Greetings, welcome to the Endeavour Mining third quarter 2018 webcast. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Sébastien de Montessus, CEO of Endeavour Mining Corporation. Thank you, Mr. de Montessus. You may begin.
Thank you, operator. Good morning, good afternoon, everyone. Thank you for joining Endeavour Mining Q3 results presentation. I'm Sébastien de Montessus, CEO of Endeavour Mining, it's a pleasure to be talking to you once again. Please note the usual legal statements and disclaimers here. We will be adopting the usual format today, here with me are Jeremy, Vincent, and Patrick. I'll start by talking you through some of the highlights from the quarter, before the team go into the financials and operations in greater detail. We will open the call for questions. Here is a reminder of our operational pillars and how we tracked against them at the end of Q3, I'm pleased to say that it has been a successful year so far.
As you will have seen from our release, we remain on target to meet full-year guidance for both production and cost, we are at the right end of the range for each, towards the top for production and towards the bottom for cost. You will have noted also that construction at the Ity CIL development is now tracking ahead of target while remaining on budget. We are now expecting the first gold pour some 2 months early. Our exploration program has enjoyed considerable success. I hope you saw the maiden resource figures from Fetekro that we released a few weeks ago. We are also looking forward to publishing a maiden resource from the Kari Pump exploration campaign at Houndé in the coming weeks, which we had previously announced in May.
Since the last time I talked to you, we have also announced the sale of the Tabakoto asset, that transaction is expected to close in the current quarter. As you will notice in the upcoming slides, Tabakoto has been classified as a discontinued activity and does not appear in our P&L or on our balance sheet anymore. Of note, however, Tabakoto is still consolidated in our cash flow statement in compliance with IFRS rules. All this has been achieved safely. Our record here continues to be strong, construction at Ity continues with not a single LTI. This is because of the constant focus that we place on the safety of our people. Everyone deserves to go home safely at the end of every day, we will continue to make that as a priority for management.
I mentioned earlier that we are on track to meet guidance at the higher end for production and lower end for cost. As this slide breaks out where we stand in a little more detail. All our mines are on track, some at the higher end and some at the lower, but this just reinforces the benefit of having a portfolio with multiple mines. Looking at cost, we are particularly pleased with where we stand. As you know, the target set in 2016 was to have a group all-in sustaining cost below $800 by 2019. Our strategy is not about how much we can produce, but rather it's about focusing on high-margin ounces. It is great to see that our costs from continuing operations are already achieving this target.
While next year we will also have the benefits of the Ity CIL project coming on stream at very low all-in sustaining costs. Production from continuing operations in Q3 was 76% higher than a year ago, thanks in part to Houndé entering commercial production, which is the primary reason for the jump in the bar from Q3 to Q4 last year that you see here. While there has been a slight decrease in Q3 over Q2, this is typically of this time of year during the West African rainy season. Just to come back to production, one of the reasons we are confident of the full-year outcome is that, as you know, we are now leaving the rainy season and moving into Q4, which is traditionally our strongest quarter.
If we were to have the same production in Q4 as in Q3, which was our lower quarter, this would already place us in the top half of our production guidance range. I'm therefore expecting a record quarter in Q4. On cost, this slide provides the bridge between where we were this time last year and where we are now. From over $900 an ounce, the portfolio improvement we have seen over the past 12 months has seen us sell higher-cost assets such as Nzema and Tabakoto. Furthermore, the cost reduction programs launched across the group and the addition of Houndé to the portfolio has driven costs down even further, leaving us at a current all-in sustaining cost of $759 per ounce for the year to date. I think you will agree that represents a significant increase in value for our business and for shareholders.
As you've seen on this next page, it means that all-in margins have significantly increased. At $134 million so far this year, we are already a third ahead of where we were at the same time in 2017 due to higher production and higher gold prices. As previously mentioned, Q4 is a very important quarter in terms of production, but also cash flow generation. Therefore, we expect to finish the year at a considerably higher level compared to the previous period. So to the Ity CIL construction, as I mentioned, and you will have seen, thanks to a great effort by the team, we continue to make significant progress and are now tracking two months ahead of schedule with more than three-quarters of the project now completed. In the chart on the right, you will see that total CapEx remains at $412 million.
Of that, just $148 million remains to be paid. With $26 million of undrawn equipment financing, the cash outflow for the remainder of the development stands at $122 million, well within the $213 million of liquidity sources that we have available to us. That is obviously a very good position to be in. In Q4, we intend to spend between $50 million-$60 million, bringing the remaining spend in 2019 at less than $70 million, therefore allowing us to maximize cash flow generation in 2019 once Ity CIL construction is completed. As you see in this next slide, because we're tracking ahead of schedule, we are intending to spend a lot more in 2018. Rather than $180 million, we are now expecting to spend approximately $260 million.
This has been possible due to our strong balance sheet and liquidity sources, which give us the financial flexibility to progress the construction quicker. The fact that we are two months ahead is expected to lead to substantial benefits for us in 2019. As you see on the right-hand side of the page, Ity CIL is expected to have an annualized production of 250,000 ounces for the first year, at an expected cost of $407 per ounce. This means that two months extra of production in 2019, representing roughly 40,000 ounces more for 2019. Assuming a gold price of $1,250, this represents $35 million of additional all-in margin generated in 2019, thanks to the project being ahead of schedule. As you would have seen therefore on the previous page, the project completion stands at over 75%.
I'd like to thank the team for their hard work and excellent progress achieved so far. The experience that our in-house construction team has gained from our previous builds in the region, the early installation of the ball and SAG mills, combined with the excellent progress made during the rainy season, have been key factors which have helped advance the Ity CIL construction ahead of schedule. Looking at the pictures, starting with the top left, you'll notice the process plant. Its construction is over 70% complete, tracking ahead of schedule as the ball and SAG mill installation commenced three months earlier than initially planned. The structural, mechanical, piping, and electrical installation work is well underway. In the top right, you can notice the 29 MW power station, its construction, and the 91 kV transmission line are progressing well against schedule, with over 70% completed here, too.
The first power drawdown is expected in Q1 2019. At the bottom left, you have the resettlement program, which is progressing well against schedule, with over 90% already completed. At the bottom right, you'll notice the haul road bridge to access the Daapleu Pit, which is 92% complete, with substructure concrete completed. For other photos, please reference the press release published a few weeks ago. You will notice that the tailing storage facility has work progressing well against schedule with, again, 70% completed, and the installation of the rubber lining has already commenced. In essence of time, I won't go through the full details in this next chart. Suffice to say that the large critical path items are now behind us, and it is now the final stretch to the first gold pour, which is expected to occur in early Q2 next year.
Finally, before Vincent goes through the finances and we looked at each individual mine, a quick word about our exploration activities. I would like here, too, to thank Patrick and the exploration team for the hard work done this year. With over 350,000 meters drilled so far this year, the exploration effort has been huge, and we're excited to share our results. Moreover, Patrick's unique approach brought from the oil and gas industry of ranking targets and building his five-year exploration program based on strategic prioritization is proving to be effective. We will highlight more of this at our upcoming Investor Day. As you can see, we've committed $46 million to exploration so far this year, with a significant proportion at Houndé and on greenfield properties. In total, we've drilled almost 350,000 meters so far this year, and in the third quarter, despite the rainy season, we drilled 54,000 meters.
In essence of time, we've added an exploration page on each asset in the appendix and will provide additional information during our Investor Day in a few weeks' time. Today, I would like, however, to focus on Houndé and Fetekro on the next two pages. On Houndé, as mentioned, Houndé has been the strongest exploration focus for us in 2018, with more than 165,000 meters drilled since the start of the year. As you recall, last year, we announced the Kari Pump discovery and in May of this year, we announced further drill results for Kari Pump, as well as the discovery of two additional nearby discoveries named Kari West and Kari Center. In Q3, drilling focused mainly on infill drilling the Kari Pump target, where we expect to publish a maiden resource in the coming weeks.
This is expected to be a big catalyst for Endeavour since based on the amount of drilling done, which now stands at over 200,000 meters over the last 18 months, is expected to be material. In addition, we see three advantages. The first one is that it is expected to have higher grades compared to Vindaloo. Second, while Vindaloo is 90% transitional ore, we expect Kari Pump to have more oxide material. As you know, oxide material is typically less costly to mine and process. For reference, in Houndé's first months of operation, it was processing only oxide material, and its resulting all-in sustaining costs were below $400 per ounce. The third advantage is that the infrastructure is already planned as part of the nearby Bouéré development, which we are completing now.
As you can tell, we're excited to announce this discovery and to then move on to drill the other two nearby targets next year, in addition to several other ones on the property. For this reason, we believe that Houndé is a Tier 1 asset, and we will probably prove it very soon. Now on to Fetekro. We have said before that one of our four priorities is to identify areas for greenfield exploration where we can develop a standalone new project. You will hopefully have seen the maiden resource recently announced at the Fetekro property in Côte d'Ivoire, which is looking very promising. It used to belong to La Mancha and was injected into the Endeavour portfolio in late 2015, along with the Ity mine.
While we knew that the Lafigué target was prospective before embarking on a larger exploration campaign, we analyzed the geology, which highlighted additional nearby targets. The potential of Lafigué, along with the other nearby targets, then gave us the comfort for Fetekro to potentially have the scale to become a standalone multiple pit operation. As such, Fetekro was ranked as the top priority greenfield target following the strategic exploration review completed in late 2016 by Patrick and his team. Since then, nearly 32,000 meters were drilled, mainly focused on the highly prospective maiden Lafigué target. As you would have seen, the Lafigué maiden resource stands at over 700,000 ounces at a grade of 2.25 grams per ton, including some very high-grade pockets.
Endeavour has spent roughly $6 million on Fetekro since owning it, representing a discovery cost of $12 per ounce based only on indicated resources, or $8 per ounce based on M&I resources and inferred. This discovery cost is in line with our four-year, five-year exploration target of finding 10 to 15 million ounces of indicated resources at a cost of less than $15 per ounce. The initial analysis of its ore characteristics and ore body shapes shows it could be amenable to open-pit mining as mineralization starts at surface, while the preliminary metallurgical test work done suggests the potential for high gold recovery rates. There is additional potential upside as the delineated resource is based on two-thirds of the total mineralized area defined today and is open at depth and in multiple directions.
As previously mentioned, 14 additional nearby targets have been identified, since announcing the maiden resource, more drilling has started on the Lafigué target and drilling on some additional targets will begin next year. With that, I'll hand over to Vincent to walk you through the Q3 numbers into more details. Vincent?
Yes. Thank you, Sébastien. I will start by commenting on slide 18, the production bridge between the end of the third quarter last year and today. Starting at the left-hand side, we have removed the figures for Nzema, which has already been sold, and Tabakoto, which is being held for sale at present. This gives us 252,000 ounces for continuing operations up to the end of Q3 2017. Notably, for the first nine months of 2018, we can see a slight decrease in production from Agbaou as a result of the lower grades that we have stockpiled for use in the mill as we focus on waste capitalization activities as planned. We can see as well an increase of production at Ity, primarily due to higher grades coming from Bakatou pit, but also higher tonnage, and a slight decrease at Karma.
As expected, the majority of the impact came from the introduction of Houndé, which contributed 201,000 ounces of production in the year to date, taking total production to 438,000 ounces. On the next slide, I will walk through the mainline items from revenue to all-in margin. The top line increased, as I just explained, and I want to note just a couple of other points. The gold price average takes, as usual, into account the streaming financing for Karma. Otherwise, the realized gold price without Karma would have been $1,282 per ounce year to date. As you see, note three, sustaining capital increase as a result of the increased waste capitalization activities at Agbaou, but also an increase at Tabakoto and the addition of Houndé mine. Tabakoto net impact year to date on all-in sustaining margin is -$4 million.
As you can also see on note four, the non-sustaining capital increase versus last year can be attributed to Agbaou with the waste capitalization that has been done for the pre-stripping of West Pit Five in Q1 and Q2. You have seen that there was no non-sustaining CapEx in Q3 for Agbaou. The pre-stripping as well of Kao pit at Karma mine, which has continued and intensified in Q3. Last, new mining equipment for the underground mine, which has been received in Q3 at Tabakoto. Later on, you will see that our non-sustaining exploration spend also increased as a result of the enhanced exploration focus. That leads to the one-third increase in the all-in margin that Sébastien talked about earlier.
On the next slide, here you can see the cash flow over the period compared to last year, starting from the $134 million all-in margin I mentioned earlier. The increase in working capital is explained at point one, and here it relates to a number of specific items. Overall, we expect some items in the working capital to reverse in Q4, but also into early 2019. As I go through the specific details, you will see why. First, there was a receivable outflow for $12 million due to timing as we sold the ounces shortly after quarter end. This item has therefore already been turned into cash in October, and we plan to offset this outflow in Q4 cash flow numbers.
The second item is $43 million outflow in inventories due to the buildup of stockpile and consumable at Houndé, which has performed above nameplate, and which need to structurally build its inventories, but also an increase of all stockpile at Agbaou and Karma for $12 million, and an increase in consumable at Karma and Tabakoto. Looking forward, the stockpiles are expected to be consumed across the group in the coming quarters for all the mines except Houndé, which will continue to slightly increase and continue to build its stockpile in line with the DFS strategy. The consumables should also reduce across the coming quarters. The working capital also includes prepayment outflow for $8 million, mainly due to strategic spare parts at Houndé.
Lastly, the working capital includes a trade payable outflow of $25 million, which is mainly due to the buildup of payable at Agbaou at the end of 2017, driven by a regulatory issue in paying a key supplier. This has been paid in Q1, and since then, Q2 and Q3 don't show any major changes. At note three, you can see an increase in the interest paid as a result of the increased debt due to the construction of the Ity CIL plant. You see the $231 million project capital at note four is comprised mostly of the Ity CIL, as you would expect. You can see the impact of our convertible issue and debt management in notes five and six, leaving us with a cash outflow of $85 million year to date.
On slide 21, you see the improvement of our overall portfolio quality, with Houndé now on stream, which has led to a significant improvement in cash flow from $1.49 per share last year to $1.94 per share so far in 2018. That represents an improvement of 30% on the cash flow per share. On slide 22, you can see the funding source, this all leaves us with a well-funded to pursue our additional growth activity and ambitions. While our net debt position has increased as a result of the Ity CIL advancing much quicker than forecast, our financing remains strong and we expect to generate significant free cash flow in Q4, with a significant increase next year. We should see a quite rapid deleveraging of our balance sheet when the Ity plant will start next year. We have $180 million undrawn within our RCF and $33 million in cash.
With expected inflows from the sale of Tabakoto for $60 million, as well the remaining payments for Nzema between $20 million and $25 million, plus the future cash flows in Q4 and coming quarters, we have significant sources of funding available to us before the completion of the Ity CIL. On slide 24, you see the change in cash based on more traditional cash flow metrics, IFRS standouts. You will see here we started the year with $123 million of cash, to which operating activity added a further $119 million. We have invested significantly during the period, investing $366 million, particularly on the growth capital, where we have spent $231 million, also $59 million on capital expenditure and ongoing operation, $38 million in exploration. As you can see, the amount invested into our business to improve the portfolio's quality are quite important.
These investment efforts would not have been possible without the balance sheet management efforts done over the past two years. Going into 2019, despite having invested massively, we expect to start benefiting from all the investment made. Last slide on page 24, to round off the finance section, this slide gives the net earning breakdown. As you had some questions last time, we gave you more detailed commentary on the P&L regarding depreciation, financial result and tax this year. I would like to highlight four items. Year-to-date depreciation increased compared to last year, mainly due to the inclusion of Houndé, as well as some adjustment in depletable ounces in 2018. Quarter-on-quarter, it has decreased by $8 million versus last quarter due to the decrease in production.
The year-to-date gain on financial instrument is mainly related to the $17 million gain on the Gold Revenue Protection Program. Also, $20 million unrealized gain on the convertible senior bond, which was offset by a foreign exchange loss. On finance costs, the finance cost remains equivalent to last year. While we have paid more interest this year, we have also allocated a higher percentage of interest, which has been capitalized in the Ity CIL project. Finally, current income taxes was $46 million year-to-date compared to $7 million a year ago. The increase is primarily due to the inclusion of Houndé in 2018, where we have recovered $30 million of tax, as well a higher taxable income at Ity. Q3 2018 current tax is down compared to Q2.
Lastly, we will have seen that we have a loss of $59 million for Tabakoto discontinued operation, which embeds $32 million impairment depreciation following the disposal signed with BCM for $60 million. On a year-to-date adjusted basis for continued operation, Q3 earnings per share were -$0.01 per share, and amounted to a profit of $0.31 per share year-to-date against $0.05 per share for the first nine months of last year. As you know, the adjustments were mainly due to four factors: losses from discontinued operation, deferred income tax recovery, prior period adjustment, gain on financial instrument, and stock-based expenses. At this point, I will hand over to Jeremy, who will take us through the individual mines operations. Jeremy?
Thanks very much, Vincent. Good morning, good afternoon to everyone out there. Looking at the operations, turning to Houndé first. Houndé continued to perform well, specifically compared to the feasibility study estimates. The plant continued to perform roughly 30% above nameplate capacity. Production, as expected, did decrease slightly in the previous quarter as the rainy season gave us limited access to some of the higher-grade areas. The all-in sustaining costs increased mainly due to the lower than anticipated grade, which is a bit of a combination of some drill and blast and mining dilution, et cetera, et cetera. The higher unit mining and processing costs, which were partially offset by the lower unit G&A costs and the lower sustaining capital. Due to its strong year-to-date performance, we are comfortably on track to meet the top end of our guidance at the Houndé asset. Over to Agba.
Now at Agba, 2018 continues to be a transitional year, with a focus on waste capitalization, which will then give us access to the higher-grade ore areas. Production remained at a low level in Q3, as mining continued to be constrained to low-grade areas, the low-grade stockpiles continued to supplement the mine feed. Nevertheless, we are on track to meet the lower end of production guidance at Agba, most importantly, the lower end of the all-in sustaining cost guidance. Over to Ity now. When we talk about Ity, we generally talk about the main horse in the stable up there, the CIL project. I'm very pleased to say the existing heap leach operation continues to perform strongly. We took the decision last quarter to mine opportunity based on equipment availability and the progression of the CIL project itself.
As a result, we have beaten guidance here pretty well. Production declined, however, less than initially planned over the previous quarter due to the lower grade stacked and the lower recovery, which was partially offset by the increase in tonnes stacked overall. We expect production to decline in Q4 and the all-in sustaining cost to increase slightly as a greater proportion of the lower-grade stockpiles are expected to be processed as the heap leach operation winds down by year-end. Over to Karma now. Looking at Karma as expected, production increased in Q3 despite the rainy season, due to the higher grades and the better recovery rates associated with predominantly the Kao oxide ore. All-in sustaining costs pleasingly decreased, mainly due to the increased production, lower processing costs and G&A costs overall, which were partially offset by the higher unit mining cost.
We are hauling from circa 12 km away now, the higher pumping costs during the rainy season. What's pleasing for me and I guess for everyone is, to look at the all-in sustaining cost curve on the Karma asset, it's progressively decreased over the last five quarters. Certainly, we're reaping the rewards of our hard work. Going into more oxide material, we can now start seeing the benefits of the plant optimization works that was being done last year, we continue to improve. Finally, just closing off on Tabakoto. I'm not going to spend too much time on Tabakoto. Production remained flat despite the impact of the heavy rainfall, as a slightly higher mill throughput was offset by just a slightly lower grade.
On the cost side, the issue remains the equipment availability and the need for some additional underground fleet at Tabakoto and the Segala underground assets. In light of the capital allocation decisions, these investments were not suited to Endeavour, we're convinced that the mine and employees will benefit from the new buyer strategy. With that, I'll pass over to Patrick now to walk you through the Kalana asset. Patrick, over to you, mate.
Thanks, Jeremy. Good morning, good afternoon, everybody. For the Kalana project, we have been quite active, especially drilling over 48,000 meters in the first semester. As you may know, it's a high grade, quite complex deposit, we have been achieving a significant amount of drilling to prove and to confirm and to refine the geological model, which is quite okay right now. Unfortunately, we have been facing some quite important delay in the lab analysis due to the LeachWELL analysis we are conducting on all the samples due to the high-grade characteristic of the ore. That being said, we are right now working on the resource evaluation. It's complex with a lot of vein being modelized and vein set and correlation and domains. Actually, we expect to publish updated resource quite soon now. Back to Sébastien.
Thank you, Vincent, Jeremy, and Patrick. To conclude, we have had a strong nine months performance, and I hope we've given you the flavor that we have much more to come, in particular in Q4. Our operations are performing well and in line with the guidance that we gave you earlier in the year, with production at the top end and all-in sustaining cost at the bottom end of the ranges. This places us on a solid financial foundation for 2019. The Ity CIL project continues to progress well, and we look forward to the first gold pour early in Q2 of next year, allowing us to have a strong 2019 full year production.
Do look out for our next announcement, the maiden resource from Kari Pump, since, as Patrick said, is expected to be a strong catalyst. Longer term, our ambitions remain unchanged, and we continue to work well to grow this company and create more value for our shareholders. I will leave it there, will remind you that we are holding a Capital Markets Day on November 28th in Toronto. I hope as many of you as possible will be able to join us on the day or listen in, and I look forward to talking to you again very soon. Before I go, would be happy to take your questions.
Thank you. Ladies and gentlemen, if you wish to ask a question at this time, please signal by pressing star one on your telephone keypad. Again, please press star one to ask a question. We will now take our first question from Justin Chan of Numis Securities. Please go ahead.
Good afternoon, everyone. Thanks for hosting the call. My first question's on Houndé. It's now run above nameplate comfortably for some time now, including through harder ore. Are you now in position to update the market on what your thoughts are for a sustainable throughput rate there? What are you expecting next year in that regard?
Thanks, Justin. I think we'll give some flavor to the market when we'll be releasing our 2019 guidance. We'll be at that time in a position to give some more stronger statement going forward on how we're expecting Houndé to behave vis-a-vis its nameplate capacity. Jeremy, you want to add something?
No, not at all, Seb. I guess, as part of any nameplate, if there's any change to nameplate, you generally go through a bottlenecking study and we look at the whole asset over and above just the mills and what the throughput of the mills in. Certainly, we need to weigh up a number of different factors before we change any key metric like that.
Yeah. I think to complete the answer, Justin, clearly up to now, Houndé has been operating at 20, 25% above nameplate capacity. I think that we'll see where it closed its first full year of operation. On that basis will give more guidance in the 2019 guidance on how to look at it going forward. Obviously it's positive and looking ahead, we're expecting to hopefully maintain this type of operation performance.
Okay. Thanks for that. My second one's more of just a high level strategic, it might be kind of infringing on the territory on your CMD coming up. You've now gotten through the major divestments, and your build pipeline, it is well along. Kalana is coming. What should we be thinking on the strategy right now? Are you relatively happy with the portfolio? Is it full? I guess, what are your thoughts with regards to that?
Well, I think that our objective was to demonstrate our ability to deliver on the four pillars of our strategic plan. Operational excellence, project development, unlocking exploration value, and also portfolio and balance sheet management. I think that at the end of the year, with the sale of Tabakoto completed and Ity well on track to its first gold pour will basically have delivered all the key items of this first three-year strategic plan. Therefore will be going forward thinking in the coming few months with the board at our next three-year strategic plan. I think this next three-year strategic plan will be based on the same lines, which is continuing to grow our business along with, I would say low all-in sustaining costs in order to really be focused on cash flow generation and looking at quality of production rather than just production for the sake of production.
Let's finish and complete this year. This will end up ahead of schedule, our three-year strategic plan. We'll be able to prepare ourselves and present to the market the next three-year strategic plan.
Okay, thanks. Just my last one's on Kalana. I realize that the new feasibility study isn't out yet, do you have any update at all with regards to your thoughts on the size of plant you're looking at there and what your view of the project is?
No, I think it would be a bit too early. In fact, part of the debate we will have once the numbers are out, is when is the right time to launch the construction of the project, depending also on the exploration upside that we see in the short term. The 2018, Patrick's team have been focused on mainly doing infill drilling on the existing resources that were in the previous owner feasibility study, to check and build our own resource model. Our objective for next year is really to start drilling and expanding the exploration base. Therefore question will be on whether we wait for those results in order to grow the size of the plant or whether we go ahead. I think that we've been insisting that for us, 2019 should be an important year in terms of cash flow generation.
Therefore, let's see what the feasibility study will show so that we can make the right call on when is the right time to launch that construction and therefore with what size of plant.
Okay. All right. Thanks very much. That's it from me.
We will now take our next question from Jack Garman of Pareto Securities. Please go ahead.
Hi, everyone. Thanks for hosting the call. My first question was concerning Fetekro and whether or not you have a target minimum resource size to develop a sort of standalone operation. Secondly, are you able to provide an update on the Randgold JV?
Thanks. Well, on Fetekro, I think our targets now on all greenfield operation is to target at least 2 million ounce indicated resources to start having an attractive feasibility study for us. This is why we are investing on Fetekro because we believe that there is potential to further grow beyond the 700,000, 800,000 ounce of indicated resources that we have currently. For that, we just need to let the exploration team to continue to drill the existing target, and to start drilling the other targets that were already identified. On the Randgold joint venture, Patrick, you want to give I think we intend to give some information on this during our Capital Markets Day end of November as we have a board meeting with the joint venture partners in the next 2 weeks. Patrick?
Yeah. Well, the joint venture is progressing quite well. While it was the first year since we signed this JV, the JV has 1 year of existence. The JV has been concentrating on the northern part of the Mankono license of Randgold. Some mineralization was encountered, and we are trying right now to extend this type of mineralization in the southern part of the Sissedougou license that we brought to the JV. I would say that it's still early days. We have interesting showing. A lot of geological work has been done, including a lot of geophysical activity. I think Randgold will report on their activity because they are operator of this JV. Far for us, I would say so good. Things is progressing interestingly, but it's still early days to say whether or not the outcome will be positive.
Okay. Thanks very much. One further question on Ity CIL guidance for Q4. Now that you've already met your full year guidance, what are you indicating?
Well, yes, I think that, as Jeremy said, for Q4, we're still expecting the Ity operation to run. Therefore, if I look at the previous quarters, we should have something slightly lower as we going into the end of this operation. I think something around 15,000 ounce is probably a good assumption for Ity pitch for Q4.
Okay, thanks very much.
We will now take our next question from Mark Bentley of ShareSoc. Please go ahead, sir.
Good afternoon, gentlemen. I have a couple of questions. First of all, on the taxation, you explained why it has risen substantially in this quarter, but it now seems to be around 50% of earnings. Is this a one-off spike, or can that be expected to continue?
Yes. You have a detail because there are some situations very different from one mine to the other. You have in the segment reporting note of the financial statements, all the details about the tax. For the moment, we are not paying tax still at Agbaou. We start to pay quite a higher level of tax in Ity this year compared to last year. Karma is also paying tax, but we are more or less at around the normal corporate rate. At Houndé, there is a higher rate of tax paid, which is due to some adjustment between the accrual of 2017 and what has been the final tax return of 2017. Yes, there are some adjustment in this quarter for Houndé in particular.
Overall, I just want to make one comment, is that it's very difficult to follow the tax on a quarterly basis because it's not completely steady, and if you make the division, you don't have a steady rate. What we will do is probably by the end of the year, is to give you a full detail of the reconciliation of the tax rate per mine to tell you what are the different items between the normal, the corporate tax rate and the effective tax rate. We'll do that once a year. It's difficult to comment on every quarter because you have from one quarter to another, some adjustments. Keep in mind that for the moment, again, Ity, Karma, and Houndé are paying tax
Agbaou is not paying tax and will pay tax next year. That overall, we have a tax amount which is between $10 million and $17 million per quarter.
From that, I understand that going forward, we wouldn't expect it, over the course of a full year, to be as high as that as a proportion of earnings.
No.
No, clearly not. Thank you. One technical question on the MD&A. This is on pages 27 and 28 of the MD&A, indicates that you have 100 million ordinary shares authorized, but it says that 107.8 million have been issued. I don't understand that.
Let me see. On that one, I need to go back. Mark, may I answer to you offline once we have seen this point?
Sure. Okay.
Okay.
No problem. Thank you.
We will now take our next question from Geordie Mark of Haywood Securities. Please go ahead.
Good afternoon, all. Just a few questions, follow on from previous. Moving on to Houndé there, can you remind me what the sort of cutoff grade is there for Houndé now versus the feasibility and the stockpiling strategy?
Jeremy?
Hi, Geordie. Good day, Geordie. How are you going? The cutoff grade is-
Yeah
is assumed when we do the resource and the reserve shell and the plan for each year. We haven't changed that. We're working off the grade control model. We still mine and stockpile in accordance with the actual plan that we set at the start of the year. It's generally at 0.5, Geordie. That changes when we start moving away to Bouéré and Dohoun, of course.
Okay, thanks. Maybe on that theme and moving over to Ity CIL. When do you expect to start your grade control drilling there for the mine?
We've started, mate. We started about six months ago and well advanced. It's a big property, as you know, and we've got the heap leach and the CIL overlapping. Did have a little bit of a slow spurt during Q3. Interestingly, Houndé, Karma, Tabakoto, Agbaou all have one in 80-year rain events during the wet season. However, the Ity CIL heap leach region to the east of the Daapleu River, oh, sorry, east of the Cavally River, had 30% less rainfall. Go figure. Yeah, we're well advanced on the grade control and it's more about hole profiles now and waste deposition and stockpile allocation now, mate.
Excellent. Thanks. In terms of Ity CIL development, obviously very nice to have brought that forward. With that concertining of that development timeframe, are you still keeping total man-hours constant? It's just more effective deployment of people?
I think we pulled the man-hours less during when we saw the advantage of having a little bit less rain during the wet season, Geordie. Yeah, certainly the two months ahead that Sébastien indicated before is pleasing. It's a team effort and it's taken a lot of people at all the other sites and all around the place to get this to where it is. We're at the hard part now. We don't want to lose the advantage. We want to keep pushing and maintain and deliver on our promises.
Okay, excellent. Maybe one last question on Kari Pump, and the other proximal sort of targets at West and Central. Has drilling recommenced on those targets and what sort of scale of drilling are you looking at there in terms of number of rigs and scope of work?
Okay. Right now, no, we don't have started drilling again. As Sébastien said, we just achieved, I think in September, end of September, we just achieved the 200,000 meter of drilling, all included, diamond, RC, air core RC stuff. Right now, we are allowing some time to the drilling contractor to refurbish all the machine, because we have been drilling around the clock for that stuff. We plan to restart drilling, I would say, at the end of the year in December. We are still working on the exploration plan, but we think that in 2019, we should be drilling even more meters, all included, compared to what we have been doing this year. It's going to be a very aggressive campaign, targeting, as you said, Kari Center and Kari West.
Not only that, because it will address also some possible Kari Pump extension and also additional target in the vicinity of Vindaloo, but also some more general targets. Again, for next year, Houndé is going to be our first spending area for exploration, where we are targeting, hopefully, a lot of success at the end of next year.
Okay, thank you very much. Cheers.
Thanks, Geordie.
We will now take our next question from Chris Thompson of PI Financial. Please go ahead.
Hi. Good morning, guys. Congratulations on a good quarter. I've just got one question. A lot of my others have been answered. Just looking at Kari Pump at the moment, I wonder if you could just walk us through, I guess, timelines and the type of analysis that you envisage to evaluate the development options for the deposit there?
Kari Pump is located on an exploration license. As soon as we have the resource, we'll embark on the process of the exploitation license. Meanwhile, we'll conduct a kind of study. Jeremy will take over to what we can do with that. For us, the key point is going to be 2019, because we have a lot of work to do, especially in Kari Center and Kari West, to try to see how we could utilize these deposits in the future.
I would probably add, Chris, that the objective for us is, if you recall the life of mine plan for Houndé, there was a decrease after 2022, 2023 due to lower grade in the Vindaloo pit. Our objective for us is to be able to bring Kari Pump, which will have substantially higher grade and also much better metallurgical, given it's mainly into oxide. To bring that, I would say, by 2021 at the latest, that we're able to bring it as early as possible.
Fantastic. That's great. Thanks, and congratulations, guys.
Thanks.
It appears there are no further questions at this time. I would like to turn the call back to the speakers for any additional or closing remarks.
Thank you very much, operator. Well, thank you all for attending this quarterly result. Again, we'll be pleased to host this Capital Markets Day on the 28th of November in Toronto for the ones of you that can join us either physically or by conference call. I'll be happy to publish with the team, as we said earlier, the Kari Pump in the next few weeks to allow and show the progress on this major discovery for Houndé. Again, thank you all for attending, and thanks again to my team for this great achievement in this quarter. Thank you very much.
This concludes today's call. Thank you for your participation. You may now disconnect.