Good day, ladies and gentlemen, and welcome to the Goldfields Q1 Operating Update. All participants will be in listen only mode. There will be an opportunity to ask questions later during the conference. Please note that this call is being recorded. I would now like to turn the conference over to Nick Holland.
Please go ahead, sir.
Thank you very much, Claudia, and good afternoon or good morning to everyone wherever you might be in the world today. First of all, we hope that you're safe. Various countries around the world are experiencing lockdowns in one form or another. So we hope that we will get through this. As with most things in life, this will pass.
The important thing is we want to be safe and healthy through it. I'm going to talk briefly about the high level numbers. I'll talk briefly then about the pandemic and the impact so far on us. And then I'll just quickly run through each of the mines and give you some salient features. So high level for the quarter, we've done 537,000 ounces at all in costs of 10.60, 1.0 6 0 per ounce.
What I can say is we're pretty much bang on where we thought we would be relative to the guidance we've given you for the year. So that's the first important point is, bearing in mind too, you can never take 1 quarter times by 4 and expect that to be the year. And I'll explain to you when I just talk briefly about the individual mines that over the entire year, you can find that production can be higher or lower depending on the quarter that you're in. So I'll go through that as well. So we're pretty much on track.
In terms of our liquidity, it's a question we've got from a lot of people. Are we in a strong financial position? What I can tell you is that our net debt excluding these capitalized leases, most of which relate to power supply, was under $1,000,000,000 at the end of the quarter. And even including the leases, that dropped us down to below one times in terms of net debt to EBITDA. So we've seen a nice reduction in our debt that's come from a combination of operating cash flow, strong operating cash flow from the mines.
And of course, let's not forget we did do an equity raise of $250,000,000 to prefund the Solaris Norte project or at least a portion thereof. Specifically with $800,000,000 of cash on hand, which puts us in a very strong position. We also have $1,500,000,000 of committed unutilized banking facilities across a range of different banks, which we can draw down very, very quickly if we need to. So we believe that we're in a strong financial position. Looking at the pandemic, we've taken a lot of precautions offices, including our office here in Johannesburg, working at home.
In other regions, there are a few people in the office in certain places, no people in the office in other places, depending on obviously the local laws and the needs of the operation. In terms of production in Australia, pleased to say that we haven't really seen any impact on production yet. We all know that the borders are closed. So clearly, people can't get into the country. But more importantly, interstate borders are also closed.
So what we've done with the bulk of our people who work on a fly in flight basis, who live outside of Western Australia, The bulk of them have actually moved into WA over this period of time. So we can avoid issues about trying to get people out of, say, Victoria, New South Wales, other places in Australia to Western Australia. So that's worked reasonably well. Flights continue. That's been one of the things we're worried about as well as we can consider the flights.
Happy to say that with the airlines we deal with, we've been able to keep flights going. We put on more flights to create social distancing, so that will be a slightly incremental cost, but the right thing for us to do. So by and large, I think Australia is moving along reasonably okay, and I don't see a material change in that, unless, of course, the infection rates change. I mean, that's the big caveat to all of what we're going to say today is if infection rates change, if we get infections on the mines, that will be a different story. Right now, we have no infections of any people across the globe, but that is up to date.
That could change in the future. Governments can change regulations in the future. They could make it more onerous. They could put additional restrictions in place. Ghana have had restrictions, mainly in the metropolitan areas, given that the bulk of the infections in Ghana have been in the metropolitan areas.
Luckily, we've had very limited 1 or 2 infections in the southwestern part of Ghana where our mines are. So we've been quite fortunate. We had that certain tarpa and damang. Asanko is a little bit further up to the north, closer to Abwase, where I know that there has been a couple of infections that Asanko hasn't had yet. And things are continuing recently okay.
That lockdown was lifted, in fact, on the 20th April. The President felt that the country was in a sufficiently good position, that it could lift that lockdown. But let's see happens. Turning to Peru. There has been disruption in Peru.
We've been subject to a lockdown for a period of time. Mines where employees did not live on the site were affected. So for example, Yanacocha, which is 40 kilometers down the road from Cerro Corona, was affected. Cerro Corona was not affected because we have a camp on the site that people live in. So we were able to keep people in the camp for longer, change the shift out.
But now with the new decrease that have been given, we've had to pull back our staff. So the normal operating staff in Peru is about 700. We've pulled that back now to just over 300 essentially to provide safety, security, environmental management to the site and also to keep the process plant going. We do have significant medium grade stocks that we can continue putting through the process plant. We believe that we'll be able to ramp up gradually back to 100% over the next 6 weeks to the end of June.
So what that's meant is we've estimated that the impact on the year will be about 25,000 ounces that will have to be deferred, but we won't be able to mine this year. And we put that in our guidance for Cerro Corona and also factor that into revised guidance for the group. With all being well, we'll get back to full complement gradually by the end of June. So you're talking roughly another 5, 6 weeks or so. Turning to South Africa, South Deep.
I think everybody knows that the mines have been subject to a lockdown for 3 weeks. Pleased to say that we're starting to ramp up back to at least 50% of production over the next few days. That would mean that we would mobilize close to 2,000 people, Total complement including contractors being around 4,000 people. And as we sit today, we're probably around about halfway through that 50%. So I would expect us to get back to production towards the end of the week.
Luckily, we have broken stocks underground in stopes. So one of the first things we can do is start loading a broken ore, get that trend and get that hoisted out the mine and into the process plant. Thankfully, the Rand refinery is available for us. So if all goes well, we should have some dore into the Rand refinery sometime during the course of next week. So, the consequence of that 50%, that means that we will only be able to operate, obviously, some of the activities.
We're going to focus mainly on de stress. Development is quite far ahead. De stress needs to get some more attention, so we're going to focus more of our activities on destress, obviously stoping, loading those stopes, ground support, etcetera. And at the same time, that will give us some gold coming out. We believe that we should be able to ramp up to full production before it goes well towards the end of June sorry, towards the end of May, another 5, 6 weeks.
But let me just qualify that by saying that's as we understand it today. If things change, if the government comes out with additional measures, we would have to relook at that. But on the basis of that, we believe that up to around about 32,000 ounces of production will be impacted at South Deep. Other than that, those are the only real changes. The price factor in Peru is another issue that impacts ounces.
It doesn't impact the physicals. It's just when we convert copper to gold ounces for reporting. The price of gold has gone up, the price of copper has gone down, so we need to get less ounces. So the net result of that is we've dropped our guidance for the year, the lower end, round about 3.5 percent to about 2,200,000 ounces. We've kept our costs in the same range as what we had before, bearing in mind that Solaris Norte has around about $110,000,000 of capital, about $138,000,000 of spend in our all in cost figures this year.
And luckily, that also continues to operate. What we found is that in Chile, most of the infections have been in the southern part of the country. In the northern part of the country where we are in the Atacama Desert, there's been very, very limited infections. Also, it's a remote site. We have about 150 people there.
We're able to continue the early works, principally focused on camp expansion, diversion channels for the footprint, preparation for bulk earthworks for the process plant and also all of the early vendor awards, etcetera, including mining contracts, etcetera, so that they can get mobilized towards the end of the year. So at this stage, we're continuing those activities in Chile. I think in terms of the overall pandemic, so far, I think we're okay. But like I say, in a month's time, it could all be different. We know that we're getting into winter in the Southern Hemisphere.
All of our operations are in the Southern Hemisphere. Whether or not winter makes a difference or not to the spread of the pandemic remains to be seen, but we're going to have to keep a watchful eye on this. So we're prepared for the worst. We have plans in place. If we do need to cut back, we've done fairly detailed plans.
If we have to cut back, what it means for us operationally, what it means to us from a management perspective, what it means for our people, what it means for our balance sheet. So I think we're pretty comfortable that we can respond pretty quickly to changed circumstances. What I'll do very briefly then is just talk about the individual operations just for a minute or 2. On South Deep, pleased to say that we've started the year very well. If you look at the fact that this is the new quarter where we had the Christmas break, we've actually performed ahead of what I would have expected given the Christmas break.
We're continuing to do well. Unfortunately, this shutdown has caused a little bit of loss of momentum, but I'm pretty sure that we'll get that back. Importantly, South Peak is making really nice cash for us now. And I'm sure that once we get back up to production, we'll continue to do all the costs. I'm quite happy with where we are, and I think this shows you're getting this mine to below 600,000 a kilogram.
Everybody knows what the spot price is, R1,000,000 a kilogram or plus. It's setting up the mine to be making significant cash into the future as we continue to develop and open up the ore body. Nothing much more to be said on that. In terms of Ghana, TAFWA is performing exceptionally well, continues to hit its numbers. So we'd expect another good year out of top.
I don't really have much else to say the numbers. I think you're seeing the book talk for themselves. If you look at Danang, I think it's fair to say that Danang is a tale of 2 halves. We're still mining through the very patchy and variable Pune sandstones that we knew we'd have to get through. So although this quarter on the face of it doesn't look very good, it's actually pretty much in line with what we planned.
And as we work through into the top of phyllites, which will be the predominant lithology that we'll be mining into the future, the grades will be a lot higher. And as you've seen in the book, we've indicated that the grades are going to be about 1.8 grams a tonne in the second half, and that's going to have a material impact on both ounces and on costs. So I'm not worried about demand. I think we're in good shape. We've done some great controlled drilling as well.
And we've also been mining around the perimeters of the fill outs. And when we're doing that, we're seeing that straightaway the grade in the plant starts to spike. So there's good indication, not just from the grade control drilling, but also from the bulk mining around the area that it's coming through. So the first half will be a little bit patchy. The second half should be very good.
And I think we'll be on plan for a good year. If we look at Asanko, Asanko has had a pretty good quarter. They've done well on their volumes, despite the fact they had the wall failure at In Tran, which has obviously impacted the flexibility. They've been able to pull ore out of other areas, other satellites that they're mining. They've been able to keep the process plant running well and they've kept their costs to a level I'd like to see more of in the future.
So I think this is an encouraging quarter we're seeing at Atacancha. Turning to Cerro Corona. I think the thing with Cerro Corona to bear in mind is we're starting to increase our volume this year, particularly as we start to move to a strategy of stockpiling. Bearing in mind, we're mining out the pits on a more accelerated basis. We want to mine out the pit in the next 5 years, stockpile.
And then when the tails dam, the existing tails dam is full, we'll switch our tails into the pit and we'll start processing those stockpiles. So it's quite a delicate balance of issues. And the important thing is for us to increase the volume so we can create those stockpiles. But at the same time, we always feed the best grade to the plant. So we're preferentially feeding the best grade, bring forward the value.
But down the road, there's some pretty good stuff we're putting on the stockpile for the future. So that's why you're seeing a pickup in the volume. But as usual, Cerro Coron has performed well, in line with what we'd expect to see over the year And subject obviously to this partial shutdown impact, I think we're in pretty good shape. If we look at Australia, Cenarius has done well again. But bear in mind, production is a little bit lower than the previous quarter, But you have to remember that the previous quarter, we were finishing up with Invincespa Open Pit, Stage 6.
That's now behind us. In addition to that, we're seeing that grades at Neptune is slightly lower, although the grades for the year and beyond will be good. It's a short term issue. And we'll see in the second half as we open up the higher grades at Hamlet North on the ground, pretty good grades there. And then still south, we'd expect another really good year out of Sonae's.
Granny Smith is performing well. No issues on Granny Smith that concern us at this point in time. It's a very steady quarter. We're spending more efforts on ore reserve development to open up the ore body in the future. So tonnes are slightly down, but there's something behind it.
There's increased focus on ore development, which will open up stoping tonnes into the future. Similar story in Agnew, where we're spending more time in the early part of the year, opening up or in the north, opening up cash lower, which are going to be really high grade additions to the mine. And we'll see a lot of that come through in the second half. We're on track to open up those areas of higher grade. Per year, Processed volumes were down this last quarter, mainly because of a plant shut, scheduled plant shut that is.
We had the containers in the mill. So that was scheduled. So obviously, we lost a number of days there that was planned. Good to see that the mine grade has actually gone up as we're moving into high areas. But we've seen the yield conversely go down a little bit and that's mainly because we preferentially fed high grade stocks we built up over 2019.
We fed those last quarter. This quarter, we haven't had that. So what you're seeing is ex pit is actually going through the plant now. So that's the reason for the anomaly on that. And again, I think that Korea is heading for a good year.
There's nothing to suggest that we won't hit all the numbers as we've indicated in February. So I think we're in pretty good shape. So that's a quick run around the world for you and where we stand. I'm conscious I've been talking for a while. So I'll stop here and we'll allow time for questions.
Thank
The first question comes from James Bell from RBC Capital Markets. Please go ahead.
But I just wondered if you could talk about consumable supplies at your operations and if you're seeing any disruptions to supply chains. We've had some of your peers talk about disruptions around things like mill liners, etcetera.
So I
just wondered if you could talk about situation there and if there's going to be any impacts later in the year from disruptions on the back of COVID-nineteen.
Yes. So one of the things we've done, James, early on in the piece is to relook at all of our stock levels of our critical consumables, reagents, etcetera. And we actually stocked up. We asked every operation to look at all of their supply chain, stock up, let's get more than what we need. And that's obviously there's an investment in working capital for that.
The other thing we've done is we've looked at where we get our stuff and whether we can actually transfer more of our exposure to in country. That's another way to actually soften the impact. If borders are closed and you can't get stuff in, let's try and procure locally. So I think we're in good shape. I mean the one area where you just physically can't have too much on hand is diesel.
Just the sheer volume of storage can be an issue. So, so far so good. I'm not too concerned about that. We don't see that as a risk. But having said that, James, if we end up with a significant increase in lockdown across the world in which we operate for an extended period of time, At some point, we will be impacted for sure.
Okay. That's very clear. And then just maybe on the cost side, obviously, slightly lower ounces this year, but you're keeping your cost guidance unchanged
and the performance was pretty strong
on the quarter. I just wonder if you could maybe dig into a little bit of detail on why that is. Is it mostly ForEx and oil price? Or is there other factors that coming through that are getting you to be slightly ahead of kind of where you might have been in Q1?
Paul, do you want to deal with that?
Can everybody hear me?
Yes, we can.
Yes. James, a lot of it's got to do with the ForEx conversion and we gave guidance early on in the year. And obviously, the rand and the Aussie dollar weakened substantially. So to a large degree, that has helped us. As Mick mentioned earlier, we picked up some small minor costs, extra costs for COVID, especially in Australia for extra flights, etcetera.
But so far so good. It looks like we'll be able to meet the cost guidance with a little bit of help from the exchange rates.
Okay. And then maybe just one more again for you, Paul. In terms of adding those additional facilities in South Africa, any sort of thinking as to was that just to replace existing facilities? Or was that just to keep
the facility in South Africa?
So we had 2 that were busy expiring. They were actually expired in March. We rolled them to May and then we renewed it to the Epsilon R and D facility. So they're just replacements. So the total in South Africa is still $2,500,000,000 of committed and unutilized facilities.
Okay, that's great. That's all for me. Thanks.
The next question comes from Arnold Van Hran from Ned Nedbank. Please go ahead.
Yes, good afternoon. Thank you for the opportunity. Nick, just a couple of questions from my side. So the first one is on the dividend. So obviously, you haven't been impacted that much so far by COVID-nineteen, but you make it very clear that it's a fluid situation.
So what's your view on an interim dividend? Are you going to be on the conservative side and maybe pass that over? And I guess the question that goes with that, have you moved into any form of cash preservation? Or is it largely business as usual in terms of capital expenditure? That's the first question.
And then the second one is, can you just remind us of how much of your diesel consumption globally, I guess, has been locked in or hedged in? And how much of that remains exposed to oil prices? And maybe a third one if I can. Do you have any idea of the direct impact on cost associated with social distancing at South Deep? In other words, if you're going to be running more buses to transport people, what's the impact in Australia, more flights?
Have you tried to quantify that? And I'm not talking about the volume numbers. So volume will also impact cost. I get that, but I'm just trying to get the additional real cost on top of just because of all these additional measures. That's it from us.
Thank you very much for the opportunity.
Yes. I'll start at the back end, and then I'll ask Paul to deal with the first two questions you had. So in Australia, I alluded to it earlier in the narrative that we are putting on additional flights. That's the main thing, obviously, distancing people in the Nest facilities, etcetera. At this stage, it's not that material.
I mean, it's probably somewhere around about $10 to $20 an ounce Aussie in Australia At this stage, if you want to press me for a number, in the scheme of things, on guidance of 13.50 percent, we're talking maybe 1%, 1.5%. So at this stage, it's not a massive issue. Now bear in mind, we're mining 1,000,000 ounces in Australia with not a lot of people because of the very productive, but very mechanized as well approach to mining there. So I think we're quite lucky that we're able to mitigate the impact. At South Deep, it's more difficult to say because we're getting back into it now.
And running the mine at 50% when we're actually paying the other 50% are not working, that's the other point. We're actually paying people the basic wages who are not working. We still got to figure out what that means. But my gut feel is we're probably looking at around about 5% increase in costs, given, A, the lower production that I've talked about, 32,000 ounces, the fact that we're building back up and the fact that it's going to take us more time to get people to the face. So how much are we going to lose on productivity on the face?
That's a tough one. But that's the area we're watching carefully is we don't want to lose another couple of hours on the face because that would translate into a bigger cost. But so far, so good. But it's very early for us to give you a definitive steer on that, Arnold. But I would say maybe something around 5%.
But as Paul says, as I said earlier and Paul reiterated, we're operating within the envelope of the overall guidance for the group and exchange rates obviously helping us when we look at the dollar costs. I'll hand over to Paul to talk about the diesel and the cash strategy.
Ronald, on the diesel hedges, it's just in Ghana and in Australia, and we hedged 50% at circa $60 So 50% is open to the market and 50% we've got locked in. On the dividend policy, I mean, current indications are we obviously have been blessed with higher gold prices. Our earnings
are still looking strong for
the year. We will stick to our dividend policy at the moment. We have had no discussions to pull it. It's obviously based on normalized earnings. And if the normalized earnings are there, we continue to pay our dividend.
That's the way we're seeing it at the moment. As we said, obviously, if we're going to major shutdowns and since change, we've reviewed the current indications are it's still going to be a good year for us, definitely a good cash flow year because of the higher gold prices. So yes, at the moment, it looks like we will pay our interim dividend.
And then diesel, Paul?
I said we hedged 50% in Ghana and in Australia, 50% we had.
Yes. So I mean, we're not going to see that much benefit of the lower prices in oil because there's some offsets here. Obviously, going forward, once we're out of these hedges, which carry us through still for a while and if we're still in the situation, then we'll see.
And not going into cash preservation mode, basically pushing the business as normal until circumstances change?
Yes. I think the one I think sorry, I'll go. We continue to make money. I mean, we've had a bit of a slowdown, as Mick mentioned, in Peru. But obviously, in Australia and Ghana, we continue to going at full capacity and with a higher price.
So as a group, we still believe at the moment we can fund our capital commitments and continue as we're going. Again, obviously, things change. We'd have to review all of it. But at the moment, we're continuing to deliver. We're spending our money on salaries and we're spending our capital where necessary.
Yes. I would just add, Arnold, that we've seen in years gone by the impact you can have when you deviate from the plan and you try and recover. You're always playing catch up and it takes a while. So I would say one of the highest priorities for us is to retain the operational integrity of the business and make sure that we're doing all of the underground development where we should be doing it in our underground mines, making sure that we're stripping in the pits at Tarko and Domang where we should be stripping and when we should be stripping so that we can continue to consolidate existing production levels into the future. So we will go a long way before we change that philosophy, particularly with the strong financial position that we're in.
So right now, that's a key focus for us. Thanks.
The next question comes from Shailan Mody from UBS. Please go ahead.
Afternoon, guys. A couple of questions from my side. Given your hedges on the gold portfolio, you've hedged about half of your 2020 production. Can you give us an idea of when those hedges when the payments for those hedges are due? What are you thinking about this portfolio?
And what happens if you start losing more ounces? And then on the pandemic side, can you give us an idea of what percentage of your labor is migrants in each of your regions? And then also just an idea of what the morale is at the operations?
Nick, I'll talk to the hedges. The hedges are monthly. You can basically divide the numbers, the guidance we gave for the year. You can divide them by 12 and you'll get what we are hedged per month. And remember, it's 50% in Ghana, 50% in Australia and 75% in South Africa.
At the moment, we are sticking with the hedges as we are. Obviously, you can do the math. We severely underwater. To try and roll them now, you obviously get no you get no increase in the price, especially with a big uptick in credit risk at the moment in the market. I mean, we did do an exercise a couple of days ago looking at it, and it's just not viable at the moment.
So and also our hedges are synthetic. So it makes no difference whether we produce or not. It's just a financial transaction. The end of the month, we balance up and we pay them or they pay us. In this case, at the moment, we're paying the banks.
Okay. So back to your question on the labor. Around about 2 thirds of our labor in South Africa is around the mine. So obviously, with this lockdown, certain people have moved into KwaZulu Natal, those areas, Eastern Cape. We're getting those back for this lift of the lockdown.
We've had a SMS WhatsApp system so we can stay in touch. The difficulty is we have about 300 people in SADC countries in South Africa. Now the border is closed with those countries. So those people, we can't get back at the moment. So we'll have to wait for the borders to be lifted.
In Australia, the bulk of your employees are flying fly out, except for St. Ives, where we do have a high degree of residential given the proximity to Kalgoorlie. So that's not impacted. The impact we have had in Australia is those employees on a FIFO roster who live outside of WA. And those people aren't too many, and we've been able to relocate most of them in WA.
If you look at Taka and Demang, a high percentage of our employees, probably about 75% of our employees are from the region. So that's not a particular issue. And again, Cerro Corona, it's largely transport in, transport out. They have a camp at the site. Luckily, the bulk of our employees live around Cajamarca, which is about 80 kilometers down the road.
So the other good thing is Cajamarca so far has been spared any significant infections. So that's helped us. We haven't had to have too many people flying in from LENA. Similarly, in Chile, the bulk of the people and we've cut the people now to only 150 at the project at Solaris Norte. The bulk of those people come from the nearest big city or town called Copiapo.
So we don't have a lot of people coming from the south. Remember Copiapo is in that area. So it's the Atacama is again not being as impacted as elsewhere. So we can move that shift in and out. The other thing worth mentioning, we've also increased the rosters in Australia.
We used to work a week on and week off. Until this issue is the IMS, we're going to be on 2 weeks on, 2 weeks off and we'll do something similar in Peru and Chile. I hope that answers the question for you.
Yes, it does. Just on the morale at the operations and then follow-up question on the synthetic derivatives, but I'll ask it also.
Yes, sorry, I forgot to mention. Morale, I would say, is very good. The one thing I must just complement all of the regions and all of the HR people. But communication with our people has been first class and it's been regular. It's been detailed, it's been honest and we've had a lot of good feedback.
And in particular, I think when you tell people, we're going to look after you, we're going to make sure your wages are paid, that has a major impact on people's morale. It shows that we're standing by our people, and I think our people are going to stand by us. And I hear around the sector that, that isn't something that's been universally applied, But certainly, it's something that we feel pretty strongly about. So I would say morale, pretty good. And just the some photos I got with the South Deep ship coming back to work, everyone was geared up, they had all their face masks on, they had their gloves on, on, they were ready, they followed the social distancing rules, very proud of what they're doing.
I think it's a great achievement in the time of crisis.
Okay. That's very helpful. Just a follow-up on the synthetic derivatives. I mean, if your production had to fall, so say, in the worst case scenario that Australia was put on lockdown and you weren't allowed to produce, you'd still have to fund the payment for those hedges. Am I correct in thinking that?
That's correct. You just you fund the difference between the hedge price and the spot price, yes.
Okay. So if your production fell dramatically, then effectively, you're funding it out of your balance sheet?
Correct, yes.
Okay, okay, cool. Thanks. That's all from my side.
The next question comes from Raj Ray from BMO. Please go ahead.
Operator, good afternoon, Mac and team. Just a couple of quick questions from me. First one on Telarus Norte. Could you tell us about the timing for the sectoral permits are? And if the current lockdown is going to have an impact on potential regulatory authorities.
Do they need to visit the site for the sectoral permits? And if that's going to have an impact on the timing for the permits?
Yes. We should have most of the permits that we need, which are subsidiary to the main umbrella environmental authorization before the end of October. And in fact, I was having a look at that with the team the other day. We're in pretty good shape. And again, the regulator is doing what we're doing.
I'm sitting at home here having this call with you. They're also sitting at home doing stuff and making sure that we get what we need. I think the important thing to remember is the environmental authorization is the umbrella authority. Once we've got that, essentially, you've got passive approval for all of the underlying subsidiary permits. So it really is just a process.
And we don't believe this will have an impact. But if it does, I mean, we have fairly meaningful contingency in terms of time factored into our schedule. So if we needed to add a little bit of extra capacity on time, it's there. But we're working very, very well with the authorities. And I don't think we're going to have a major issue here even with the lockdown.
Sorry, what was the second part of your question?
No, that's what I had. The other question that I have is it's more of a nuts and bolts question on Domingue. You did talk about the fact that the grade sequencing is going to be higher grade in the second half of the year. Just wondering what impacted the ore mine? I see that your waste mine went down, but your ore mine also went down almost 25% quarter over quarter.
Yes. Look, we've had some change outs of contractors, and we've had to put together some short term initiatives to replace contracts that came out. So I think there's been a little bit of interruption and change. But I think if you look at the volumes we were getting towards the end of the quarter, we were largely through that. The other thing is we were ahead of where we needed to be anyway up to the end of last year.
So on a cumulative basis, we're in a good position to hit those high grade talcworth lights hopefully by the middle of the year.
Okay. Thanks, Nick. That's it for me. Sure.
The next question comes from Dominic O'Kane from JPMorgan. Please go ahead.
Hi, Nick. A few questions, but they're pretty quick. So just on the hedging, can you confirm if you have done any additional hedging in 2020 or whether you're thinking about doing additional hedging in 2020 given where the gold price and the rand gold price is? 2nd question, you've given us sort of the all in cost guidance, but obviously there's very large foreign exchange moves through the period. Can you just maybe help us maybe isolate some of the CapEx expenditure that you're expecting for 2020?
And also exploration, given the COVID lockdown, should we expect a materially lower exploration spend in 2020? And then final question, if I may. With a 50% reduced workforce at South Deep, how many tonnes a month can you do?
Okay. So maybe I'll see if I can remember some of that. On hedging, I think the simple answer is we're done. We did say that previously, even though these prices have gone up, I don't think we're going to contemplate any additional hedging at this time. As Paul mentioned, we were looking at potentially rolling some of the hedging, but I think on balance, that probably doesn't make sense.
We'll just get the hedges out of the way. They've achieved what we wanted them to achieve. So that's
Sorry, Nick, just to interrupt. We did do some of out of the money puts in Australia. We did 300,000 ounces, but those we paid for. So there's no downside protection, full exposure to the upside. We did that as part of the Salares Norte project to just give us an underpin for next year.
That's all that we've done, but we are now as next year as we have finished for this year and we don't see any hedging for next year as we stand at the moment.
Thank you, Paul. And then on exploration, most of the exploration is done in Australia. That's the bulk of it. And as we've said earlier, there's been no real change in what's been happening on activities in Australia. The whole suite of activities continue.
So I wouldn't see a material impact. Now obviously, depending on what happens from here, if rigs are in short supply or operators are in short supply because we outsource this stuff, we don't do exploration drilling ourselves. We bring in people to do it for us. We could be impacted, but I'm not seeing it today, but that could change into the future. In terms of South Deep, I think the main impact is going to be over the 6 weeks or so.
And I mean, we were doing roughly 100,000 tons a month. So if you want to factor in something over the next 6 weeks divided by 2 crudely, I think you could use that to underpin the ounce reduction that we've given you. Sorry, Dominic, what were the other questions?
The only other question was
just on CapEx. Can you just help us try and maybe break down CapEx by specifically Australia, which
is in the Q1? Yes. Look, the overall CapEx is budgeted at about $620,000,000 to $630,000,000 including obviously Solaris. I don't have that specific breakdown here. Maybe Avishkar does or Borr does.
I know it's implicit in the all in costs we've given you. Can you guys remember the numbers there, Chaps?
No, I think, Nick, we just got in the quarterly book that we did in February. We gave a split for mine and we're still checking our capital for all the regions, yes.
The total is about 620, 630,000,000, 630,000,000 including Solaris. We're still good for that number.
Yes. But presumably a slightly lower slower pace at Solares, though?
I still think we're going ahead on Solares. I mean, the way things are moving along, we're looking to still get through that. We're not delaying the project. All the people on-site are there to actually advance the project. As I've said earlier, the camp expansion, Phase 1, Phase 2 will come later in the year.
We've got the diversion channels that are being done now. We've got the bulk earthworks that will also start in the second half of the year. So I'm not seeing at this stage, unless we're going to pull things back, but that is going to push out.
Okay. Much appreciated. Thanks.
Thanks, Robert.
The next question comes from Patrick Mann from Merrill Lynch. Please go ahead.
Hi, guys. Thank you very much for taking my call. I think most of the questions have been asked. I just wanted to follow-up on one thing you said, Nick, around potentially being able to ramp up South Deep to 100% by the end of May. I mean, my understanding is that you can go back to 50% now and thereafter you need ministerial approval to go above that.
I mean, is that just what you guys are comfortable that you'll be able to do while complying with all the regulation? Or am I missing something around what's going to happen after the lockdown? Thanks a lot.
No, you're spot on. There's been no definitive indication as to when we can move to 100%. You're spot on. So we're making an assumption here. We're assuming that we can get back to full production by the end of May in our guidance.
If we can't, then obviously, we're going to have to relook at the numbers. I think as you know, I mean, the mining industry in this country is in a situation where there's something like ZAR7 1,000,000,000 to ZAR10 1,000,000,000 a month being incurred in wages across the sector with little production to support it. And I think the mining industry has made strong representations to, on a very controlled basis, move back to full production over a period of time. Now whether or not the minister or the government allows that to happen is moot. So that's the assumption.
So if we're stuck at 50% beyond the end of May, then we'll have to relook at all the numbers again. But that's our assumption for now.
Thanks. And then maybe, sorry, a follow-up there. I mean, you said that you were paying all of the employees. Does that continue? So if you you're permitted to bring back 50%, are you still paying the basic wages of the other 50%?
And then maybe how do you go about choosing who comes back to work without causing sort of unhappiness amongst your workforce? I suppose that goes to the moral question Shailen was asking earlier.
Yes. Well, I think if you're paying everyone, it's easier. The other thing is the people with immune compromised systems and those people in certain countries, obviously, we need to look after them first. And then it's a question of what are the activities, what are the main activities that we need to get going with and then on that basis, pulling people back. But I mean, the commitment is that we want to bring everybody back as soon as we can.
People understand they are getting paid. I think if this lockdown goes on for months, we're going to have to relook at whether or not we can continue paying everybody. But I'm hoping that we don't get to that point. There are things we can do. We can send people on leave for a period of time.
That can buy more time. But I think realistically, if we go into months months of lockdown, we'd have to relook at all of the financial implications for that.
Thank you.
The next question comes from Tanya Jakusconek from Scotiabank. Please go ahead.
Good afternoon, everybody. Thank you for taking my question. I wanted to come back, Nick, on the additional costs for COVID-nineteen. You mentioned, thank you for the South Africa impact and obviously Australia with the additional charter flights. Are there any other additional costs that you're seeing at any of your operations with this COVID-nineteen?
Nothing material yet. I mean, if I look at Ghana, I'm not seeing significant impact of the social distancing at this stage. Peru, I think we've talked about, I mean, we have reduced the people anyway in Peru. We've reduced the people in South Africa. So that's obviously a knock on effect there.
Australia, we've talked about additional flights, etcetera, around $10 to $20 an ounce. At this stage, not really. And we've probed into this in quite some detail across the group. And that might change. As we sit today, I mean, if things get tougher, then it will have an impact.
For example, we're told in Ghana, you've got to restrict the number of people on the mine. Obviously, we may not have enough people to drive trucks, to drive loaders, etcetera, diggers. That might change. But right now, we're not seeing that. And in Australia and Ghana, in particular, which makes up 80% of our production, the governments of those countries are quite keen to find ways to keep mining going.
Those two sectors have received particular focus in those countries. But obviously, with the right restrictions and the right protocols. And as things evolve, Tania, maybe some costs will emerge that we're not aware of today. But I don't think we're seeing you're not talking $50, dollars 100 an ounce type stuff here, even if something comes up. Supply chain is a working capital issue.
That's more we stock up, so there's a cash flow impact. So we sit in some additional stores for a while, but it's not really a cost issue in the scheme of things. We'll use that stuff over time. Paul, I don't know if you want to add anything to Tania's question.
Nick, now I think you've summed it up well. Yes.
Okay. And then what about the productivity? I know you mentioned, I mean, the social distancing, I have to believe, takes longer to get people to the face. I'm assuming that's going to be the case in South Africa. I don't know how many people you can get down the shaft at the same time with this 2 meter of social distancing.
Maybe it's not 2 meters in South Africa, I'm not sure. But how does all of this impact the productivity if this keeps going?
Look, I think if
we stay as we are, I mean, the indications are we're coping right now. Let's just park South Africa for now and Peru for now because they have been scaled back. But in Ghana and Australia, we're hoping we're not seeing a major issue. We have employed a few additional people. Maybe I should have mentioned just now, we've employed a few additional people to take into account that rosters have changed.
Productivity, I think if you go to a mine like Agnew, bear in mind at any point in time, we're probably running a half a dozen ends. We're running maybe 8 or 9 stopes. Now they are all in any event spread over a strike and they're not all bunched up together as you would know because of geotechnical issues etcetera. So I'm not saying that this is a massive Achilles heel for us at this point. Like I say, if we start getting infections on the mines, it's a different ballgame.
Social distancing, isolating people will obviously become more acute. The regulators may shut us down. Down. So that's ongoing risk, Tanya. But we're not seeing it today.
But in a month's time, we could be having a different discussion.
Okay. So for now, even with this, the new health and safety measures that have been implemented, you're not seeing any impact to productivity?
Nothing but 0. Nothing but 0.
And okay. So no other cost besides the ones that you've mentioned. And then maybe for Paul, you said you put in 300,000 ounces of put for Solaris Norte at floor. What gold price is that floor at?
I can give you that if he is not on the line.
Sorry, maybe I was on mute. Sorry, somewhere at $2,100 and somewhere at $2,200
Yes.
Sorry, can you repeat those numbers again? You faded out.
Somewhere at $2,100 and somewhere at $2,200 Aussie dollars an ounce.
Aussie dollars, okay. Thank you.
The final question comes from Martin Kremer from Mining Weekly. Please go ahead.
Thanks very much for taking my call, Nick, and congratulations and thanks to you guys for sacrificing like a third of your pay the next 3 months. I think that's a very generous thing to do. Now I'd just like to swing to South Deep. You're hearing this wonderful production and productivity coming out of Australia and other places. Is there any strategy that is in place that is how or that's directing South Deep towards a productivity benchmark that can start comparing with some of the benchmarks that you have elsewhere in your group, getting south deep closer to what you are used to in Australia and other places?
Yes. It's a great question, Martin. That's one I ask myself on a regular basis. So we do have a strategy of looking at the whole value chain and improving the productivity at South Deep is not just one issue because you have to open up the ore body, you have to mine it, you have to support it, you have to backfill it. And it's looking at how do we improve that whole mining cycle.
And so we're looking at every element. And at the same time, we want to make sure that you're maximizing your quality. It's already well moving more tonnes, but you've got to get the right tonnes in the right area. So there's a lot of initiatives underway here. I think we're making good progress.
And I think as you've seen over last year, over last year despite the fact that we took a third of the people out, towards the end of the year, we were getting the same kind of output we were getting before we took a third of those people out. So already last year, we saw around about a 30% improvement in productivity. I think with all of the work we're doing now on innovation technology, we have a control room on surface that is giving us real time information. We have sensors on vehicles underground, which we've rolled out in one of the corridors, which probably makes up around about 20% of our production. That's giving us real time information.
We're getting the same on people. That's going to give us a lot of information, which we're going to use to improve the overall cycle time and how we get people to the phase quicker. The other exciting thing is, as we move more of our mining into the new mine areas that we've developed under our ownership over the last 10 years, they've been properly set up where we can do bulk non selective mining, where we have infrastructure right there. We have bays that we can park equipment and check them quickly. We have ore passes in close proximity.
We have a much better setup than what we inherited where currently around about half the mining is taking place. So as we gradually move into the new mine area, we'll find that productivity will improve as well. So it's getting people to the workplace quicker. We've got initiatives on that. It's making the FaceTime more effective and it's making sure that the equipment and everything behaves good.
I'm pleased to say as well we've seen an improvement in availability of equipment, particularly drill rigs, where meantime before failure has improved. So we're getting the rigs for a longer period of time. It's taking less time to repair. We're now rolling that out onto our trucks and our loaders. Very excited to see that we're trialing now remote loading from surface, where we have a chap sitting in the control room that's operating a loader 3 kilometers under the ground beneath it.
Very exciting to see that kind of technology being rolled out. So all of those things will mean you don't need to change somebody on the loader. You can have a chap in the control room, just continue to operate that loader. We don't lose a couple of hours while we change people out on the ship, for example. So multiple areas the team we're working on.
I'm very excited about the developments. I'm sure it's going to have an impact on productivity and cost going forward.
Skills and then skills moving out of the business faster than they're coming in and being unable to train enough people?
Yes. I think skills are an issue in our business, particularly as mechanized mining is the future of mining in South Africa. Conventional mining, I think, is dying. Handheld conventional mining, I think has got really 5, 7 years tops. I wouldn't be too bold going beyond 5 to 7 years.
The youngsters just don't want to do that stuff. And mechanized mining obviously means that there's going to be a huge amount of demand for the right skills. We realize we have to train up. We've realized there aren't enough skills in the industry. And so one of the key strategies we've been working on is to have our own bespoke training facility where we can actually roll out mechanized miners.
We continue to sponsor Fitch University and to make sure that we're pushing out at least 100 minuteing graduate a year. I'm involved in that directly. And that's the kind of strategy, but it takes time, Martin. It's not a 1 year story.
Sure. That sounds great, Nick. Thanks very much.
You're welcome.
The final question comes from Jared Hoover from RMB Morgan Stanley. Please go ahead.
Afternoon, guys. Thanks for the call. Just two questions for me, please. The first relates to COVID-nineteen. So we know that there's been 2 extensions to the lockdown in Peru and that you'll be ramping up staff to about the end of June.
But do you anticipate having any logistical challenges being able to get your concentrate from the mine sites to the port and then shipping it off and effectively being able to monetize production over that ramp up period? And my second is just on the hedges as well. Given that they are not zero cost collars, they are put options. Is there any cost that's associated with that? And would you be able to share it with us?
Okay. Paul, do you want to deal with the second one first? I'll come back to the first.
Sorry, which ones are you talking about the cost, the out of the money puts that we bought? Yes. So I
just asked if there's a cost associated to given that they aren't zero cost collars.
Yes. Well, we did have to pay for the puts here. We bought the puts here. And it was about $10,000,000 to buy those puts for the 300,000 ounces.
Okay. Thanks, Paul.
Yes. I think in terms of Cerro Corona, it's a very good question again and it's one that is a risk to the business. And that if we can't get our concentrate trucks down to the coast to the Pacific Ocean, we can't get them onto the vessels, We can't get them to the smelters in the East and to Europe, and then we can't get paid. So twin strategy on that one. One is we've got additional storage on the site, which means we don't have to stop the operation.
We could probably go for another month to 6 weeks before we start hitting a capacity issue. Number 2 is we're obviously liaising with governors of the different provinces we have to drive through. It's probably around about a 400 kilometer drive from Serra Corona to the Pacific Ocean port of Salaveri where the vessels dock. And we've been talking to the different regional governors about making sure that we can get through. And we're not the only ones.
Bear in mind, there's quite a lot of concentrate that goes out of different ports along the Pacific Coast. So we're talking as an industry to the various regional governors. And we got a lot of strong support from the central government in Lima. So hoping that we'll have a solution. Right now, it is a risk, but I'm hopeful we'll have a solution within the next few weeks.
Okay, good. Thanks, Nick.
Nick, I'd like to hand back to you for closing comments.
Kjell, I just want to thank everybody phoning in today for this quarter 1 results update. I think as you've seen, we've been able to withstand the early onslaught of this pandemic reasonably well. I think the teams across the globe have reacted, putting people first in terms of health and safety, and we'll continue to do that. At the same time, we're very focused on ensuring that the business is sustained, that we can make sure that once we come through this, we don't have to spend 2021 or beyond trying to get back to where we should have been. We've got the liquidity to do it.
We've got the balance sheet to do it. And bear in mind, as we sit today, around about 80% of our production is continuing with minimal interruption. So that puts us in a very strong position. So we look forward to giving you an update. And let's hope the next time we talk that the world is in a better position to deal with this pandemic.
Last message to everyone, be safe. Look after yourselves. Talk to you soon.
Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.
Thank you, Claudia.
Thank you.