you.

Thank you, Alyssa, and good evening and good morning to all. I hope you're all safe and healthy. It's a pleasure to be here with you today to provide an overview of our first quarter results and share the many exciting growth opportunities we have underway. Delivering on our commitments is a core value at Oceana Gold, and our quarter one results demonstrate that we're on the right path to deliver operationally, as well as advance our organic growth. profitability improved quarter on quarter on the back of higher average realized gold prices and improved margins, despite nil challenges and lower gold ounces sold. I'm particularly proud of our operational teams who adapted and overcame normal course of business disruptions that affected nil throughputs during the quarter. The team quickly evaluated the challenges and then executed to find solutions. As such, we're on track to achieve the consolidated 2021 diet. We're also on track and on budget as we advance our own organic growth projects. Total capital investment during the quarter of approximately $70 million were focused on and included market underground development and hail paid waste storage and CSF expansion. We ended the first quarter with $196 million in immediate available liquidity and have structured our balance sheet to ensure our project's progress on optimal timelines, irrespective of the GPO status. Our ability to deliver long-term value for shareholders is predicated on the proven capital allocation and the path is very clear to my team. We are focused on delivering on our commitments and we are excited about our future that will deliver long-term value for shareholders. While many of our peers are seeking growth through M&A, we are growing significantly through proven investments in our assets, leveraging existing infrastructure, personnel and our track record as a responsible mining company. We expect to bring online three new underground mines and expand our existing open pit operations, all in geopolitically stable jurisdictions. With our fourth quarter results and investor day, we announced our inaugural five-year outlook, which you can see here, forecasting 75% higher production at 25% lower all-in sustaining costs. We are delivering margin growth, which for shareholders translates to real value over the long term through the development of our high-quality assets. What's also very exciting about this chart is that we have significant upside potential. The outlook does not include the DPIO, and restarting the DPIO is a key catalyst and priority for us. We expect that once the FTA renewal is finalised, the operation can contribute up to 120,000 ounces of gold and approximately 12,000 tonnes of copper annually. At first quarter of all and sustaining costs, the DPIO will be a significant source of free cash flow moving forward. Moving on to slide five. Responsible mining is fundamental to the way we do business, and part of responsible mining means prioritising the health and safety of our workforce. The COVID-19 global pandemic continues to impact many of us in our daily lives, and it is a reality that we are addressing at each of our operations. As at the end of Q1, approximately 121 positive cases have been reported amongst our workforce since the start of the pandemic. including 11 at Hale and 9 at Didipio in the first quarter of this year. The Philippines and Didipio host and adjacent communities are still being impacted by COVID-19. And as such, in the spirit of Bayanihan or Unity, we're doing everything we can to assist locally by providing medical supplies, COVID-19 test kits and household care packages, including sanitisers, protective face masks and rights. At the site, we continue to enforce strict health and safety protocols, including mandatory and precautionary quarantines, in an effort to reduce the transmission of the virus. Our health and safety record is one of the best in the industry, but we strive to do better. We saw an uptick in the total number of recordable injuries in the first quarter. In response, each operation is reviewing the injuries engaged to prevent rare errors. Across our business, we're focused on key programs that have delivered a sustainable reduction in TRIPA over the last eight years, and these include the management of principal hazards, fostering a culture that supports safe work practices, and increased focus on occupational exposure in our work environments. We also continue to progress key initiatives this year in ESG, including the development of our 2020 emissions reduction targets, alignment with the global target standards, and delivery of our first modern slavery statement reporting on future improvements in our supply chain processes. I will now turn it over to Scott McQueen, our Chief Financial Officer, who will review our first quarter financial results. Thank you, Scott. Thank you, Michael, and hello, everyone. The next few slides summarise the key highlights of our first quarter financial results. As illustrated on the summary table, the first quarter results reflect improved quarter-on-quarter profitability. This is despite lower golf prices and some milling throughput constraints that both ways inhale. As will be discussed later, our operational teams rose to those challenges and throughput constraints that impacted the first quarter have now been resolved. First quarter revenue came in at $149 million. The quarter-on-quarter reduction may collect lower gold production and sales. This was partially offset by higher realised gold prices, with all of our New Zealand dollar gold hedges closed out at the end of 2020. EBITDA benefited from G&A, with 50% reduction in costs to Dipio, which totalled $4.5 million in the quarter. While still negatively impacted by realised non-cash currency translation losses, the impact this quarter was reduced to the prior quarter. Accordingly, the stronger real life gold price and improved margins plus lowered appreciation and amortisation expense resulted in an adjusted net earnings of $21.8 million or $0.03 per share fully diluted. Concurrently, operating cash flow increased to $47.6 million and excluding net working capital changes equated to $0.09 per share. As expected, investing cash flow increased to $71.9 million in the first quarter, reflecting hail waste storage capacity expense, increased McCrae's print shipping, and a continued undergrant development of water. Financing cash flows for the quarter consisted primarily of financed leases, with no drawdowns on the debt facility major in the quarter. Turning to slide 11 and some information on our capital allocation strategy. As at March 31 our cash balance was approximately $146 million and our net debt stood at $163 million. This cash balance represents the planned investments in organic growth projects as we progress the development of three new underground mines to production over the next two years. We continue to actively monitor and manage liquidity. as we move through the peak growth investment period in 2021. For the new year, we continue to prioritise the reinvestment of cash flow into our high-margin organic growth projects, which we believe represent top-tier investment returns that will deliver long-term value to shareholders. As we move beyond this peak investment period, we expect to deliver that inherent value as well as return free cash flow to shareholders. which includes some additional detail on our capital investments during the quarter. As already noted, our 2021 capital investment program is focused on the advancement of our organic growth projects. For the quarter, capital investments were just under $70 million, which was largely flat quarter-on-quarter. Over half of that total was allocated to growth investments, including $15 million to list and pay construction and hail. 17 million for the continued development of the market underground, which totalled just over 2,300 metres during the quarter. At Macrae, approximately 4 million related to the development of the Golden Point underground, which is on track as planned. The expanding capital expenditure was just over 24 million for the quarter and included 16 million in pre-stripping. Approximately 11 million of this related to activities at Deep Vale North, Open Pit at McClellan with the balance primarily Hale. Exploration spends a total of $5.8 million with the majority related to projects and targets at Waihi. However, it did also include some resource conversion drilling at Golden Point Underground, intentional drilling at the Horseshoe Underground at Hale. As mentioned, we are building three new underground lines. two of which will be online, Martha Underground and Golden Poisoner. Our organic growth projects are progressing consistent with our guidance issued earlier and remain on track to be delivered as planned. I'll now turn over to Michael, who will provide more details on the operations during the quarter. Thanks, Scott. And on to slide nine, where we'll discuss the improvements we've seen at harvest quarter, and particularly year-on-year. At HAL, first quarter gold production of approximately 44,000 ounces was 10% lower than the fourth quarter of 2020. The lower quarter-on-quarter production was due to the lower mill throughputs related to the processing of the saturated saturated light ore. The saturated ore blocked shoots to the primary crusher, resulting in lower mill yield like action rates and a 20% reduction in the mill feed quarter-on-quarter. The operations team worked quickly to resolve this by utilising the previously planned, say, involved mill liner replacement shutdown to redesign and rebuild the primary crusher chute, which thus far has effectively mitigated the blockage and we believe is a more robust design. If you compare the current quarter to last year, gold production was over 50% higher, largely due to improved mining productivity. Over the course of 2020, full commissioning of the 19 Komatsu 730E haul trucks increased hauling capacity by 30%, and the successful implementation of the management operating system succeeded in delivering our best quarter yet in total mining movements, up 24% year-on-year and 7% quarter-on-quarter. Our current run rate would put us at a total mining movement of approximately 40 million tonnes in 2021, best thing of 2020, at a reduced mining unit cost. Going forward, we expect to move a lot more material, which provides upside for production and potential unit cost reductions for this year and beyond. During the first quarter, generally higher grades from Snake Phase 2 help to offset the reduced mill utilisation rate, and we expect marginally lower recoveries related to feed rate to course correct through the balance of this year. We continue to expect 150,000 to 170,000 gold ounces of production in 2021 at HAL, which is 60% of which will be delivered in the first half year as we complete the mining and state phase 2 and reach the high-grade ore portions in Leadbetter phase 1. Total capital expenditures for additional carlings and waste storage facilities are in the range of $60 to $70 million, as well as additional capital for the development of the HAL underground. Portal development for the HAL Underground is expected to begin in the second half of this year, and the project remains on track for first production in Q4 2022. This timeline is predicated upon the receipt of the Supplementary Environmental Impact Statement, currently expected by mid-year 2021. The SBIS will allow continued development of the existing HAL footprint, expansion of the CSF and PAGE cells, and full development of the hail underground. Turning to slide 10, Macrae's gold production of approximately 34,500 ounces was impacted by a mature rainfall event in early January that prevented access to primarily all sources in Coronation North, Open Pith and Fraser's Underground for approximately two weeks. As a result, mining activity was focused on waste movement as well as pre-stripping activities at the new D-Cell North Hayden Pit. In addition, the unplanned outage of one of the three existing sagnail motors in early February reduced throughput capacity across the balance of the quarter. The refurbished sagnail motor was back on site earlier this week. With the refurbished motor installed and the completion of the planned re-break of the autocars, the plant will be fully operational at the end of this month. Despite the impact of quarter one, full year guidance at McCrae's don't change. With the mill restored to full capacity, the team at McCrae's is confident that the adjustments made to the mine schedule will deliver on full year with an improved second quarter and a stronger second half. As you can see in the picture on the lower corner of the slide, Golden Point Underground development is well underway. First production is on track for quarter four this year. Progressively, Dolden Point Underground will replace production from Fraser's Underground. Dolden Point Underground, along with additional open-pit opportunities at Beakdale, Innes Mills and Gaytand, will be the primary sources for the McRae's mine life extension to 2028. Moving on to slide 11, and why he produced approximately 4,000 ounces in the first quarter prior to shutdown of the processing plant replacement of the existing sage mill and general maintenance. The new sage mill was delivered to site in early April and will be installed before the restart of the plan, currently expected in race quarter two. With the restart, we expect to begin continuous remilling of oil from the Martha Underground and deliver 35,000 to 45,000 ounces of gold production this year. Ramp-up of gold production will continue and we target a production rate of 90,000 to 100,000 ounces per year from the project over the next few years. Development of Martha Underground continues to progress on budget and on schedule, and in our view, this is a producing asset with significant potential upside. During the first quarter, we announced the first resource at Martha Underground of 620,000 ounces of gold, rating 4.3 grams per tonne. And in 2021, we expect to drill an additional 27,000 metres. Moving 10 kilometres to the north of Waihi, we continue to believe that Sarahiraponga, our WKP project, represents a promising opportunity within the Greater Waihi District. WKP is a major discovery with an indicated resource of 421,000 gold ounces and inferred resource of 717,000 gold ounces. grading between $12,000 and $13,000 per tonne. And that is all based on 35,000 metres of drilling, primarily on one of the three veins thus far. We expect to deliver an updated pre-feasibility study for this project in the second half of this year and continue to define the potential of this high-quality asset. Turning to slide 12, we consider the ZPO an integral part of our portfolio and its restart is a key focus for us in 2021. We remain in dialogue with the representatives at national and local levels on the renewal status. Currently, the FDAA is with the Department of Environment and Natural Resources for endorsement to the Office of the President. The current expected timeline for resumption to full operation could be up to 12 months post-renewal. This is primarily driven by the time required to rehire and reorientate our workforce, which may also be impacted by the COVID-19. The DPO is currently held in a state of operational standby, poised for transition to full production. Once fully ramped up, the DPO would produce approximately 10,000 ounces of gold and 1,000 tonnes of copper per month at first quarter oil or in sustained cost. Now looking to the future. On slide 13 you will see our key initiatives for 2021. Excellence in ESG and a commitment to responsible mining remains fundamental to the way we do business. We have operated as a sustainable business for the past 30 years by applying robust ESG practices across the company and we know this is critical to ensure we deliver value to the communities in which we live and work. Delivering on our commitments is a core value for Oceana Gold. And for us, that means achieving our 2021 production and capital guidance while successfully delivering organic growth. As of the end of the first quarter, we are comfortably on track to achieve both of these measures. Advancing our robust organic growth projects is a key to delivering shareholder value. And as I stated before, our organic growth projects are on track and on budget, with two of the three new underground mines coming online this year. And as discussed, the restart of the Dipio remains a significant near-term catalyst for the company. The Dipio has the potential to be a material source of cash flow. It is why we continue to employ a small crew at the site to keep the operation in standby. We continue to invest in the community and I continue to dedicate a significant portion of my time and effort as CEO to its restart. We look forward to the day we return to normal operations and can contribute to the Philippines' COVID-19 economic recovery. Turning to slide 14. Advancing our organic growth is key to delivering long-term shareholder value, and we're doing this in two geopolitically stable jurisdictions, New Zealand and the United States. As mentioned previously, in the Americas we are progressing earthworks for the Hale Underground and expect to begin the port of development in the second half of this year upon the receipt of the SPIS. The equipment is ordered and the mining contractor has been selected and the project is on track for first production in quarter four of 2022. Martha Underground underpins the Greater Waihi District as we currently see it. The project is on track for continuous milling to begin late in the second quarter and deliver 35,000 to 45,000 ounces of gold this year. As we develop the Master Underground project, we continue to invest in the drill bit. The majority of our exploration activities are in New Zealand, where we plan on drilling over 80,000 metres with 10 drill rigs in place this year, four of which are currently active at the Master Underground and two at WKP. It's early days, but we believe the Waihi District represents the largest value-creating opportunity we have in our portfolio. Moving to the other islands, Macrae's mine life extension to 2028 is supported by Golden Point Underground and open-pit expansion opportunities, including the decels and layback of existing open-pits. The Golden Point Portal development is progressing on plan and on track for first production in the fourth quarter of this year. In summary, we're focused on the future and bringing our organic growth online, which we believe is critical to creating shareholder value. Oceana Gold is a resilient and dynamic gold miner with a strong, sustainable future. We are excited about our five-year plan and beyond that delivers increasing margin and real value to shareholders. The acquisition we made at the low point of the gold cycle have created a platform for us to create value through our own organic Thank you for joining us today, and I'll now turn the call back to Alyssa.

Thank you, Michael. So we will now transition to Q&A.

Thank you. Ladies and gentlemen, if you do have any questions, please press star followed by one on your touchtone phone. You will then hear a three-tone prompt acknowledging your request. And if you wish to withdraw your question, simply press star followed by two. And if you are using a speakerphone, we do ask that you please lift your hands up before pressing any keys. Please go ahead and press star 1 now if you do have any questions. And your first question will be from Hovai Habib at Scotiabank. Please go ahead.

Hi, Michael and team, and thanks for taking my questions.

Quick two questions for me. The first one at Hale. Now, mill throughput, as he had mentioned, was lower due to some challenges with, I guess, the flow of the saturated saprolyte forward to the plant. Now, I believe this has been rectified during the quarter and also grade was, you know, hung in pretty well compared to Q4 coming into Q1. Can you give us a little bit of color on Again, just want to double check that this situation with the flow has been rectified and how do you see kind of grades coming in the next couple of quarters? Is it going to be fairly flat or do you see grades kind of tapering off? How do you see the grade profile of the market here? Yeah, thanks for that. We have fixed and have resolved the problem. We were trying to sort of manage through it and decided to do the redesign of the primary crusher and the apron feeder and the chutes. And we managed to take the opportunity of doing that during the middle shutdown for the reline. So that's been resolved now and plant throughput is back up to the levels that we were forecasting, which is great. And we believe that that solution is now a long-term solution for the process plants. Yes, the grades were able to sort of, as we've done that and with the lower throughput, we're able to sort of put the better grade materials through. We'll see sort of the grades for this quarter will be relatively flat, but the throughput will be increased. Then there'll be a reduction in the grade profile in the third quarter and then a slight increase in the fourth quarter.

So as mentioned before, 60% of our oil production will be in the first half of the year. Okay, perfect. Thanks for that.

Just another quick question on then just moving on to the DPO. In regards to, you know, the approval, you know, we started off negotiations with the DNR, then the file kind of moved to the office of the president. Now, I believe the file is now back to the DNR. Has there been any changes or any sort of additions or corrections to any sort of, you know, agreements? Is there something that they're you know, they're working on, or any other additional color you could provide as to what's taking the DNR so long to get, you know, approval across the line? Yes, well, thanks, Avijit. The frustration for us is the transparency of the timing of the process, but as previously mentioned in some other announcements, we did work with the the FCA renewal committee technical working group, which was a combination of the Mines and Geosciences Bureau, the Department of Environmental and Natural Resources and the Department of Finance. And we renegotiated the FCA terms and conditions and that sort of happened over the Christmas New Year break and now basically it's just been going through verification process and the sign-off process and so it's basically now just into the office of the Secretary of the Department of Environmental and Natural Resources which is the last signature that's required before it goes to the Office of the President. So through the technical working group it sort of went through the undersecretaries that were working with us and the directors that were working with us and then it did go up through the different So we've got that from the Department of Finance, and now it's just with the, as I mentioned, with the Department of Environmental Resources to the Office of the President. There has been, you know, complications within the Philippines with regards to COVID, with government offices being shut, so that has impacted the target.

OK, thanks for the colour of that, Michael. And that's it for me.

Thanks.

Thank you. Once again, ladies and gentlemen, if you do have any questions at this time, please press star followed by one on your touchstone phone. And your next question will be from John Tomasos at John Tomasos Variant Dependent Research. Please go ahead, sir.

Thank you for taking my question. Which quarter will CapEx peak this year? And presumably... As CapEx falls in subsequent years, production rises, costs fall. What might be a plausible year where a net debt would fall to nil? Are we four years away, five years away? We all like you to be strong and well capitalized.

Yeah, thanks, John.

Scott, I'll hand that question to you. Hello Don, happy well. Thank you for your question. Capital will peak this year in the next quarter. We're expecting about 60% of our capital in the first half. Third quarter will be similar to the first and the fourth quarter the lowest capex, capex remaining on track with our guidance. You're right, our plan is predicated on delivering these projects with a peak capital year this capital coming down next year, Martha Underground, Golden Point going into production, production going up, margins increasing, as you know. I would expect, and it's gold price dependent, of course, John, but expect that we would be targeting to be, as you said, net debt neutral within three years, certainly. And we'll be doing everything to achieve that as soon as we can, delivering on our objectives.

Thank you.

We're all reading for you. Thanks, John. Any further questions, sir? Thank you. No, I'm fine.

Thank you. As a reminder, ladies and gentlemen, if you do have any questions at this time, please press slowly star followed by one on your touch-tone phones. And at this time, it appears that we have no further questions registered. I apologize. We do have a question from Farouk Ahmed at Raymond James. Please go ahead.

Oh, hey, guys. I thought I would just jump in here with a question. A couple of things. One is at Hale, in your press release, you put out a comment saying, I guess a bit of a warning, that while the guidance is reiterated, it could be adversely impacted by the COVID cases that are going on there. Can you just give us some insights into what you're dealing with in terms of workforce availability and what would have to happen for you not to be able to maintain guidance at

Yes, thanks, Farouk. I'll hand it... I mean, the COVID has been managed exceptionally well on site, and we've seen some great reductions of cases. Unfortunately, it's just had another uptick in the region. But I'll hand that over to Jim Whittaker, who should be able to give you a little bit more colour on just exactly how he and the team have been managing the situation. Jim? Yeah, thank you, Michael. And hey, Farouk, thanks for the question. As Michael noted, the numbers have come way down after this first quarter in South Carolina and around Kershaw and Lancaster County as well. They're literally down to the single digits of people that we have off-site, either for presumptive cases or for confirmed cases. So the numbers have come way off. That has helped our ability to plan work and obviously through the reduced absenteeism. We've We've kept our same policies in place as we had all the way through last year. We also kept the same policies in place with respect to vacations, which is helping the situation a bit because now we're into the vaccine cycle in the United States, as you may know, and people are taking time off. to go out for a half a day and to make sure they get their vaccine. So we've really been doing a lot of communications and promoting that to make sure that people are out there and looking for getting the vaccine. With respect to impact and operations, it's really more of a cost impact that we saw last year and some complications with absenteeism, not having people in seats all the time. I think we're through the worst of that. But again, it is kind of a crystal ball. We're hoping that the We don't have this famous third wave that some people are talking about, but what we see through this month is very, very favorable for what we're trying to do with the Hale business plan.

Okay, that's great. Thanks for that color. And then maybe just to round out that, how are you in terms of your workforce, in terms of filling out your workforce at Hale? Have you kind of reached full complement there?

Yes, we've been at full complement for a while. The challenges of hail, more specifically in the open pit mining operation over the past year, have been rotation. We're still doing a lot of work on, you know, looking at what we need to do to bring people into the company that want to stay with the company and also working through conduct issues such as health and safety, which we hold at very high priority. So we're at full complement. The next steps, and actually through the month of May, is very critical for the underground group.

We have left the contract for the underground contract miner to be able to reduce risk on the schedule.

That's looking very good, but it's indeed we're actually going through a hiring cycle right now. It will be a very, very busy month in May and into June.

Great. Thanks for that, Jim. And then... Michael, maybe just one follow-up question on Didipio, kind of an add-on to, I think, Oase's original question. It sounded, or I guess when I read the release and just hearing your presentation, it sounded to me that you're a little more upbeat or maybe even a little more certain about the outcome at Didipio. Am I just reading and hearing things that I want to read in here, or is there something you can tell us about how things have gone? I mean, it sounds like the Department of Finance has signed off. Can you give us some color into kind of what the discussions have been with the DENR and what they're telling you in terms of their willingness to sign off imminently?

I think there's been a couple of changes within the country that we're seeing in the announcement of the President with regards to mining within the mining industry within the Philippines and the opportunity they've got of advancing that for a COVID-19 recovery. And so there's been some announcements from the President with regards to the Open Fit Bands and the EO79. And I think that's an important view for the country and the Department of Finance and I think quite sure the different departments to sort of move that forward. I think from our point of view, when you look at the technical working group, it was made up of the different departments and they're all sort of quite happy with what we've done with the renewal and it's just a matter of now just going through the process of sign-off. And so as we've been going through the process of sign-off, we've sort of seen that, you know, the department of the Mines and Sciences Bureau director has come out with some positive sort of statements within the Philippines press, as well as the direction of the President with regard to mining industry within the country. So again, we don't have a... The clarity on the timeframe for us is something that we've never had, and that's been one of the most frustrating things that we're still dealing with. But we believe, you know, we've done... And the working group with us has done what we've done, and it's now just, you know, it's a significant point for the Department of Environmental Resources before it then goes to the office of the principal.

Okay. Okay. Thanks for that. Thanks. These were helpful answers. I appreciate it.

Thank you. Once again, ladies and gentlemen, as stated, if you do have any questions, please press star 1 at this time.

And currently, we have no further questions registered. Please proceed.

Thank you, Operator. We do have a handful of questions that have been submitted online. We'll start with the first question for our management team. Question one, will the pre-sold ounces from last year be accounted for in the second quarter of 2021 at $1,925 per ounce or thereabouts?

Thanks, Alicia. I'll take that one. Yes, I will. The pre-sold answers were the cash was received and the revenue was put on the balance sheet. That unwinds through the P&L as revenue at $1,920 as we deliver those answers across the next few months.

Okay. Thank you, Scott. Second question.

At what share price would you look at doing buyback?

Yeah, look, thanks, Liz. I think at the moment we're sort of focused on our organic growth, and so the free cash that we've got and the balance sheet and the way we've set it up for business through last year and the year this year is all going back into the organic growth which we see as the long-term value for the shareholders. I think the question, you know, when the DPO comes back online... and we do get that free cash flow generation. It's just how we then sort of utilize the cash flow from that and what's the best way of doing that, and we'll review that once the DVO comes back online.

Thank you, Michael. The third question, turning to the DVO.

Assuming you get the SQAA renewed, you won't have any production for up to 12 months. Is that correct?

Yeah, thanks, Lisa. No, that is not correct. So the DPO, we've still got concentrate currently on the ground, so we'll be chucking the concentrate out. Total value of that's around $50 million to $55 million worth of concentrate on the ground, and we'll get a payment for that within up to six weeks, about 90% payment of that in the first six weeks, and then the remainder will come as we finalise the assay. It'll take a period of two to three months to get the processing plant and the people re-employed and trained back up to get the processing plant back up and running. And we will then be utilising the stockpile, the 90 million tonnes of all the stockpile we have to start feeding the process plant. And that will then assist with the delivery of tarrings for the pastoral plant. But we'll be supplementing that as we sort of ramp up. What we're saying when we're up to 12 months, that production is the full rate. And so we were actually ramping up production to 1.6 million tonnes. So it'll take us about 12 months to get back up to that full production rate of 1.6 million tonnes from underground. And, of course, that gets supplemented through the process plant, where we mill about 3.8 million tonnes. So there's another... 2.1, 2.2 million tons that comes from the stockpiles that gets put in there. So initially, it will be processing the low-grade stockpiles, and then we'll continue to feed the underground oil as we ramp up the underground to the 1.6 million tons, which will take up to 12 months.

Great.

Thank you, Michael.

Our final question of the day is, what is your working capital cost with Didipio Startup?

Basically the ZIPIO was cleared out from underground and so the startup costs aren't that great. The working capital should be around that $3 to $5 million for the startup. more about the employment of the people and the training of the people. We'll have the concentrate, as I said. That will be sold within the six weeks. We'll move that off-site and sell that. So that should be positive cash of around about $50 to $55 million, and then actually ramp up the process plan and then get the operation into full production.

Okay. Thank you, Michael. And I was mistaken. We have...

One more question, and that is, can certain capital expenditures be delayed or deferred if liquidity declines? And if so, at what gold price will you consider deferring?

I'll take that one, Mr. Markmeyer.

The organic growth projects can be deferred but our priority is to deliver on the optimal timelines and that's the way we set up our balance sheet with that intent. 2021 is our peak capital investment period and when we set our plans in 2020 was at a record high gold environment with a very bullish outlook on funds. But that said, our plans for this year were set at gold prices. We started the year with $205 million or so in liquidity. And we set up our balance sheet expecting a $205 million this year, expecting softer gold prices. And at talent prices, that drawdown could be circa $20 to $125 million, but we're still in a good position. And gold prices, $100 either way, is about $30 million. And we have levers in our control. Before we would look at the timing of those projects in terms of additional short term cash flow, free payments or additional short term debt options etc. We've got options on the table and we're well positioned to manage goods should the gold price drop but that's averaged $1,793 for the first five months and we continue to monitor that closely.

We've already used to deliver those great projects on the optimal time. Thank you, Scott.

That is our final question of the day and concludes our webcast and conference call. A replay will be available on our website later today. And on behalf of Michael, Scott, and the rest of the team, thank you for joining us. Bye for now.

Thank you. Ladies and gentlemen, this does indeed conclude your webcast and conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.