Good day, ladies and gentlemen, and welcome to the Dundee's Precious Metals Second Quarter And Year To Date 2019 Earnings Results Conference Call. At this time, all participants are in a listen only mode. Later we will conduct a question and answer session and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Janet Reid.
You may begin.
Good morning, everyone. I'm Janet Reid, the Manager of South Relations, and welcome to Dundee Precious Metals Second Quarter Conference Call. With me today are Rick Howe, President and CEO, Hugh and Kyle, Chief Financial Officer who will each comment on the quarter, as well as David Rae, Chief Operating Officer and Nicole Isaac Stocks, AP Sustainable Development, who are here today to assist with answering questions following the formal remarks. After close of business yesterday, we released 2nd quarter results, and I will be happy to review our material. All forward looking information provided during this call is subject to forward looking qualification, which is detail in our news release and incorporated in full for purposes of today's call.
Certain financial measures referred to during this call are not measures recognized under IFRS. And are referred to as non GAAP measures. These measures have no standardized meanings under IFRS and may not be comparable to similar measures presented by other companies. The definitions established and calculations performed by BPM are based on management's reasonable judgment and are consistently applied. These measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS.
Please refer to the non GAAP financial measures section of our most recent MD and A for reconciliations of these non GAAP measures. Please note that unless otherwise stated, operational and financial information communicated during this call have generally been rounded, and any references to 2018 pertain to the comparable period in 2018. On this morning's call, Rick will comment on our second quarter year to date operating results as well as the progress being made on our capital projects and exploration programs for the quarter. Human will then provide a brief overview of our second quarter and year date financial results as well as our guidance for 2019. With that, I'll turn the call over to Rick.
Thanks, Janet, and hello, everyone, and thanks for joining us today for our second quarter 2019 conference call. I'm pleased pleased to provide you with an update on first quarter results progress on our key projects and initiatives. Financial results in the second quarter of 2019 reflected strong operating performance in Chelopech and Tsumeb. Both operations performed in line with 2nd quarter operating plan and remain on track to achieve their 2019 production guidance. This resulted in earnings per share of $0.09 and cash flow per share of $0.17 in the quarter.
Gold production at Attatetepe reached commercial production on June 8th, but was somewhat lower than anticipated in the period due to temporary constraints with the integrated mine waste facility, which are expected to be resolved in the third quarter. We still expect to ramp up the full design capacity in third quarter, resulting in even stronger financial performance for the second half of the year, and only a minor deferral of production revenues. Gold production for the second quarter was 52,425 ounces, at an all in sustaining cost of $707. With most of the asset base, capital spending now complete or all of the asset base capital spending complete, our balance sheet remains strong. At the end of the quarter, we have a net debt of $19,000,000, $30,400,000 and invest and undrawn revolving credit facility of $134,000,000, following the downsizing of that facility in the quarter to reflect the upcoming for lower capital spending requirements.
With that, as Tempe now ramping up, we expect to start building a cash position in the second half of year. We saw a quarter on quarter moving up in the gold price to an average realized gold price of $13.21 from $13.01 in the quarter. Compared to Q1, copper prices were relatively unchanged with an average realized copper price of 2.77 This recent strong move up in the gold price in June was perhaps an overdue correction to the upside given the devil's sentiment of both the Fed and European Central Banks and expected industry's cuts aided by the economic concerns over the U. S.-China trade dispute and geopolitical concerns over in recent tensions with Iran. Chelopech produced 47,000 ounces of gold and 9,100,000 tons of copper at a cash grounds net of my product credits of $6.18 an ounce.
The increase in gold production compared to the first quarter was due primarily to higher grades recoveries. Gold grades are expected to be slightly lower than the 3rd and 4th quarters and copper grades slightly higher, consistent with the plan. We have a number of key improvement projects underway this year that will enhance revenues and decrease costs, including drilling blast optimization, and the transition from the use of ample explosives, autonomous drone survey, further mill optimization and move to integrated dynamic planning and execution with minor fees and the introduction of Digital Smart Center for Precision Making. We continue with our investments in exploration in and around Chelopech to increase resources and reserves in my resource development drilling total 17,000 meters in the quarter, concentrating on the upper levels of Block 18151, 5,8 and Target 7 100 with the aim to expand current ore body extents and allow conversion of mineral resources into mineral reserves. Further to this, the area is down plus Block 147, 149 South,151 and Target North were also drilled during the second quarter of 2019.
Both programs produced a number of significant intercepts which can be seen in our Q2 M and A. In the regional exploration program around a Chelopech total of 6 2866 meters, a diamond drilling, was done and continued from the underground positions along the 1.5 kilometer long Southeast Breccia pipe zone and from surface on the craft to target and other prospects located in the Speta Petka and Brevin license Crafts now have 21 of 22 holes drilled, hitting mineralization in 21 of 21 of 22 holes, a new zone of shallow copper gold mineralization for a strike length of three hundred meters between 1 hundred and thirty five hundred meters service. This will be further tested in Q3 and Q4 when drilling to determine the uptick extends towards surface as a potential open pit resource. Results of the significant intercept from that drilling can be seen in our Q2 MD and A. Complex Concrete smelter during the second quarter of 2019 at the Tsumeb smelter was 61,667 tons.
Which contributed to a record 6 month EBITDA of $22,000,000 with good process stability reached and the continuing effort on performance and cost improvements, we are seeing an extremely improving financial results of this matter. With the improved temperature stability of the furnace operations, we anticipate achieving a record 18 months lining life between rebuilds, which means the annual maintenance shutdown should then occur in Q4 twenty nineteen, and we would not see a major maintenance shutdown 2020. The cash cost per ton of complex concentrate smelted and a byproduct credits during the 1st 6 months, of 2019 of $3.72 a tonne was $150 a tonne lower than the corresponding period in 2018, This is primarily due to the higher volumes smelted as a result of the extended furnace lining revenue volume. We continue to make progress reducing the secondary copper inventories accumulated during the construction and commissioning of the new asset planning, copper converters have now reduced excess inventories by 64% since July 2017. This reduction will continue through 2019 and will result in a reduction in stock file interest and allow higher throughput capacity for fresh concentrates.
We continue to advance the smelter expansion project to increase throughput accomplished concentrate to as much as 370,000 tons per annum. A feasibility study was completed in the fourth quarter of 20 16 and inferred the robust project economics with an estimated implementation capital cost of $52,000,000. The scope of the project includes the rotary molding furnace, additional cooling, and other upgrades to y'all amount for us, as well as upgrades to the slag mill area. Work to secure the necessary permits to support this planned increase in production and progressing. We submitted an updated ESIA for approval and Q2 and are awaiting review and approval from the environment ministry.
Discussions are ongoing for potential new sources of complex concentrate feed to fill this expanded capacity. Construction of the out of Tempe gold project is now 100% complete and construction crews have been demobilized. First concentrate production was achieved in March and commercial production was achieved on June 8. We expect to receive the operating permit in Q3. The commissioning and ramp up phase of both the mine and mill have gone very well so far and much faster than its typical of most startups.
We've seen many days in the second quarter where the plan has already been running at 100% decline throughput of 100 and 5 tons an hour and design recovery of 85%. Mining of the ore and waste continued through the second quarter of 2019. 196,000 tons of waste and 73,000 tons of ore mine. 98,700 tons of ore were treated through the mill at an average rate of 2.8 grams per tonne. Head grades during the second quarter were not representative of what can be expected going forward and lower grade ore from the stockpile was purposely bent to the mill, while we commissioned and ramped up production.
Now that we have reached design recovery grades, rates will be brought back to plan grade for the remainder of the year. Gold production in Q2 of 5351 ounces was lower than planned. The mill is constrained by the ability to dispose the tailings in the integrated mine waste facility due to the longer than expected tailings headwind time in the North in the 1st North Valley cell, which delayed cell construction and readiness to accept tailings in a subsequent cell on the next lift in the North Valley. This resulted in having to shut the bill down for 21 days to complete this construction of this North Valley settlement, which was completed on July 7th. Since then, we have run the mill at 60% capacity until construction of the next cells on the second lift in the south valley air complete.
Is expected to occur before the end of August. Construction of these cells is progressing as planned. We have a number of other steps that will help solve the problem quickly and permanently Our engineering consultants have made a number of design improvements to the IMWF sales to allow faster drainage and consolidation. We are advancing test work on different chemical reagent additions to aid with faster drainage and so on. We have sourced additional earthworks equipment and contractors to assist with accelerated construction of new cells.
We are constructing 2 contingency cells in order to have a backup tailings storage location if needed. Also, as we advance up the 2 values, the area of total volume of storage in the sales per lift will increase taking some pressure off the settlement time and self construction constraints. We've experienced at the bottom of the two valleys where the cell capacities are much smaller, which results in a much shorter cycle turning to the cell alone. In other words, we will be able to build much bigger cells as we move up the 2 valleys with more time resending a construction of the next cell. We view this as a temporary problem and small production deferral that will be resolved in this quarter.
We also have some operating flexibility and makeup capacity with the ability to blend feed to the mill from our high grade ore stockpiles for the remainder of the year. We have lowered annual gold production from 55 to 75 ounces to 45,000 to 60,000 ounces to reflect the impact of this year. The project spending is complete as of the end of June with final approach costs coming in under budget at $164,000,000 compared to the original estimate of $178,000,000. Exploration has identified a number of satellite deposits a few kilometers of Krumovgrad. They've completed the drilling program for the cernek satellite deposit located approximately 3 kilometers southwest of the Krumovgrad will get are awaiting and are awaiting on metallurgical test work to be completed before releasing the beta resource estimate, which we expect to complete and release in Q3.
Drilling to begin on the next 2 satellite discoveries, SINAP and Yucleasea in Q4. Drilling on 2 other exploration targets in the region Chactalkaya, and Elite Chvo will begin in Q3. On July 15, 2019, we announced results of preliminary preliminary economic assessment for our Timon Gold Project in the Moore District in Serbia. The PEA is based on an outdated mineral resource estimate in dated in September 2018 and provide the base case considering primarily oxide and transitional material upon which the project will now be optimized for mining and process strategies, including an economic valuation of the larger sulfide resource. The study is based on open pit mining and heat leaching of the oxide Sichwint Cereal followed by later construction of the conventional mill facility to produce a flotation gold concentrate.
Submarine highlights, of the project are, as an after tax NPV, a 5% of $105,000,000 after tax IRR of 18.6 percent at $12.50 gold and an all in sustaining cost of $7.17 an ounce and peak annual gold production of approximately 132,000 ounce. Initial capital cost is around $36,000,000 with a mine life of 9 years. Based on results of the PGA, DPM is conducting a geotechnic and hydrochlorological study as well as further optimization work to target additional sulfide material prior to commencing a preliminary feasibility Development of a permitting approvals plan, incorporating the environmental and social impact assessment process approvals, as well as additional licensing, patient permits now reservation requirements were initiated in the fourth quarter of 2018. Exploration during the second quarter of 2019 included infill soil a geological mapping to the north and west of the corporate deposit and on the northern half of the Ooma license, a technical review that included a Panartificial intelligent study, identified many high priority near resource drill targets, as well as other targets within geochemical and geophysical anomalies that occur over and supply kilometers north of the Cortkin Kids deposit. Expiration plans for the 3rd fourth quarter of 2019 include up to 2 1000 meter trenching and 5 thousand meter diamond drilling on these new targets, with the aim of increasing near surface oxide resources.
The application to extend the potash Cuca and the DRA stock expiration licenses for an additional 2 years were approved on July 19th. We see great potential with our investment in MineRP as unique new enterprise digital platform for the mining industry We ourselves are adopting MineRP as well as many other digital technologies to transform our business. In fact, we have with MineRP is to introduce Hawaiian planning enhancements and intelligent use of data. Key benefits expected from this initiative are data unification to a single platform, rapid parametric life of mine planning sequencing and real time line of performance versus plan with faster response to interruptions and better decision making. MineRP is making good progress and introducing this unique platform, but there is a science of mining to the business of mining to the industry with good industry interest in updating We expect significant growth in revenues beginning in the second half of twenty nineteen as several major new mining customers have signed on or in the process of signing on this new software platform.
In summary, the strong results from Sumit and CaliFetch, along with the ramp up of production that is now underway at Grumabrad, reflects the exceptional progress our team has made to improve the performance of our operations and advance our growth projects. Sume continues to improve and contribute to the free cash flow of our business further upside possible by increasing throughput of recent costs further, which is the focus for 2019 and beyond, with significant near term growth in free cash flow from our TruBridge project beginning in the second half of this year. We represent a real growth and value investment opportunity for invest We expect to build a cash position when we will start this year and grow rapidly over the next several years. In discussion with our board, we have adopted a disciplined allocation capital allocation framework that will balance reinvestment in the business with returning capital to shareholders once we are in a position to do so. Thank you.
I will now turn the call over to Hume, who will review the financial results and 2019 guidance, following which we will open the floor to questions.
Thanks, Brit. Overall, Q2 financial results reflect with the follow-up operating performance at Chelopech and Tsumeb, as well as I said, they didn't contribute earnings in the quarter or generate the ounces that we forecast that did achieve the commercial production on June 8th that we expected. And as Rick has noted, it is expected to ramp up to full design capacity in the third quarter of 2019. From an earnings perspective, we reported Q2 adjusted earnings of $0.09 paired with an analyst consensus estimate of $0.03 and to 0 point 0 $8 in 20 18, and adjusted EBITDA of $34,000,000, up $32,000,000 in 20 18. These increases were primarily driven by Tsumeb, which reported higher volumes in complex concentrate smelted, mainly attributable to improving performance and to the progress maintenance that was done in Q2 of last year.
As well as reduced stockpile interest, IRS admitted metal recoveries and a stronger U. S. Dollar, relative to both the euro and the South Africa and RIN. These were partially offset by lower volumes of gold and concentrate sold as a result of lower planned grades at Chelopech and higher local currency operating costs. For the 1st 6 months, we reported adjusted earnings of $0.08 per share and adjusted EBITDA of $51,000,000 which were comparable to settlements on previously reported and provisionally provide price concentrate sales and the mark to market impact related to the increase in our share price mainly in Q1, each of which dragged down our Q1 financial results.
For the quarter and year to date, results, gold and copper realized prices did not have a significant impact relative to 2018. With the gold price increase being offset by a reduction in copper prices. Q2 and year to date funds from operations were $30,000,000 $45,000,000, respectively, while free cash flow was $24,000,000 $34,000,000, respectively. These results were essentially unchanged from the comparable periods in 2018 and reflect the same factors that affected adjusted EBITDA, the exception of free cash flow which also benefited from lower sustaining capital expenditures during the first half of the year, which primarily reflects the timing of Tsumeba's scheduled furnace maintenance as well as work related to Jellifedgest E and F rates. Turning to cost measures, the Jellifed budget Q2 and year to date cash cost per ton of more process was $85 compared with 2018, and down 4% from year to date, 2018, due primarily to the stronger U.
S. Dollar The pending Q2 and year to date cash cost per tonne of ore processed was $48, which was in line with plan. And on a consolidated basis, our all in sustaining cost per ounce for Q2 was $707, up $167 from 20.18 due primarily to lower gold rates. Year to date, all in sustaining costs of $7.61, up $160 primarily due to lower copper grades and gold grades, higher treatment charges, higher share based compensation as a result of mark to market impact related to our share price increase to Q1. Higher cash outlays for sustained capital expenditures relating to the TMM raise and partially offset by the U.
S. Stronger dollar. At CMS, Q2 and year to date cash costs were $3.73 $3.72 per ton, down 32% 29% compared to 2018. This was due to the higher throughput, higher by product credits, from increased asset deliveries and prices and a favorable impact in the weakness are which offset higher global currency operating costs. From a capital expenditure standpoint, sustaining growth capital expenditures for the second quarter were 5 $50,000,000, respectively, for an aggregate spend of $20,000,000, down from $27,000,000 in 20.18.
Sustaining growth capital expenditures for the 6 for 6 months were $7,000,000 $33,000,000, respectively for an aggregate of $40,000,000 down from $57,000,000 in 20.18. These decreases were due primarily to the reduced outlays in connection with that HIV wind, the timing of planned sustaining capital expenditures, including the timing of Tsumeba's furnace maintenance, which is scheduled for Q4 this year versus Q2 in 2018. At June 30th, construction on the unassessing project was complete. The aggregate capital cost for the project was 160 $1,000,000 and is 8% below the original budget of $178,000,000. At June 30, our financial position is strong 156 dollars of cash resources including the $135,000,000 of undrawn capacity under the revolver and $22,000,000 of cash as well as a 10.3 percent interest in Sabina.
During the first half of twenty nineteen, we also of the opportunity to divest our royalty interest and dependence of equipment no longer required at Chelopech. This generated proceeds of approximately $8,000,000, while it's not reported in our free cash flow numbers, it did add to our cash resources. With that testing production now ramping up and DPM shifting towards a period of significant cash flow generation, we've reduced the size of our revolver to 107 $5,000,000 to better align with our near term capital requirements and made certain other amendments to reduce costs and increase the flexibility. From a risk management perspective, during the quarter, we increased our 2020 hedge position in respect of the Namibian dollar to due to Tsumeb's operating cost exposure. As a result, June 30, approximately 96% of Tsumeb's 2019 operating costs were hedged for the balance of the year using a 0 cost option strategy that provided for an average minimum and maximum change rate of 14.15.46.
And for 2020, approximately 50 percent was hedged using a similar strategy with the 4 that on average provides 484 to 14.64 and a ceiling of 16.15. Looking forward, based on current market environment, we expect further increases in our operational and financial results in the second quarter of this or second half of this year, driven by continued solid operating performance from both Chelopech and Tsumeb, as well as the startup of the Atataki mine. By year end, we expect to have no draw downs under our revolver and will have built a modest and growing cash position. For the full year, guidance remains unchanged from the guidance that we provided on July 10th in connection with our Q2 production results. As well as the updated guidance in respect about AtEPI's 4 throughput gold production and sales to reflect the temporary rate in the INWF.
With the release of our financial results yesterday, we also updated our guidance throughout its equity to cash costs per tonne of ore processed, to $55 to $65 per ton, up from $50 to $60. Overall, the I and WF constraints is in no way material to the business. And we've taken a number of actions to address the issue and remain confident that at a technical vein, on track to achieve full production Q3 and thereafter contribute significantly to increase gold production and free cash flow and shouldn't support further increases in our share price.
With that, I'll turn the call back over to the operator.
To prevent any background noise And our first question comes from Cosmos Chiu from CIBC Capital. Your line is now open.
Great. Thanks, Rick, human team, for a very thorough presentation. Maybe First off, my question is on Aditepay or also known as the artist formerly known as Krumovgrad here. On the INWF, it sounds like you figured out the issues behind the settlement and longer than expected settlement of some of the fines and whatnot. And it sounds like you've built the next set of cells at the end of July, next sets coming up as you go up the valley in late August.
Could you remind us, Rick, does that give you enough capacity for the remainder of 2019?
Well, it's an ongoing process. So you have to keep constructing cells, but annual alternate cells from Wind Valley to the next. So, what we got behind the schedule because of the delay in the settling really started with the very first sale. So we're playing catch up, but we'll be caught up by, as we say, pretty much the end of August. After that, we don't anticipate that we won't have we'll have any problems keeping up with the cycle between the North Valley and the South Valley.
So that's really the process. There'll be many, many sales constructed over that period towards the end of the year or through the end of the year, but they'll happen on a fairly consistent frequency.
But as you go up the valley as when I was on-site back in April, it opens up. So there's more areas that where you can construct sales.
Yes, that's correct. And the sales we're constructing now on the south side are quite a bit larger, one of them is quite a bit larger, and will hold a little much longer and larger quantity and tailings. So it gives
us much
more time, to prepare the other cells and so on. So that's kind of where the relief come from and that's why we've been saying we're pretty confident at the end of August. We'll have be in a situation where we can run full capacity in on a continuous basis there.
And then on that, Rick, in terms of your revised guidance of 45,000 to 60,000 ounces, coming from out of Tepe. Is that based on, as you said, getting to 100% capacity, by the end of August? Or is there some kind of flexibility in terms of grade that you can rely upon just given all the ore that you've stockpiled And I believe some of that is fairly high grade.
Yes. Based on the assumption that Fadi, we will be in that position in August to turn the mill back up to full capacity. So we may even be able to do that slightly earlier and that's what we're looking at some upside potential there. And as you say, the other opportunity really agreed through all around feeding higher grade on the stockpiles into the feed mix, routing the mining activities. So, yes, we'll definitely expect that inventory creates up well.
So not all that's built into the, let's say, the base assumption. It's upside that we intend to try and execute on.
And on that, Rick, I don't know if you have it handy on you, but what kind of tonnage and what kind of grade do you currently have in the Stockpows?
Well, it's indeed probably at the end of the stockpile size.
Stock power is about 150,000 ton And the grade on stockpile at the moment is around 4 grams a ton. And as Rick said, there's quite a number of different grades in those stock So what's currently coming from the mine and what we're blending together with the high grades on stockpiles allows us to get to a number beyond what's in that stockpile in terms of grade. What we anticipate coming from the mine is also going to be higher grade 2440 is the number that's the the asset grade, we're going to be able to run-in a number of high. We're anticipating between now and the end of the year.
Thanks, David. And then you also mentioned that in the MD and A, you're still awaiting the formal operating permit from the government. Any updates here? When I guess when we talked about this back on the site tour, there's really no concerns. It's really just crossing the T's and dotting the I's here.
Is that still the case?
Yes, Cosmos, this is a significant piece of work. The people have decided to some excellent judge to get to where we are now. What we have is 2 sort of groups these things, the first one is around the power supply and we have side to that completion. So we're expecting that to be done 1st week of August. The main area of the site itself, 4 different sub permits But on that, there are meetings to be held on the 8th 9th.
So basically, we formally review and are expecting final of those items. To take these sites and compliance. There'll be a short period after that until we're issued with a permit. But at that point, we're already in a position where we are able to operate normally. So basically within the first half of August, we're expecting to have that behind
Yes, for sure. Maybe switching gears a little bit, as you mentioned, humor and Rick, you're entering a period of very high or increasing free cash flow with Krumovgrad out of Tempe coming in. I think, Rick, you sort of touched on that in terms of your capital allocation strategy, but could you give us a bit more color in terms of you have a lot of areas where you can kind of allocate capital. You touched on Tamark. You touched on Sumit.
You touched on, would you repay the debt? Would you issue a or have initiated a dividend? Maybe if you can give us a bit more color on that, I think that would help.
Yes. The context of the strategy really for that is really to look at the priorities within the capital allocation opportunities reinvesting in the business, particularly around exploration, in and around existing assets is is giving us the highest returns. So that gets the highest priority. And then after that, it falls down through the ranks. But basically, clearly sustaining capital plus reinvestment and exploration to extend the life or add to reserves.
And then after that, it really comes to, around growth of the company what are the opportunities that are in front of us? What are the returns that can be generated from that capital? And also, returning money to shareholders in the form of potential dividend or share buybacks, we're weighing those options going forward. And so think the outlook is pretty good in terms of free cash flow and we think we can actually do both, return some money to shareholders in the form of potentially a dividend, once we get in, build a cash position up and continue to look at opportunities around potential growth in the company. We've got, obviously, our organic projects in TMAC, which we're moving forward on.
But also looking at potential acquisition opportunities, that might fit our strategic alignment and generates returns that we would anticipate to meet our hurdles, for return to shareholders.
Okay. And then on free cash flow, you mentioned $24,400,000 in Q2. Could you tell us how much of that actually came from Tsumeb?
The free cash flow for Tsumeb for the period
For the quarter, yes.
It would have been actually quite, quite strong. Let me just take a quick look here. So, yes, for Q2, it probably would have been like
$10,000,000. $10,000,000?
Oh, great. Okay. Great. Thanks, Rick, Hume and David. Those are the questions I have.
Thank you.
Thank And our next question comes from Jacob Willoughby from Beacon Securities. Your line is now open.
Thank you. Congrats on a good quarter guys. My questions, well, first, Sorry. Can you hear me better now?
Hello?
Yes, we hear you, Jacob.
Okay. Can you tell us what your next steps are for Sorry, your project in, for, Timok?
Yes. We just completed the PEA, and we the economics as we show our I'll say just that kind of our minimum hurdle rate. So we would like to see the project a little bit more robust and we see some optimization opportunities. So So we're looking before we decide to move to pre feasibility, we're looking at some of these optimization possibilities particularly around the sulfide and whether we've optimized the pit shells and that around the sulfide aspect We know pretty well the oxide portion transition for us fairly well. But the big shells were not designed originally to optimize complete package.
It was really just to optimize the heap leach part of the project. So now we're going to go back and just look at that. Also exploration, we think there is some upside that we can get around year to near additional oxide ounces near surface in and around the existing pits. There has I mentioned in the early discussion, we have done some work with AI on all the exploration data And if identified, that's a large number of new targets, to test near surface oxides on, and that's what we'll be doing in the next couple of quarters. So with that, if we could add oxide ounces also and optimize the sulfides, we think that we can improve the project economics And then from there, it looks good.
We'll move to pre feasibility. And that's kind of the steps we're on now.
Okay. That's good. So no rush there?
No rush. I mean, certainly it's going to take a few years to get permit and so on. So on the overall timeline would be more likely a 2024 production start or something like that, looking at the timelines now.
Okay. And then just on the smelter shutdown, is it going to start right around the beginning of Q4?
So we're anticipating the shutdown is going to be in oxide at the start.
Okay. And I mean, you have to shut it down and then it's got to cool down and everything. So if you shut it down October 1st, do you think it'll be back running January 1st?
Oh, yeah. So we're talking basically 21 to 24 days from the time you take the process off, you stop putting B to the furnace. So the time you put feedback on the furnace, that will be running again with
Oh, okay. So just basically a month and then how long does it take to heat it up again?
That's the ease up is included in that timeline and it's 4 to 5 days.
Okay. That's excellent. Thanks very much.
Thanks, Jacob.
Thank you. And our next question comes from Ingrid Rico from JMP Securities. Your line is now open.
And looking at the CapEx. So guidance remains at $14,000,000 to $18,000,000, which I presume the bulk of it will be spent in Q4 with the with the shutdown. But really giving the year to date spend, that CapEx number seems kind of high for Q4, So could you maybe comment on that and how should we think about CapEx at this smelter?
It's possible that might be a stretch more and you corrected the bulk of the money remaining to be spent, is, let's say, this already allocated to numbers, but it's a router shut So we're anticipating that's going to be in the region of about $5,000,000 to $8,000,000 for the shutdown. At this one, we would anticipate to be a little bigger than a half going forward because there's a number of things that we're testing during this shutdown, which we expect to mitigate costs going forward and potentially extend timelines. So to your question of, do we think that's likely to occur? I would say that they're likely to spend. So the bottom of the range of spend on capital between now and the end of the year.
Okay. All right.
And then just to follow-up to, on Kosmos question on capital allocation. So, thinking on that and Timok, could you remind us what does DMP look for a project? Looking at other opportunities?
Sorry, I missed that. What?
Just on capital allocation. So what does then do you look for another project if you're looking at other opportunities?
Well, strategic fit, Ann, clearly, the number one thing is robust returns that would generate including acquisition, if it was acquisition and if it required development, total returns that would exceed our, say, requirements and be accretive to shareholders. Key criteria. Beyond that, it's obviously mainly around risk and jurisdictions and making sure that a strategic fit within the business itself and plays to our strengths and then think that's sort of the whole package really. Our strength may be underground mining, but it doesn't mean the dual fixed, but basically look at areas where we think we can create value that may not be visible to to people or opportunities that we can now perform the current assumptions around value creation for the assets.
And there are no further questions at this time. I would like to turn the call back to Rick House for any further remarks.
Oh, yes. So thank you very much for joining us today on the call and wish everyone a great day and a great rest of your week.
Ladies and gentlemen, thank you for your participation in today's conference. This concludes today's program. You may all disconnect. Everyone have a great day.