Royal Nickel Corporation (RNKLF) CEO Paul Andre Huet on Q4 2019 Results – Earnings Call Transcript

Royal Nickel Corporation (OTCQX:RNKLF) Q4 2019 Earnings Conference Call March 26, 2020 10:00 AM ET

Company Participants

Paul Andre Huet – Chairman and CEO

Graeme Sloan – Managing Director, Australian Operations

Johnna Muinonen – President, Dumont Nickel Project

Barry Dahl – CFO

Oliver Turner – SVP, Corporate Development and IR

Conference Call Participants

Derek Macpherson – Red Cloud Securities

Matthew O’Keefe – Cantor Fitzgerald


Ladies and gentlemen, thank you for standing by and welcome to the RNC Minerals Fourth Quarter 2019 Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions]

I would now like to hand the conference over to your first speaker for today, Paul Huet, Chairman and CEO of RNC Minerals. Please go ahead sir.

Paul Andre Huet

Thank you, Julie. Good morning and welcome to RNC Minerals Q4 2019 conference call. In addition to me speaking on today’s call, will be other members of RNC’s executive management team; Graeme Sloan, Managing Director of Australian Operations; Johnna Muinonen, President of Dumont Nickel; Oliver Turner, Senior Vice President of Corporate Development and Investor Relations; and our recently hired new CFO, Mr. Barry Dahl.

This morning, we issued a news release outlining fourth quarter and year end 2019 results. Our MD&A and financial statements for the period ended December 31st, 2019 have been filed, all of which are available on the RNC website or under RNC’s profile on SEDAR.

During today’s call, the speakers will be referring to presentation slides, which are available for download through a link on the homepage of our website at

Before I begin the presentation, I would like to remind you to please review our cautionary statement regarding forward-looking information and non-IFRS measures, which can be found in our news release, MD&A, and in our presentation slides.

I will start by giving my sincere wishes that all of you are keeping as well as possible amid all the market turmoil. More importantly, I hope you and your family are keeping safe and healthy. The current global situation is challenging and it has been no different for the gold mining equities.

At RNC, we are focused on ensuring what — we are focused on ensuring we are doing everything possible that we keep doing what we do best, producing gold at a profit while ensuring the safety of our employees.

With this in mind, we have implemented strict control measures at our operations in response to the COVID-19 pandemic. A taskforce at our Australian operations led by Graeme Sloan has been established to ensure our operating sites remain as prepared and responsive to this evolving situation.

We are carefully monitoring the advice of local authorities, we have informed our site personnel of the precautions that needs to be taken with respect to travel to and from site, along with isolation periods should anyone exhibit symptoms consistent with COVID-19.

We have also proactively employed a full-time nurse specifically to monitor the status of people entering and leaving our operation. Additionally, we have sealed off our operations from any outside visitors not critical to business operations.

In order to minimize potential disruptions to our supply chain, we are building additional critical supplies beyond normal levels. During the Australian bushfires in December and January, our stockpiles proved critical in ensuring milling rates were maintained. Presently, our stockpiles are increasing steadily from three different sources; our Baloo open pit, our Fairplay North open pit, and our Beta Hunt underground mine.

Our second half of 2019 of 51,090 ounces, exceeded the high end of our guidance by over 2,000 ounces. All-in sustaining costs for the fourth quarter were reduced by $52 an ounce to $1,131 per ounce, down from $1,183 per ounce in Q3.

Our excitement comes from the continued trend quarter-over-quarter clearly demonstrating that our initiative, focus, and efforts are paying off. Even more encouraging these reductions were achieved despite some huge challenges to our operations from the wildfires in Australia in late 2019 in early 2020.

I’d like to take this opportunity to once again thank all of our personnel on site who work tirelessly to ensure that our mill remain fed and our production was not impacted.

With respect to the second half of 2019, the first two quarters of our own mill, we reported an all-in sustaining costs of $1,144 and out, which also came in below our guidance range of $1,150 to $1,250. I’m extremely pleased to report these strong numbers and announce that we exceeded even our own initial expectations despite the challenges that nature brought our way.

Our strong fourth quarter performance, as you would expect, was reflected in our treasury. We continue to build up our cash balance, finishing the year with a strong cash balance of approximately CAD35 million, which is net of a CAD3 million debt repayment we elected to make to reduce our interest costs. Those were Canadian dollars by the way.

The cost reductions we achieved are part of our ongoing comprehensive plan and we expect these to continue into 2020. Some of our cost reduction efforts were targeted towards partnering and working with our top 20 vendors to purchase supplies more efficiently and improvement on productivity rates at both operation and ongoing efforts to reduce G&A.

As previously mentioned, we continue to target an all-in sustaining costs of $1,000 us by the year end. Late last year, we also announced that we had negotiated a significant reduction in the Morgan Stanley royalty which covers approximately 70% of the Higginsville historical resource.

The results of this renegotiation cannot be overstated. This has truly unlocked both exploration and mining at Higginsville and the results we have announced are already — are tremendous actually.

Today, we have press release five new areas of exploration and have already begun mining the Fairplay North open pit. This land package has not seen exploration of this magnitude in a very long time and we plan to focus a large part of our $10 million exploration budget to conduct an aggressive exploration plan on high priority targets at Higginsville this year. We expect from these tenements to make up an increasing portion of the capacity at our HGO plan. Graeme will discuss some more of our targets from the operations in detail.

In December, we also announced the maiden 2P to be reserve of approximately 300,000 ounces at our Beta Hunt mine. This aligns with our goal of increasing our confidence in the amount of feed we have in front of our mill.

With respect to our 2020 guidance, presently, it remains unchanged at 90,000 to 95,000 ounces and then all-in sustaining costs between $1,050 and $1,250. Our guidance assumes no significant interruption in operation as a result of the impact of COVID-19 virus.

Opportunities to creating and realized value for our shareholders is something I think about every day and it certainly drive everything and all our decisions at RNC.

At this point, I will turn the call over to Graeme for discussion of our potential — of our — sorry, of our operational performance and the exploration potential.

Graeme Sloan

Thank you, Paul. I’m very pleased to report that building on the third quarter performance, we were able to finish 2019 on a high, despite the challenges of the bushfires late in the quarter.

Our operating teams at both sites have performed extremely well in spite of these events and continue to do so, even when faced with the impacts of the global COVID-19 pandemic.

We’re actually in a good position with operating results in quarter four exceeding forecast and we remain on track in quarter one. Morale and psyche across operations is tracking very nicely with over one year, loss-time incident free at Higginsville and 128 days at Beta Hunt.

If you move to slide seven, the West Australian operations. As Paul discussed in highlights, the restructured Morgan Stanley royalty has opened the door for a new strategic approach for exploration at Higginsville. It is particularly pleasing to work with a business partner like Morgan Stanley, who also recognize the in-ground potential and the need to unlock this value for both shareholder groups.

Previous historic resources labeled marginal or uneconomic and they have been reassessed and there are multiple new exploration targets being prioritized for drilling over the coming quarters.

Turn to slide eight, consolidated results of operations. On a consolidated basis for the fourth quarter of 2019, we produced a total of 26,874 ounces, bringing the total gold produced for the second half to 51,090 ounces.

The Australian operations mined 239,000 tonnes and milled 321,000 tonnes for quarter four. Mill availability improved by 4% to 97% for the quarter.

Slide nine, for our first full quarter production at Higginsville, we milled a total of 188,000 tonnes for 10,584 ounces, up 119% and 84% respectively when compared to the third quarter. So, a significant increase in both metrics.

At Baloo open pit where production commenced in August 2019, Stage 1 will continue to provide mill feed of around 30,000 tonnes per month at grades ranging from 1.8, 2.8, until mid-2020.

Approval for Stage 2 was received from the Department of Mines in January this year. Mining is expected to commence at the completion of Stage 1 and will continue until January 2021.

Following the Morgan Stanley royalty restructure, we have identified a number of projects close to the Higginsville mill, which are now being prioritize for development.

The first of these is a Fairplay North open pit, which is located only a kilometer from the mill. The pit will remind concurrently with Baloo to ensure optimum feed blends and recoveries.

Completion of Fairplay North is expected to be at the end of quarter three 2020. However, as with Baloo, recent drilling has raised the potential for both pits to be extended. A further three open pits are in varying stages of being drilled and optimized ready for mining. This provides us with a solid pipeline feed to Higginsville plant for several quarters. Recent exploration results provides strong confidence that this pipeline will continue to grow.

Slide 10, operational highlights, Beta Hunt. Beta Hunt’s contribution to the fourth quarter was 133,000 tonnes milled end of quarter three and production of 16,289 ounces. 11% reduction on the previous quarter, due to a slightly lower mill grade, the result of rescheduling of some mining areas.

Beta Hunt production continues to be sourced from Western Flanks and A Zone. Several stoping blocks being developed within Western Flanks will shortly access areas up to 20 meters wide, resulting in higher productivity and lower costs. Combined production from Western Australia — from Western Australia — from Western Flank and A Zone is forced — is forecast to increase to plus 50,000 tonnes per month.

Slide 11, late in December, we announced the maiden Beta Hunt reserve of 306,000 ounces at a grade of 2.8 grams per tonne. The new reserve will form the foundation of a revised life of my model from which production scenarios will be developed.

Slide 12 and Higginsville, our systematic review of the entire historical results in the 2 continues in earnest. Work completed to-date is showing very promising results with a number of various having the potential to provide short-term mill feed with minimal drilling and setup costs.

At Baloo, drilling is forecast — is focused on increasing our and upgrading the existing resource. Target areas include North Baloo, Eastern Footwall and the down dip extension of the main Baloo in mineralization. To-date, drilling results have either confirmed or expanded our existing models. Some of these drill highlights can be seen on slide 12.

At Fairplay North, there has been a significant amount of grade control and some additional drilling to upgrade the resource within and on the margins of the optimized pit design. As our results have confirmed the geological model and extended the near surface mineralization. Again, drill results can be seen on slide 12.

Slide 13, in late January, we announced the results of a recent completed high density gravity survey program. This program identified a nearly interpretive structure extending over five kilometers. The structure is located just north of the previously mine, 1 million ounce Trident gold deposit. It is considered to have high potential and we will focus of a new round of drilling in our 2020 Higginsville Exploration Program.

As part of the resource review, drill results from the Aquarius deposits, formerly was the Corona deposit have identified this area as a possible future high-grade open pit and/or underground. Highlights of historical drill results can be seen on slide 13 and include hole VIND047, which returned 658 grams per tonne or 20 ounces per ton over 1.9 meters from 202 meters.

They — VIND049 returned 225 grams per tonne or seven ounces. Another source of high-grade mill feed in a relatively short space of time curve drilling confirms these results.

Recent drilling results have extended mineralization at Hidden Secret and Mousehollow projects, which now form part of our near-term mine plan. Whilst conducting surface sampling at Hidden Secret, we discovered visible gold right on the surface. This is very rare and with most mineralization under several meters of cover.

Some of the better intersections at Hidden Secret include 15 grams over four meters or — from 24 meters including 48 over one and 25 grams per tonne over four meters from 17 including 93 grams per meter — per tonne over one meter


At Mousehollow, holes were 26 grams over three meters from 22 and three grams per tonne over 19 meters from zero. In other words, right at the surface, which means our first bucket of material could well be mineralized.

So, despite the challenges, a really solid fourth quarter to finish 2019 and we remain on track for quarter one this year.

I will now pass over to Johnna.

Johnna Muinonen

Thank you, Graeme. Good morning everyone. I will now give an update on the Dumont Nickel Project, please refer to slide 15. The results of the updated Dumont feasibility study were announced on May 30th, 2019. And the 43-101 compliant technical report is available under RNC’s profile and SEDAR.

The study confirms the economic feasibility of the deposit with a strong rate of return of 15.4% and an NPV of $920 million dollars. These results reconfirm that Dumont is a large scale, low cost, and long life asset. Dumont will produce an average of 39,000 tonnes of nickel annually at a C1 cash cost of $3.22 per pound with a 30-year mine life.

Dumont represents one of the only large scale fully permitted nickel-cobalt projects in a low risk jurisdiction that can begin to satisfy the significant growth expected in the nickel demand from the electric vehicle battery market.

With the completion of this positive feasibility study, RNC with our partners at Waterton are continuing to complete value-added work on Dumont. The current focus for 2020 is to update all stakeholders with the results of the 2019 feasibility study and integrate these results into all project construction readiness items.

This includes an update of the Dumont closure plan, which is a critical element in finalizing the mining lease and maintaining our shovel-ready status. In addition to maintaining our shovel-ready status for Dumont, we will continue to evaluate opportunities to improve the economics of the project as well as derisk the project including focusing on the preparedness for detailed engineering, as well as construction execution planning.

We are continuing to move forward to implement the approved compensation project to offset fish habitat losses related to future mine development. Portion of this work was completed in the third quarter of 2019 and the remainder will be completed in the summer of 2020.

Although the current economic environment provides uncertainty with regards to short and medium term nickel supply and consumption, and it’s caused current nickel price to decline and inventories to increase, the positive longer term nickel market fundamentals remain strong. The nickel market has been in deficit for several years now and there’s a 10 year under-investment in exploration to increase the nickel supply.

This supply deficit is layered on top of continued stainless steel growth, plus increasing demand from nickel containing lithium ion batteries. We therefore still believe there’s an exciting future ahead for the nickel market and RNC continues to evaluate all opportunities to maximize shareholder value for our portion of Dumont.

I will now turn the call over to Barry Dahl for a discussion of our financial results.

Barry Dahl

Thank you, Johnna. Fourth quarter revenue was $57 million, up 32% from Q3. The revenue increase was primarily from the increases ounces sold. Adjusted earnings for the fourth quarter were $13.7 million and adjusted EBITDA was $14.4 million.

For the full year, adjusted earnings were $15.9 million and adjusted EBITDA was $18.3 million. We finished the year with a healthier balance sheet, including a strong cash balance of $34.7 million and a working capital of $26.5 million, a dramatic improvement from December 31st, 2018, when cash was only $1.3 million and we had a working capital deficit of $19 million.

At Higginsville, cash operating costs were $1,182 per ounce for the fourth quarter, $544 or 85% higher than in the prior quarter. The increased cash cost was largely due to a reallocation of processing costs inside the Western Australian Business Unit among other periods specific item.

With Higginsville now fully integrated into Western Australian Business Unit, internal processing charges have been normalized. This has resulted in a reallocation of internal processing charges between Higginsville and Beta Hunt, as is reflected in the reported cash operating costs. This has not changed the overall cost with Australian Business Unit and as such cash operating cost and all–in sustaining costs are unaffected by the reallocation.

I will now turn the call over to Oliver.

Oliver Turner

Thank you, Barry and hello everyone. As we are all very aware, recent events related to COVID-19 have placed handcuffs on businesses in all sectors as we comply and agree with the importance of social distancing and self-isolation.

When it comes to physical marketing, we, along with all other gold miners, have seen our schedules for marketing roadshows and conferences placed on hold this year until the COVID-19 situation stabilizes. That said, at RNC, we are not going to let that hold us back from continuing to attract new investors and communicating the transformational story we have accomplished over the past nine months since the acquisition of Higginsville.

To that end, we have already held discussions with several of our online and financial partners in North America, Europe, and Australia as to how we can effectively get in front of both our existing and new shareholders.

Over the coming weeks, we will be announcing several online initiatives we are working on in tandem with these partners. But I want to announce our first online webinar, which we will be joining on April 1st. Red Cloud Securities is highlighting three of their top gold producers in a one hour webinar to be hosted at 12 P.M. Eastern Standard Time.

Later on in the month, we will also be participating in the Denver Gold Forum Virtual Conference on April 20th to 23rd. RNC is pleased to be featured in both of these events and we are looking forward to communicating our exciting 2020 strategy to a wide online audience.

As always, the health and safety of our employees and our investors is top of mind at RNC, but we will not let the current global situation get in the way of us continuing to attract new high quality investors to the story and improving research coverage.

This is something we have accomplished at an impressive pace so far, which is reflected in both our shareholder registry and our new status as a top pick for 2020 with two of the research analysts covering us. We look forward to seeing you all during an online presentation soon.

With that, I’ll turn the call back over to Paul.

Paul Andre Huet

Thank you, again everyone for joining us today. We look forward to some relief in these ever fluid times and we really wish you and your families a good health. When I just take a snapshot of RNC and where we’re at, I’m quite pleased to know that we are in a very unique situation to overcome everything that’s in front of us with our cash balance and our consistent operations led by our team in in Australia.

So, thank you very much and we’ll open it up for calls. Questions please.

Question-and-Answer Session

[Operator Instructions]

Your first question comes from Derek Macpherson from Red Cloud Securities. Your line is open.

Derek Macpherson

Good morning guys and thank you for hosting the call and congratulations on what has been a great quarter. A couple of questions around Higginsville and development of the pits. Perhaps, Graeme can you talk a little bit about what you expect for grades of those pits and what the strip ratios are going to be for this year and next for Fairplay and Baloo?

Graeme Sloan

Yes sure can Derek and thanks for the question. Look most of the pits in and around Higginsville or at the grades going to be around that two grams and some pits are higher around the two and a half and even higher like Baloo in some sections. There’s a couple of pits coming in a bit lower than the two, but on average around that two to 2.2 grams a tonne.

As far as the strip ratios are dependent on the pits obviously, and it’s probably hard to put an average across what you say, but typically, you’re looking — a sort of around the seven, six, to eight to one is probably a fair average to apply to most of those pits.

As I said the same with the grades, they’ll vary between pits and — but most of them — in fact, the ones we’re mining now with the pre-script most of that material and we’re now into the also stripping ratios quite low.

Derek Macpherson

Okay. And just a follow-up on that you noticed in the MD&A that there was — in Q4 is pulled ahead from some stripping activities for — at Higginsville, is that increased development going to continue into Q1 or do you expect those costs to sort of stabilize?

Graeme Sloan

No, that’s — it’s — what we did was — look, we had a fair inkling of where things would be in some areas, not all around the pits. So, we actually — I’d like to say it was all good management. There was certainly been a lack in amongst it, we carried out an extensive crease stripping of the Fairplay and took that material right down to the ore, and actually started mining the ore very early in — very late in the quarter and very early in in the new year. And that allowed us to have a large stockpile in front of the mill just before the fires and just before the heavy rains that came which really sort of saved our bacon in many ways. So, we currently still have a very healthy [Indiscernible] of mine stockpile right in front of the mill. And that’s planned, again, just for the unexpected events and who knows where we’ll be in a few weeks’ time, but we certainly have — we can keep that mill turning for quite some time based on those stockpiles alone.

Derek Macpherson

Okay. And I just sort of continuing on the on the Q1 theme, how is the — how our Q — is Q1 going? Obviously, it’s over in about five days, so how are the operations going? And any trends that are worth noting?

Graeme Sloan

Sir, certainly — look, I can say they’re all tracking the way they should be. We’re — as far as our guidance, we’re sort of certainly moving in that direction has been no — I mean, look, there’s obviously impacts with what we’re seeing out there today.

We’ve put together a good management plan to overcome and we’ve been really quite proactive in the approaches we’ve taken to this and for the most part, they’ve paid off really well.

So, quarter one production is tracking really quite nicely for us. And quite frankly, we’re setting ourselves up as well for quarter two. So, quarter two is a bit early to talk about, it certainly doing is going to make it a little bit easy for us.

Derek Macpherson

Okay, that’s great. That’s — I’ll let someone else ask question. Thank you.


Your next question comes from Matthew O’Keefe from Cantor Fitzgerald. Your line is open.

Matthew O’Keefe

Thanks. Good morning. So, a good quarter. Congrats on that. Some good news here in the midst of all this craziness, but I just had some questions on two things. First, on the reaction to COVID here, you’re — in Ontario mining is being considered an essential service, so mines are still running, Quebec they said no, they shut them down for short-term, Peru and other places, they’ve shut down mining for various periods of time.

What — I mean what’s the local government sort of attitude for you guys and for your mines in Australia there and I mean what kind of hints have they given with respect to potential shutdowns or actions to fight this spread?

Paul Andre Huet

Matt, this is Paul. I’ll actually let our Senior VP, Oliver take that question. Oliver, you want to jump on and answer that question?

Oliver Turner

Yes, sure. Not a problem. Thanks for the question Matt. It’s something that is been top of the public forums in Western Australia. The Mines Minister quite quickly came out and said that Western Australia has mining as an essential business and obviously, a lot of the camps in Western Australia are fly-in, fly-out.

So, all of the producers are going through various contingency plans, just like we are insured in terms of making sure that we isolate anybody with symptoms and that we manage the personnel coming in and out of site.

So, at this time, it is an essential business and operations are continuing as per usual, both us along with our colleagues and along with our partners in the region, are all talking together and relaying with the local health officials to make sure that we keep the operations open as long as we can.

Matthew O’Keefe

Okay. And I apologize, we got cut off a little bit before, so I missed the first caller’s question, which I think was with respect to stockpiles and supply chain. I guess you don’t have — do you have a goal for a period — for months and are there any critical items that you’re having trouble sourcing? And then along that same thing, but more on the positive side, what percentage of your costs are related to fuel and diesel because we should see some really with respect to that on pricing?

Paul Andre Huet

So, Matt–

Graeme Sloan

Just on the–

Paul Andre Huet

Yes, go ahead Graeme. Sorry, go ahead Graeme. My apologies.

Graeme Sloan

Yes, just so the first part of the question. Sorry, could you just repeat that first part?

Matthew O’Keefe

Sure yeah. On the supply chain, as far as critical supplies are concerned did you mention — I don’t know if you mentioned what goal you have as far how many months of supply you want to get and what are the main critical supplies that you’re looking to stockpile and are there any that are difficult sourcing already?

Graeme Sloan

Yeah, no, a good question. We had a guy and it was one of the measures we took earlier on in the place. We have appointed a specialist logistics consultant expert on this. So, we’ve brought him into the mix. We’ve gone through all our main key components and supplies, the potential ones that would be impacted.

We’ve put a lot more onto the shelves than we normally do. And as you say — and so really as far as supplies, we were in pretty good shape. And that’s not a defense how long these things go, obviously, but certainly what we’ve seen and the feedback we’ve got from our experts is that supplies don’t seem to be the issue.

Having said that, we’re still overstocked in most of our areas to just in case that was to change. As for the fuel, the fuel prices is somewhat set, although we do get some — certainly get some relief from the — and we spend an enormous amount on fuel a year given that we self-generate their own power at Higgins Ville. And so we would spend close to sort of $1 million every six weeks or so. And so it’s a big chunk of money and we expect to see savings around that 10% what we’ll be looking for, so it has a significant impact on our overall cost.

Matthew O’Keefe

Great. Thank you. And if I could just ask one other quick question just on Higginsville, you’re going to spend a fairly — sounds like you’re still going to continue with your exploration there and a fairly sizable allocation of exploration budget going there.

You gave a good sort of explanation of where and why, but are we going to be in a position to see resource increases during this year, or is that something we shouldn’t have to wait till 2021?

Graeme Sloan

The exploration is still a key part of our business at this stage. We have a plan where the non-production essential services would collapse in towards the production, should there be any issues around keeping people on site or traveling or isolation or whatever. So, exploration may would be one of the first ones to sort of fold into the production scenario.

So, but having said that, exploration is still a full pet as we speak. And we’re focusing on near mine projects that we have. We have a pipeline of projects that that require a bit more drilling. And on top of that, we’ll look to commence some of the project work around the palios [ph] and so on. So, it is a hefty exploration program. It’s on track. It’s continuing as we speak. But we do have plans things where the change with the COVID-19. We need — we may well sort of look to bring them into the production side of things if need be.

Paul Andre Huet

Matt, this is Paul with respect to timing, we’ve been out there saying that there’s so much information that we’re summarizing and consolidating from Higginsville. We have all our new drilling information, all our new locations, we’ve got a healthy budget this year. Our target is to update things by the end of the year and have our own new resource and reserve from Higginsville by the end of this year.

As Graeme said, look, things could slip as we put if we have to shift people into operations, but at this point, we are targeting our RNC resource and reserve update from Higginsville by the end of 2020, that was our internal part.

Matthew O’Keefe

Great. Okay, great. Thanks. Thanks a lot. That’s it for me.

Paul Andre Huet

Thanks Matt.


Your next question comes from Dana Allen [ph]. Your line is open.

Unidentified Analyst

First of all, congratulations to the team. We’ve had an excellent turnaround from the first half of 2019. Few questions with your HGO pits being high-grade and shallow, is your ASIC actually lower at HGO than it is at Beta Hunt?

Paul Andre Huet

So, Matthew — sorry, Dana, sorry, my apologies. Some of our ASIC was impacted by the equipment we bought, so we actually rebuilt a truck for about $1.4 million to $1.6 million, which impacted it. Then we also did about three — close to — I don’t have the numbers directly in front of me, but off memory, they’re very close to about $3 million into pre-stripping. So, — and we have to expense that all upfront because of the shortness of it and following the World Gold Council.

So, there’s probably — right close to about $100 an ounce in ASIC there on equipment that we’re going to use for the next five to seven years on some pre-stripping that we had to expense right up front. So, it’d be close to that number, Dana.

Unidentified Analyst

Okay. Okay. In the comparison between the two operations, Beta Hunt to HGO, do you think the ASIC actually lowered HGO or not?

Paul Andre Huet

Yes. So, look we — with the ASIC separately?

Unidentified Analyst

Yeah, yeah. If you compare the two operations, which would have the lower AISC?

Paul Andre Huet

Yes, look, we’re not — Dana, you saw we reported a consolidate and there’s a reason for that for — there’s some tax reasons, there’s a lot of reasons and rationale why we’re reporting it the way we are that benefit our shareholders. So, I don’t have them right in front of me. We have the cash costs, which we actually reported and explain why, but — really, we’re just reporting an ASIC for across Western Australia, which we — which you saw about a $50 reduction.

And again, I think we need to focus on ASIC, we’re targeting $1,000 an ounce. We said that for a while now. We’ve got some steps to do. We were clearly, clearly outlining a plan and a strategy targeting for things. We have been extremely focused, despite everything we’re facing, to really focus on the productivity rates, the top 20 vendors, royalties, we saw some huge relief with Morgan Stanley, G&A. We’ve been saying and repeating ourselves on the things we’re going to do and look at the trend. We started off at the first half of the year was well over $1,300, $1,400 an ounce, we dropped by 11%; in q3, we dropped another.

We’re continuing to see that trend despite all these challenges we’re being faced with. So, all those strategies and plans we’ve been focused on Dana they’re working. There’s — you can’t question–

Unidentified Analyst

Yes, that’s an amazing turnaround. It really is. Curious on the ore shorter, I know you guys are planning to do it. You’ve talked about it quite a bit. At this point, now that you’ve studied it more, what’s your guess as to how much you could increase the production with your current mill if you had an ore shorter?

Paul Andre Huet

So, Dana I’m going to give that question to Graeme. I know we have had some early results and look rest assured that this COVID has impacted even that ore sorting testing I know, but despite that, the two were initially there and we had some early on results. They might be premature, but Graeme maybe can you give us a little more color on Dana’s questions?

Graeme Sloan

Absolutely Dana. Look there’s two parts to this, there’s the all sort of that we’ve just undertaken some test work and the results today are fairly promising. You’re sort of saying a rejection of around 20% to 30%.

Now again, it’s early days and that could jump higher or lower, but that’s not a bad start. And remember that the variables within this all ore order [ph] takes some time to be able to control until just to get the right reject. So, early days but certainly sort of looking quite well.

We also have what we call a screening at Higginsville which is screening some of the material free before going into the crusher. And that work will means we can bypass the crusher and therefore go straight into the mill phase.

The crusher has always been the sort of the middle of the bottleneck there given us a Stage 4 Crusher and the type of material we’re trading. So, we’re starting to get some good results from that as well.

So, the combination of those two are looking pretty promising just a bit early at this stage to be able to give you any real flavor, but other than what I’ve just pointed out.

Unidentified Analyst

Very, very good. Thanks. Last question is today right now, Australian gold is $2,700 an ounce. For some investors is a little bit hard to understand why that benefits the profitability. Can someone there on the financial side or whatever, you know, give us just a rough guess because of the currency translation and the all-time record highs and Australian gold, how that’s benefiting the company.

Paul Andre Huet

Yes. Barry, do you want to take that? Take it off mute by the way.

Barry Dahl

Yeah. So, the increase in the gold price will pick up because the functional currency in Australia is the Australian dollar, our gold transactions are also an Australian dollar. So, they’ll go right down to our bottom-line.

Unidentified Analyst

Right. Do you have any guess on how many dollars per ounce, this is helping you because a lot of investors have trouble understanding how that benefits you?

Barry Dahl

Yes, so the budget that we put together for the year was $1,400. So, every dollar above that is making a significant contribution to the company.

Unidentified Analyst

Oh, yes, sure. Yes. Okay, good. Okay. Thank you and again, congratulations, gentlemen.

Paul Andre Huet

Thanks Dana.


Your next question comes from Nancy Drew [ph]. Your line is open.

Unidentified Analyst

Hi. I was just wondering if you were going to still go ahead with Australian Stock Exchange.

Paul Andre Huet

Yes, thank you for the question. Actually, Oliver, do you want to tackle that question, please?

Oliver Turner

Yes, not a problem. Thanks for your question, Nancy. So, we are evaluating an ASX listing as we’ve talked about for several months now. There certainly is — or has been a very healthy market down there for gold mining equities. And we’ve seen them trade at higher multiples than in North America.

Obviously, with what’s happened over the last several weeks with COVID-19, market conditions are extremely fluid and changing almost daily as we’re all very aware of watching our screens here. So, we absolutely are continuing to evaluate it. But we are going to make sure that we don’t list in Australia in a market where there still is impacts of COVID-19. So, it’s something we’re going to continue to evaluate over the year and we’re going to make sure that we have our timing right.

Unidentified Analyst

Thank you.


That is all the time we have for today’s Q&A. I would like to turn the call back over to Mr. Paul Huet.

Paul Andre Huet

Look, again, I just want to thank everyone for taking the time out of your busy lives. I know that there’s a lot going on in the world. We really are sincere when we wish all of you, your families, your loved ones a very, very healthy time during these uncertain times in the world. We are praying for everybody and we are excited about what’s in front of us.

The bottom-line is we are in a very unique position. We are going to take advantage of this position. We’re going to focus on the health and safety of our people, our employees, and we’re going to continue to deliver.

So, I’m excited about where we are — we are in — look, again, we’re in a position where we can really get through this; our finances and our operations are not such that we’re going to be out there trying to raise money at any of these levels. We can get through this and continue to improve on everything else we’re doing.

So, have a great day. Wish you guys all the best and thanks for the questions and the call. Good bye.


Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.

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