Thank you for standing by, and welcome to the Perseus Mining December 2018 Quarterly Conference Call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Jeff Quartermaine, Managing Director and CEO. Please go ahead.
Thank you very much, and good morning, ladies and gentlemen, and welcome to this conference call to discuss Perseus Mining's December 2018 Quarterly Report that we released to the market earlier today. For those of you who've had an opportunity to read the report, you would have noted that the operating results that we've reported were once again fairly strong and in line with the midpoint of guidance both in the December half-year and the full 2018 calendar year, clearly indicating that Perseus is living up to its promise of doing what we say we're going to do. So let's turn to the report and talk about what we've actually delivered in more detail, and looking first at the group as a whole. Across both of our operations, we produced a combined total of 68,078 ounces of gold. That included 50,141 ounces from Edikan and 17,937 from Sissingué.
Now, that's down slightly on the previous quarter, but very much in line with our expectations. For the December half-year, we produced 140,555 ounces, which was almost exactly in the middle of our production guidance range of 130,000-150,000 ounces. And in the full 2018 calendar year, we produced 288,463 ounces, which was within 0.5% of the midpoint of our guided range. And I should say it's almost 80,000 ounces or 38.5% more than what we produced in 2017, so some fairly clear evidence of the growth that we've been talking about for some time. Now, what these production statistics do indicate is that both Edikan and Sissingué operations are running very much to plan, and that's in spite of the usual operational challenges and one of the wettest wet seasons experienced in West Africa for many years.
Turning to group costs, the quarterly production cost at Edikan was $1,049 an ounce, and the all-in site cost was $1,151 an ounce, both slightly up on the prior quarter, and I'll talk about that in a moment. The production cost at Sissingué was $723 per ounce, and the all-in site cost was $776 per ounce, once again higher than the last quarter, but not to be surprised around that given that we did actually make a transition into harder fresh ore this quarter. Now, when combined, this resulted in a weighted average all-in site cost for the group of $1,052 an ounce. On the half-year and the full-year basis, the all-in site cost was $999 and $994 per ounce respectively, so just under the $1,000 an ounce mark for those two periods of time.
I should note that in respect of the half-year and the full-year, we were about 5% below the midpoint of the guidance range in each case, so once again delivering as we said we would do. Now, looking forward, we're expecting pretty much more of the same for the June 2019 half-year, and in terms of guided production for that period, we're forecasting once again 130,000-150,000 ounces. In terms of guided costs, we are expecting an improvement in costs as our new life of mine plant at Edikan kicks in from January this year, and we're guiding all-in site costs of $852 an ounce for that period. In fact, if everything stays on track, which I expect it to do, I hope it will do, we should end up doing very well relative to the guidance range.
But as we all know too well, the mining business is very capable of throwing up surprises when least expected, and our forecasts prudently take this into account. Having said that, to the 20th of January, we are running about 13% above our budgets at the moment, so as far as the March quarter is concerned, we're definitely off to a flyer, and hopefully we can sustain that sort of performance throughout the half-year period, but time will tell, I guess. But look, all of that said, as a company, we are operating very much better than we ever had. Producing about 290,000 ounces of gold a year at a touch under $1,000 an ounce is not a bad outcome when comparing us to some of our more fancy peers.
Our ability to anticipate and deal with surprises is much better than it has ever been in the past, and we're looking forward to continuing further strong results as a group going forward. Returning to the December quarter, we sold 66,705 ounces of gold during the quarter at an average price of $1,250 per ounce, once again generating positive cash flows at both of our mines. In fact, based on this average gold price and our average all-in site cost of $1,052, we generated an average margin of about $200 an ounce, and when we multiply that by the number of ounces of gold produced, the notional free cash flow from the two operations was about $13.5 million, $8.5 million coming from—that's US dollars, I should say—about $8.5 coming from Sissingué, and about $5 million US coming from Edikan.
So even though Sissingué is producing the smaller proportion in terms of ounces, with lower costs, it's clearly contributing very strongly to our cash flows, and that doesn't come as a surprise to us at all. Now, obviously, not all of this cash goes directly to the bank balance. We have to service debt, pay corporate costs, and we choose to explore. We also have movements in debtors and creditors. But after all these things were accounted for at the end of December, our cash and bullion balance was AUD 92 million or $65 million. This is down slightly on the balance at 30 September.
However, a key point to note is that the outstanding bank debt at the end of December has decreased to $48.5 million USD, so our net cash and bullion position at the end of the quarter was AUD 23.3 million, $16.4 million USD, and that's an increase of a couple of million dollars on the previous quarter. So while the cash generation this quarter was down a little relative to last quarter, and I should say a lot of that can be attributed to sales volumes, as well as obviously slightly higher costs. I mean, last quarter we did have extraordinarily high sales, unusually high sales as we sort of sold gold from the previous quarter.
But we are generating cash from both the operations and improving the balance sheet ahead of entering into future financing arrangements to fund our third project, Yaouré, but more of that in a moment. Let's first look at each of the operations, and Sissingué is the place to start given it's our newest operation. So in the December quarter, Sissingué produced, as I said, about 17,937 ounces, so it was up a little bit on the September quarter. The mill head grade averaged 1.62 grams a tonne, mill throughput rate averaged about 176 tonnes an hour. Runtime for the quarter was about 94% of available time. Now, the fluctuation of all these statistics period on period was largely a function of the extremely wet conditions that we experienced at Sissingué over the half-year, and I should say the knock-on effects that lasted well after the rain stopped.
It also reflected a transition into harder material towards the end of the quarter. Now, as I mentioned before, we had about 1,000 millimeters of rain in the September quarter and further 200 millimeters of rain in the first week or so of October, and that represented about 50% more than the 40-year average rainfall in the area, so it was indeed very wet, and the fact that we performed as well as we did, I think, is a real credit to our operating team.
Even though it stopped raining early in October, the aftereffects of the wet season were evident throughout the full quarter, in that we were restricted in accessing parts of our pit as we had previously scheduled for mining and grade control, and this meant that we were processing ore out of our planned sequence, and this is what caused the relative fall in head grade for the quarter. Frustratingly, though, since the end of the quarter, we have gained access to the material that we were originally planning to mine in December, and so far this month at Sissingué, we're about 120% above budget, so as I say, we were expecting to process that material last year, and had we done so, the result would have been substantially better than what we've been able to report.
But the nice thing is we are getting that ore and turning it into gold, and that's extremely pleasing. What is very pleasing about the production or the performance at Sissingué is gold recovery, which is continuing to average above 95% or about four and a bit % above our forecasts, and that's notwithstanding the fact that we've now started to process fresh ore. I have to say, though, it is still relatively early in the mine life, so we have made a very good start, and it's encouraging, but we don't want to get too carried away with it. But certainly, that recovery is well above what we were thinking we might get. The key to it appears to be the very high gravity gold recoveries that we're achieving.
In our feasibility study, we assumed about 25% gravity recovery, but we're regularly above 30%, and in the last couple of weeks, it's been very much above that as well, so that's a pretty pleasing outcome. In terms of tonnage and grade reconciliations at the mine, the study reconciling tonnes and grade between the reserve model and the mill for the period when we started mining in November 2017, it indicates a positive reconciliation on contained metal. I think it's quite a lot of, well, there's more tonnes, slightly lower grade, but quite a bit more gold contained, so that's fairly handy trend at this stage. It is relatively early in the mine life, as I said, and we shouldn't be drawing definitive conclusions, but certainly, the ore body to date has been performing slightly above expectations, which is very good.
In terms of the operating costs, the production costs for the quarter came in at $723 an ounce, $776 all in. This increase in unit costs is largely a function of the increased volume of material moved during the quarter. As I said earlier, we were unable to mine and to perform grade control drilling in certain areas of the pit for a period of time due to the very wet floor conditions, so rather than slowing down mining, what we did was we switched to mining waste material from areas that were accessible, and we mined at a rate above what was originally planned, as it was oxide ore largely, and it was fairly easily moved.
While we've incurred higher unit costs this period due to the high level of waste mining, this will be of benefit in future periods when our waste mining costs will more likely than not fall below what they might otherwise have been. Having said that, with an eye to the next wet season and making sure that we don't have a repeat of this year's challenges, we may well continue moving waste, so the costs may not drop immediately. What the thinking is here is that by bringing forward the cutback of the interim wall of our pit, so we get to the final pit wall sooner rather than later, we may be able to avoid any slumping of that interim wall as occurred this year in the event that we get another very heavy wet season next year. But anyway, we're looking at that fairly closely.
The other point to note, I guess, in terms of costs, was that in November we did start to drill and blast as we started mining transitional and fresh material, and this did increase costs slightly relative to when we were mining oxide ore, but we also saw some savings in terms of power and consumables, so as is fairly normal, you get a few swings and roundabouts, so outside of the higher mining volume, costs were pretty much as we had been predicted, and generally speaking, I mean, that's a fairly good outcome under the trying circumstances that we experienced. We sold 16,769 ounces of gold at Sissingué at an average price of $12.57 an ounce during the quarter.
That gave us a fairly healthy average margin of $481 an ounce, which, as I said earlier, converted to notional free cash of $8.6 million USD or AUD 12 million for the quarter. The single biggest issue associated with Sissingué continues to be mine life, which at the moment stands at about five years. We think that the prospects for extending the existing mine life are very good, and our exploration team has been following up several near-mine targets that we think will ultimately yield additional mill feed. We have had some pretty encouraging sniffs at Zanakan, M’Bengué, and Papara, and we'll be wanting to follow those up pretty vigorously.
Later in the quarter, the land around Sissingué did dry out sufficiently well for us to start moving reefs around and to make a start on drilling, but as of the end of the quarter, very few assays had been returned, so I guess this is a case of watch this space. Now, turning to Edikan, during the December quarter, we produced 50,141 ounces, and we continued the trend of strong production from Edikan that has been in evidence over the last seven quarters, so this was the eighth strong quarter of production. It was down a touch on the previous quarter, as I mentioned earlier, but very much in line with what we were expecting to see. The gold production was influenced by several factors. Runtime of the plant was 90%, and it was down about a couple of % on the previous quarter.
Average hourly throughput rates were also slightly down. It was 877 tonnes an hour against about 900 last quarter. And these differences are not overly material, but both statistics can be traced back to a sequence of mechanical issues that occurred at the mine site in early October. Early in the quarter, we got some tramp metal caught in a chute, and that caused us to be down for a period of time while we cleaned up the mess, but almost as soon as we got back up and running, we experienced some structural failure on our low-profile feeder that transfers ore from the crusher to the conveyor that leads to the crushed ore stockpile. Now, this took a bit of fixing, but we were able to compensate by bringing in mobile crushers.
But all of these things add up, and so throughput was down a little bit for the month, and of course, costs were up a bit too as a result of the hiring of those crushers, but we'll talk about that in a moment. Grade reconciliation remained satisfactory onsite. Reconciliation of gold from the resource block model to grade control is just about 100% across all the pits combined. Reconciliation between grade control model and mill, in other words, the Mine Call Factor is currently within accepted industry standards, so there's no dramas there. As we noted previously, we've concurrently mined from up to four different pits at a time on the site, and due to variability in ore hardness, head grade, and metallurgical recovery, we need to very carefully manage the blend of ore fed to the mill.
Now, this quarter, we did have access to some relatively high-grade material from our Fetish pits, but unfortunately, this very high-grade material contained very fine-grained gold as well as carbonaceous material, so the benefit of the higher grade was largely offset by decreased recoveries when we processed that material. As a result, the overall head grade for the quarter was about the same as last quarter at 1.16 grams a tonne. Recovery was down about 3% to 77.5%, and this was the main factor that led to the reduction in gold production for the quarter. The very positive news on that front, though, is that in early January, we processed the last of that fine-grained carbonaceous material from Fetish, and since then, recoveries have shot back up to around the 87.5% mark, so they've gone up about 10%, which is where they're supposed to be.
And of course, this bodes well for the balance of this quarter and half-year when the major source of ore that we'll be processing will be coming from the Esuajah North pit, and clearly, that is recovering quite well. Now, in respect of costs, they were slightly up again. The production cost was about $1,049, and then after bringing royalty and capital, it was $1,151 an ounce, so that was higher than the September quarter. As noted, more than half of this increase was a function of the decreased gold production, so fewer ounces. But the balance of the cost increase was due to a couple of things. Firstly, as previously reported, we have adopted a new life of mine plan for Edikan, and that takes effect from January 1.
Now, this plan involves the use of a single mining contractor on the site instead of two contractors, as was previously the case. Now, late last year, we called tenders for mining from a range of local and international contractors, mining contractors, and from these tenders, we selected a Ghanaian miner, Rocksure International, to mine for us for the next six years. Not only were Rocksure's tender prices well below their competitors, but they've been mining at Edikan now for several years and have proved their capacity in terms of safety, equipment availability, and performance. I should say they're also a Ghanaian company, and that's also a plus in terms of increasing local content, which is something that just about every country in the world seeks these days.
This did mean, of course, that AMS had been mining on the Edikan site since the beginning of the mine, had to be demobilized at the end of the year, and the cost of this demobilization is reflected in the all-in site costs for the December period, so this is a cost that won't reoccur. In addition to that, we also did incur some higher maintenance costs and costs associated with the rental of the mobile crushers to supplement mill feed that I referred to before while we were carrying out repairs. So once again, we hope that these costs will also be one-off and won't be repeated. The average price of gold sold during the quarter was $1,248 an ounce, generating a positive cash margin of about $100 an ounce, and that translated to notional cash flow from the operation of about $5 million USD or AUD 6.6 million.
As mentioned, we will be implementing the revised mine plan for Edikan, which is aimed at improving cash flows by smoothing production and lowering cash costs more than any decrease in revenue associated with the production smoothing. We started implementing that plan by reducing mining movements in the December half-year, but we plan to continue that reduction in mining volumes quite significantly from January. So while the grade may be down slightly, and I have to say we haven't seen any sign of that at this stage of the game, it's not overly material. The important thing is that the costs are coming down, and we expect that this trend will continue. And the new mining contract with Rocksure is expected to deliver some additional savings in terms of unit mining costs, and this, of course, will feed through into the all-in site cost.
Now, in terms of exploration at Edikan, in recent times, we've increased our exploration activities on the Edikan tenements with the aim of extending the mine's current six-year mine life. We've been drilling on the Esuajah Gap prospect, which is located between Esuajah North and Esuajah South deposits, and based on the drill results we saw late last year, we appear to have discovered a significant mineralized granite body. Now, based on those results, as we reported to the stock exchange on the 20th of November, there are quite significant similarities between the Esuajah Gap mineralisation and that which we've seen at Esuajah North and also the Esuajah South deposits. And I guess it's worth stating that Esuajah South, as an open pit, is carrying about 391,000 ounces in reserve, and similarly, prior to mining, Esuajah North reserves total 475,000 ounces.
So if we are successful in proving that up, that is potentially a significant addition to our reserve inventory. Since late November, we have been busily trying to follow up the drilling results. We have encountered some access issues as the preferred drill sites are close to the Ayanfuri village, and while the community leaders are very much in favor of what we're doing and supporting our activities, we have struck a bit of resistance from a few residents. Now, I should say that that resistance is purely monetary related. It's not that we're doing anything that's particularly damaging to their lifestyle, but money's always an issue in these sorts of things. Anyway, we do have to be in a position to report more positive results later this quarter. So Edikan, it's tracking fairly well at the moment.
In fact, East Edikan is a challenging operation, and there's not a great amount of room for error. We do make reasonable cash flow from the mine, but we're always on the lookout for opportunities to improve the business, and in that respect, we have a fairly active business improvement unit running, and we could see some very good opportunities to improve our performance even further from where we are at the present time. Now, as I mentioned, our third project, Yaouré, and in the context of saying about cash generation and how that augured well for future financing of the project.
Other things that we've done in terms of advancing Yaouré during the quarter towards the development decision were these: our application for an exploitation permit was filed in January 2018, and it's continued to bounce around inside the Minerals Commission in Côte d'Ivoire during the quarter without, well, with limited visible signs of progress. However, subsequent to the end of the quarter, we have made several advances, which is pleasing. We've received formal confirmation that we will be exonerated from the ordinance that was issued by the government in 2018 that impacted on the tax holiday afforded to new mining developments. This is an important point for us, being granted the full five-year tax holiday, as we were assuming that that was the case in our feasibility study, so our feasibility assumptions are correct and will apply throughout the mine development.
We also understand that the Minerals Commission has made a positive recommendation to the Minister for Geology and Mines about the granting of the exploitation permit. The next step is for this proposal to be tabled for approval at a Council of Ministers meeting. When exactly this is going to happen is not known to us, but we have been informed that it is likely to occur in the very near future. We can't say a lot more about that at this stage of the game other than we have been informed that there are no impediments to the proposal being favorably considered by the Minister, so we are hanging out for that to be approved.
Now, once that is done, negotiation of the mining convention, which incorporates the guarantee of fiscal stability throughout the project life, it'll start straight away, as will, of course, payment and final instalment of crop and land compensation and commencement of early works to secure the mine site. So we are looking forward to getting on with that. Now, as an indicator of our intention to move the project forward as rapidly as we can, on 10th of January this year, 2019, we issued a notice of award for the engineering and supply contracts to the very well-regarded Australian engineering company Lycopodium Limited. Now, for those who are familiar with Perseus, you'll recall that we collaborated very successfully with Lycopodium in the past, most notably ahead of time on budget development of Sissingué that was commissioned earlier this year.
The award of the engineering and supply contracts for Yaouré are subject to finalization of formal contract documentation, full project funding, and, of course, the receipt by Perseus of the exploitation permit, which, as I said, is hopefully not too far away. Probably the most important initiative undertaken by us this quarter related to the project funding for Yaouré. Now, early in the quarter, we formed a shortlist of banks from a long list of potential financiers, and we invited them to submit credit-approved proposals by the end of November. Now, a number of credit-approved proposals were received on time, and we also received a number of requests for extensions of time. Now, if anybody who's tried to close a deal or a financing in December knows it's next to impossible to get the attention of banks during this period, nearly into January.
And the long and short of it is that we have received some very strong responses so far, and we expect several further credit-approved responses in the very near future. We do expect to form a syndicate of three or possibly four banks very shortly for the provision of $200 million corporate debt facility. I'm not able to go into the specifics at this point other than to say that this is a plain vanilla corporate debt facility. It doesn't involve streams or royalties or quotation periods or equity kickers. It'll be priced similarly to our existing debt facilities. It will involve some hedging, but this is not going beyond the hedging amounts prescribed by our existing hedge policy.
Speaking of which, at the end of the quarter, we had gold forward sales contracts in place for about 101,000 ounces at an average price of $1,304 an ounce. Now, these hedges were designated for delivery progressively over the period up to 30 September 2020 and matched to the Edikan and Sissingué production. Now, in addition to that, and I guess in preparation for us moving forward with this facility, we had 83,000 ounces of gold sold on spot at an average of $1,238 up to the end of the quarter. And following that, since early this quarter, we've done another 45,000 ounces of gold, bringing our total spot-deferred position up to 128,000 at a weighted average sale price of $1,259 an ounce. Now, once the corporate debt facility is in place, these spot-deferred sales will be designated as required by the facility over the three-year period ending 2022.
Once the contracts are designated, they roll out to those periods. Based on the current forward curve, the average delivered sale price of these hedges will be around $1,350 an ounce, give or take, just depending on where the forward curve is at times. So that's $1,350 an ounce against, I guess, an assumed $1,200 in our feasibility study. So that hedging, I think, will not only secure the cash flow to give comfort to the banks, but it'll substantially enhance our economics on the project as well, which is good. Now, as I've said many times before, the funding plan that we intend to apply for the project involves the use of up to $200 million of debt, and I say up to because depending on our cash flows, we will minimize the amount of debt that we draw.
We will also use existing cash, as I said, about $65 million at the end of December, and of course, future cash flows from the two operations. I know that the total capital cost of the project is forecast at around $265 million. So strictly speaking, once the debt facility is in place, we're essentially covered for our capital requirements, ignoring any future cash flow. We believe that this approach is not only an appropriate plan because it's non-dilutive for our existing shareholders, but more importantly, it is eminently deliverable. I am very frustrated at not being able to lay out the full details of our plan just yet, but we do need to lock down those banking arrangements first. As I said, it's not that far away, we expect.
I'd like to think that sometime in this current quarter, we'll be in a position to go public on the full financing details. Also, during this quarter, we do expect to be starting some early works and then move into full-scale production in the June quarter and have first gold production by about 2020 coming from Yaouré. The Yaouré project is moving forward apace, and we're very excited about this and what it means for Perseus. We have the team to execute the development, as we've ably demonstrated by the very slick Sissingué development. As soon as we're confident in our ability to finance, we'll get underway with the project. In conclusion, it's fair to say that Perseus is in very good shape, both operationally and commercially.
We've now had eight good quarters in succession, and I think that even the most cynical observers must now start to concede that Perseus is a reliable, cash flow positive gold producer of some substance and one that represents a very attractive investment proposal in the current economic climate. We are pushing forward with our growth strategy and delivering strong performances from the existing businesses. As I said, we've increased our production 80-odd thousand ounces from 2017 to 2018. So there's pretty clear evidence of the growth strategy working. And of course, with Yaouré coming through and hopefully getting into development this quarter, we are looking forward to an even better future for the company. Thank you very much for your attention. I'm very happy to take any questions you may have. Thank you.
If you wish to ask a question, please press Star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press Star 2. If you are on a speakerphone, please pick up the handset to ask your question. Your first question comes from Reg Spencer from Canaccord Genuity. Please go ahead.
Thank you. Morning, Jeff. Congratulations on a reasonably good quarter, notwithstanding the wet weather at Sissingué. My questions relate mainly to Yaouré, actually. I was just curious about the timelines for the project. You sort of maintained the first production in December 2020. What would the cutoff date be, i.e., when would you need to receive your EP finalising mining convention and submit to FID and complete financing before that timeline becomes unrealistic? i.e., I suppose what I'm trying to say is how much fat is built into that December 2020 first production date?
We're looking at we need to start full-scale production by the end of this quarter, basically. I think early in April, actually, it is, in order to hit that timeline. Now, obviously, there is fat built into the schedule just from a planning point of view. But I think if we haven't got the license and made a decision to move ahead by the end of this quarter, then it will start impacting potentially on the schedule. That's why we're pushing very hard to deliver both the license and the financing. One of the things that we do need to keep in mind, and we are very, very conscious of it, is the weather windows that are available to us.
If we get caught out by that, it's going to make some of the civil works around the site difficult, doing the tailings dams and things like that. So we are working very hard to get away on time. At this stage of the game, everything is still looking very positive, and hopefully, that will continue to be the case.
Okay. Great. Just around the financing, sorry, the.
Just one more question, Reg, because there's probably other guys on the line as well.
Yeah, understood. Just on the debt facility, can I just clarify that that is a corporate-level facility up to $200 million that may replace some of your existing, or that will be in addition to some of the?
No, it'll replace the existing very much. So yeah, probably very early on in the piece, we'll draw it out enough to refinance whatever's outstanding at that stage. And then we move on from there. But certainly, with the existing cash and the cash flows that we expect to be generating, and I guess the track record of production indicates that those cash flows can reasonably be expected, we are in pretty good shape to finance the project.
Okay. Great. Thank you.
Thank you. Your next question comes from John McDonald with Hartleys. Please go ahead.
Hi, Jeff. Just a quick one on some of the quarterly numbers. The debt service finance costs are sitting there at $7.4 million for the quarter. Could you just clarify what that might be?
I guess there's fees and interest, normal debt servicing payments. There's nothing untoward in there. That's Aussie dollars, I presume, as well.
Yes. But it's.
Oh, and the, yeah, sorry. And the repayment as well. There was about $3 million US repayment in there.
Okay.
Actually, 3.9. It's more than that. Yeah, sorry.
Okay. Done.
Thank you. Once again, if you wish to ask a question, please press Star 1 on your telephone and wait for your name to be announced. Your next question comes from Michael Slifirski of Credit Suisse. Please go ahead.
Thanks. Look, apologies if you've answered what I'm going to ask, but I dropped out twice, strangely. Just on the Esuajah Gap drilling results, what are you thinking in terms of what's the sort of success rate required to overcome the hurdle of village relocation? And from what you're seeing in that drilling to date, are you getting towards something that starts to look like it has a commercial potential?
Look, since we published our results in November, we haven't had a lot of additional results. We've got a few, but it hasn't changed the initial thoughts. The initial thoughts were that it looked very encouraging, but we do need to do more drilling. There is an area which goes away from the village that appears to have oxide material in it as well as granite, and that looks very good. And we've actually got the drill situated at the moment to put a fan through that, and that could have either a very positive or a very negative effect on our view. I mean, if the results came back awful, then that would cause us to pause and reflect quite a bit. So I can't answer your question in a definitive sense. I can't say we need X ounces or whatever to deliver the outcome.
Certainly, we've got the general support of the community. The combination, what we would like to think will happen is that if we can prove up enough ore in the Esuajah Gap, then we'll be able to do a combined development of a Esuajah Gap and a Esuajah South. Now, at the present time, the Esuajah South is economically viable, and it's in our reserve, but it's not in our mine plan because we believe that the risk associated with development is not worth the expenditure that it would involve. However, if we put the two things together and we get quite a critical mass from the two deposits, then in fact, we would have a fairly sizable additional mining operation going on there. But that, unfortunately, is no certainty right now, but that's why we've got the drills poised and ready to go.
And hopefully, we'll work our way through the compensation issue in the not-too-distant future. It might sound a little bit petty in a way, but the thing is that what we need to do is to be very mindful about how we compensate for the work so that we don't set precedents in our enthusiasm to get after a target that will actually cause us a lot of harm later on down the track. So it's easy to be impatient for the results, but we just have to go after this in a measured and methodical way.
Essentially, Jeff, and then that's all, is if you are successful, let's say it repeats what you've got in Esuajah South, so you get a meaningful increase in mine life. With that potential hypothetical grade of visibility, are there other projects that then make sense, optimizations, recoveries, and so on, that are gated by inadequate mine life at this stage?
Look, we'd certainly be inclined to spend on some of the business improvement initiatives that we've identified. Yeah. I mean, at the moment, we're thinking, well, it is a trade-off between, well, what's the payback on this investment and the return like this is on the business improvement things? Certainly, if we were able to extend the life by, say, three or four years, then you'd be looking more favorably at some of those initiatives. But we're watching, well, we're working on all of those fronts at the present time, and we are encouraged by what we're seeing, but it just takes a little bit of time to deliver sound results. So we don't want to sort of go too far off beam before we're ready to go.
Yep. Understood. Thanks, Jeff.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Quartermaine for closing remarks.
Okay. Well, look, thanks very much. And as I said earlier, thank you for your attention today. We are in very good shape. Things are moving along according to plan. As a company, we place a lot of value on delivering on our promises and doing what we say we're going to do. And we've got every expectation that the coming quarter and half year, we will do that once again. So thanks very much, and I look forward to bringing you further good news in the not-too-distant future.