Ladies and gentlemen, thank you for standing by, and welcome to the Endeavour Mining's first quarter 2022 results conference call. At this time, all participants are in a listen-only mode. After management's presentation, there will be a question- and -answer session. We note that due to time constraints, we will be prioritizing questions from covering analysts. Today's conference call is being recorded, and a transcript of the call will be available on Endeavour's website tomorrow. I would now like to hand the call over to management. Please go ahead.
Hi, everyone. I am Martino, Vice President, Strategy and Investor Relations, and I'd like to welcome you to our Q1 2022 results webcast. On the call, I am joined by Sébastien, Mark, Joanna, and Patrick. Today's call will follow our usual format, where we'll first go through the quarter's highlights, then the detailed financials, and finally, we'll walk you through our operating results by mine. We'll try to be as quick as possible to leave time for questions at the end. Before we start, please note our usual disclaimer, and I'll now hand it over to our CEO, Sébastien, to walk you through our Q1 highlights. Sébastien?
Thank you, Martino and Laura, and hello, everyone. We're pleased to report that it's been a great start to the year for us, which position us well for the rest of the year. We've noted six recurring themes, as displayed on slide 6, which summarize the quarter and showcase where we are continuing to focus our efforts. In a nutshell, we had a strong operating performance this quarter, with production of 357,000 ounces at a very low all-in sustaining cost of $848 per ounce from our continuing operations. This performance has resulted in robust cash flow generation during the quarter, which in line with our capital allocation framework, was used to further strengthen our balance sheet, to continue our attractive shareholder returns program, and to reinvest back into our business.
In the green box on the page, you can see that our net cash position has improved by $90 million, and in the yellow box, you can see that during the quarter, we returned more than $100 million to shareholder through dividends and buybacks. In line with our focus on continuing to improve the quality of our portfolio during the quarter, we were pleased to launch the brownfield expansion of Sabodala-Massawa. Once completed, this will further enhance our business resilience, as Sabodala-Massawa is poised to become a top-tier asset, as outlined by the robust DFS numbers published a few weeks ago. In addition, to further improve the quality of our portfolio and focusing management efforts on long-life core assets, we were pleased to announce the successful sale of our non-core Karma mine during the quarter.
On the ESG front, we are looking forward to publishing our sustainability report in the coming weeks, which will showcase how we are leveraging our increased size and scaling up our ESG efforts. Given we are now the largest producer in the region, we firmly believe that we can have positive, lasting impact in the region, and we're excited to continue progressing our ongoing ESG initiatives. Moving to slide seven, you can see how we've performed well across our key operating metrics. On the safety stat, although the company's aim is always looking to achieve zero harm performance, we are proud to say that our lost time injury frequency rate remains better than our industry peers at just 0.15 during the quarter. Looking at the quarter's production from continuing operations, you see that if you annualize it, you will exceed the top end of the full year guidance.
It is therefore very apparent that we are very well positioned against guidance, and we need to keep the momentum going in the next quarters. The same story goes with our all-in sustaining cost, which are sitting below the full year guidance range. It's a great result given the industry-wide inflationary pressures, which of course, we are not totally immune to. Joanna will provide more detail on our cost base in the next section. But at a high level, during the first quarter, the inflationary pressures have been partially offset by the pricing mechanisms brought by our long-term supply contracts, favorable exchange rate variations, and production and cost optimization initiatives. Again, we're trying to manage our business like any other business, and hence, have negotiated long-term contracts to lock in prices and have a more predictable cost base.
We've also benefited from the regulated in-country fuel pricing mechanism, where prices are revised on a monthly or quarterly basis, which shelters us from paying peak spot international fuel prices. And of course, a key driver is focusing on improving the quality of our production, and we are seeing the benefit of our discoveries being put into production and that of our optimization initiatives. Turning to slide eight, you see our production and cost quarterly trend. In gray, we have shaded the production coming from discontinued operations, which includes Agbaou, which was sold in Q1 last year, and Karma, which was sold this quarter. Overall, this performance was better than our guidance, coming off of a very good fourth quarter, which has historically always been our strongest quarter due to the seasonality, with coming out of the West African rainy season.
On slide nine, you see our all-in sustaining margin trend. Given that we've maintained a low cost base and have restructured our revenue protection program, we were able to benefit from the higher gold price environment, resulting in a $48 million increase in our margin compared to the first quarter of 2021, which represents more than $150 per ounce of extra margin. Turning to slide ten, you can see the trend of our operating cash flow before changes in working capital, which increased by 41% over the first quarter of last year, and which marks our strongest quarter to date. Diving a bit deeper on the next slide, you can see that the strong cash flow we are generating is coming from a well-balanced portfolio of six mines across three West African countries.
Furthermore, we see further potential to diversify our production by completing the brownfield expansion at Sabodala-Massawa, and over time, by pursuing our greenfield project pipeline. On slide 12, we see how our balance sheet has continued to strengthen, most notably following our investment phase, where we built Ity and Houndé between 2016 and 2019. We added more than $90 million to the balance sheet in the first quarter of 2022, all the while continuing to return capital to shareholders through dividends and share buybacks. In fact, this now marks our fifth consecutive quarter of shareholder returns, following our investment and debt reduction phase, as illustrated on the chart. On slide 13, you can see more detail on how we are tracking against our shareholder returns commitment.
As you recall, last year, we outlined a three-year dividend policy to pay a progressive fixed minimum dividend, which increases each year, with the aim of distributing a cumulative minimum of just over $500 million by the end of full year 2023. For 2021, we exceeded our minimum dividend of $125 million, paying $140 million, and in green in the waterfall chart, you can see that so far, we've paid out $200 million in dividends. In addition, we've continued to supplement our shareholder returns with buybacks, having repurchased $169 million worth of shares since the program began about a year ago. In all, it means that over the last five quarters, we have returned $369 million to shareholder returns.
For context, this is near the equivalent of the CapEx required to build a new mine. In the waterfall chart, you see that if you only factor in the minimum dividend commitments for this year and next, it will represent almost $700 million in shareholder returns. These amounts could be higher, provided the gold price remains above $1,500 dollars per ounce, and if Endeavour's leverage remains below 0.5 times net debt to adjusted EBITDA, as stipulated in our dividend policy. This amount is well above our minimum commitment of $500 million, so we hope this shows how focused we are on delivering shareholder returns. In addition to delivering shareholder returns, given our financial strength and cash flow generation, we are also well positioned to fund our growth, and slide 14 highlights our attractive pipeline of growth projects.
Our priority is the Sabodala-Massawa expansion, where construction is commencing, with the first gold pour from the BIOX plant expected in early 2024. As outlined in the DFS, this expansion will lift the Sabodala-Massawa complex to top-tier status. I will let Mark provide more information within his section. Our greenfield development pipeline is also progressing well. At Lafigué, on the Fetekro property, we expect to publish the DFS mid-year, while at Kalana, we're working on advancing some of the desktop work that contributes to the DFS and expect to publish the DFS results in the second half of the year. Both projects look attractive, and thanks to the long production visibility we have from our portfolio, we have the flexibility to decide when is the optimum time to bring on one of these projects into construction.
Turning to slide 15, you can see the continued importance of our exploration efforts with an $80 million budget committed for 2022. We spent $18 million during the first quarter and intend to do a strong push during the second quarter ahead of the rainy season. This means that we will be well positioned to communicate our successes and report updated resource estimates later in the year. You can see our exploration focus area with the pie chart on the left of the page. We are continuing to both explore near mine to extend mine life and on greenfields to find new projects.
As published last year, our discovery target is 15 million ounces-20 million ounces between 2021 and 2025, and with over three million ounces found last year and the success we're continuing to see this year, we are confident we will be able to achieve this ambitious target. Lastly, before handing over to Joanna, I want to reemphasize our continued commitment to increasing the overall quality of our portfolio. As shown many times, our goal is to move our assets to within the bottom right box on this chart, which represent plus 10-year mine life with an all-in sustaining cost within the industry bottom quartile. Over the last several years, we've built and integrated assets, but we've also divested non-core assets, shown in light blue. The most recent was Karma, where we closed the sale in March.
On our core assets, the two key factors to enhance their outlooks have been and continue to be our exploration and optimization efforts. While you have often heard about exploration efforts, we are also working on a number of optimization initiatives at both the group and asset level... some of which are highlighted on the slide here. Some efforts relate to expediting the opening of better deposits, be it with the underground operation at Mana or at Wahgnion, with opening the Samavogo deposit, or at Houndé with the Kari West deposit. Some efforts are linked to improving our processing and mining efficiencies by integrating new technologies or simply by including learnings from one mine to the next. Other initiatives include using solar power to reduce our energy cost and improving our processing plants to allow for better recovery rates and reduce costs, such as the resin initiative at Ity.
What I like about our portfolio is that while we are low- cost, we still see strong optimization potential. I believe that this is normal because Ity and Houndé are recent builds, which are now gaining in maturity with strong teams on site, capable of focusing on optimizations. While at our other assets, which have been integrated over the last twenty-four months, we got some quick wins, specifically on moving to a group procurement strategy, but still see strong optimization opportunities. Overall, we believe that our current combination of continuing to focus on exploration, reducing costs, and improving operating efficiencies will help us offset the inflationary theme and continue to generate healthy levels of cash flow well into the future. Moving on to section two, I will now hand things over to Joanna, who will take you through the financial results in detail. Joanna?
Thank you, Sébastien. On slide 18, we show our financial highlights. As you see in the call-out box, our adjusted EBITDA increased by 10% quarter over quarter due to reduced all-in sustaining costs and the increased gold price, and our operating cash flow before working capital was up 22% quarter over quarter to $370 million. Working capital was an outflow of $70 million, and as a result, operating cash flows from continuing operations decreased slightly quarter on quarter to $299 million. Moving to slide 19, you can see a breakdown of our operating cash flow, which shows a quarter-on-quarter decrease. The amount of gold sold decreased by 31,000 ounces from Q4 to Q1, but was more than offset by an increase in the realized gold price of $124 per ounce over the same period.
Operating expenses decreased by approximately $29 million due to the lower production in the quarter and the timing of certain operating expenses, while our lower tax payment is linked to a nonrecurring tax settlement of a tax assessment in Q4 2021. And lastly, working capital decreased by $112 million over the fourth quarter of 2021, resulting in an outflow of $70 million during the first quarter of this year. The outflows during the quarter were primarily due to the expected increases of stockpiles at Houndé, Ity, Sabodala, Massawa and Wahgnion due to the mine plan, a decrease in trade payables, and an increase in advanced royalty payments at Houndé, and an increase in VAT receivable at Boungou and Mana, due to the timing of the receipt of our VAT reimbursements. As Sébastien highlighted earlier, inflationary pressures are present across the industry.
So on slide 20, I wanted to address our cost breakdown in a little more detail, focusing on the largest components of our costs, which are fuel, consumables, and salaries. Regarding fuel, it's important to break it down further into LFO and HFO exposure, where roughly 75% of our exposure is LFO. We only use HFO at the powerhouses at Boungou, Wahgnion, and Sabodala, and have the option to switch to LFO, as all of our gen sets are configured to also use LFO. Typically, HFO is cheaper than LFO, however, we have recently seen a divergence. Given LFO is used by the general public, its price is generally more subsidized by government, whereas HFO doesn't always get the same benefit. Prices for both LFO and HFO are fixed and revised on a monthly, quarterly, or sometimes longer basis.
This means that the price impact of Brent crude oil, crude volatility is generally, generally delayed and often not fully felt in country, and we are shielded from paying peak spot international prices. As you see in the chart at the top right of the page, during the quarter, LFO price was only up 2% in Côte d'Ivoire, and it was down 2% in Senegal, compared to Brent crude oil price having increased by nearly 30% from Q4 last year to Q1 this year. Because Burkina imports oil, while Senegal and Côte d'Ivoire have their own refineries, the LFO price did increase by 16% in Burkina in Q1 2022.
Of course, we cannot forever avoid the impact of higher oil prices, and we are expecting some price increases during the second quarter, which we expect will result in roughly $40 per ounce increase in our all-in sustaining costs, some of which we had anticipated, which is still a lot less than most of our international peers. On the other hand, we are also seeing some of the cost pressures being positively offset by a favorable exchange rate variation, as approximately 65% of our cost base is linked to the euro. Touching upon our consumables, given we renegotiated key contracts across the group last year to leverage our larger size, we are currently well positioned with favorable terms.
On some items, we are completely protected from price increases, while on others, we have seen some increases, but given they represent a small proportion of our cost base, they are negligible at the group level. Lastly, our salary and mining contractor costs tend to be stable from one quarter to the next. As Sébastien mentioned earlier, cost controls are an important factor in maintaining our low all-in sustaining costs, but the larger opportunity for us continues to be improving our operating efficiencies and discovering higher quality deposits, which the team is continuing to focus on. Moving to the next slide on page twenty-one, we illustrate how our financial position strengthened during the quarter.
We ended the quarter with a net cash position of $167 million, an improvement on the $76 million position we had at the end of the year, further solidifying our net cash position, even after $31 million of share buybacks and $70 million in shareholder dividends paid during the quarter. Operating activities during the first quarter included $304 million in operating cash flows, which includes the cash flow from discontinued operations of $4 million, while investing activities was an outflow of $94 million due to sustaining, non-sustaining, and a small amount of growth capital. During the quarter, cash flow used in financing activities was an outflow, mainly due to the shareholder returns paid during the year, during the quarter, sorry. Moving to slide 22, we have a detailed breakdown of our net earnings.
I won't go through every line here, but we'll address a few of the most significant items. Earnings from continuing mine operations increased due to our improved production costs and the increased realized gold price during Q1. During the quarter, we recognized unrealized losses on our gold forward sales and gold collars as part of our revenue protection program. This loss is based on the forward-looking nature of this program and is influenced strongly by gold price volatility. As the gold price was performing well during the quarter, we restructured our revenue protection program by deferring a portion of our forward sales from Q1 to later in the year, allowing us to benefit from the strong gold price during the quarter. For Q1, 2022, adjustments mainly included a loss on financial instruments.
Adjusted net earnings was consistent with the prior quarter, and adjusted net earnings per share decreased during Q1 compared to the fourth quarter of last year, due to a higher portion attributable to non-controlling interest. I'll now hand things over to Mark, who will go through the details of our operations on a mine-by-mine basis.
Thank you, Joanna, and hello to everyone on the call. As Sébastien and Joanna mentioned, our operational performance continues to be strong and reflects the benefit of having a diversified portfolio. The group is positioned well against guidance, and on slide 24, we have provided a breakdown of asset performance against guidance. As you can see, the strong group performance is being driven by a very good start at our flagship operations, Sabodala-Massawa, Houndé, and Ity. Starting on slide 25, I would like to begin the review of our individual mining operations with our flagship asset, Sabodala-Massawa. I've just returned from the mine this morning, where we are making excellent progress with opening up both the Massawa CZ and NZ pits. There are many other initiatives underway, including a comprehensive exploration program and early works activities on the BIOX project.
During the first quarter, we continued to see all-in sustaining costs trend down towards the lowest levels achieved at the mine so far, reiterating Sabodala-Massawa's status as a top-tier asset. Production decreased by about ten thousand ounces over quarter four, as tonnes milled decreased slightly due to an increased proportion of fresh ore from the Sofia Main and Sofia North pits. In addition, the average grade milled decreased due to a lower proportion of high-grade ore from the Sofia Main, offset by more ore from the Sofia North pit. With the ramping up of activities at Massawa Central and Massawa North in quarter two, we expect grades to decline as we focus on establishing pit perimeters and waste extraction ahead of the wet season. Grades are expected to pick up again in the second half of the year.
Moving to slide twenty-six, you can see an overview of our Sabodala-Massawa expansion, where we are constructing a one point two million ton per year BIOX plant. This will allow us to process the high-grade refractory ore from the Massawa deposits, where there are currently over one point three million ounces of reserves, with strong potential to continue to add to this through exploration. As Sébastien said, construction activities have started with the first gold pour from the BIOX plant expected in the first half of 2024 . On slide twenty-seven, you can see the projected production profile for Sabodala-Massawa for the next ten years, which explains why we are so excited to push ahead with the expansion project. In dark blue is the production expected to be added with the refractory circuit.
Given the exploration upside, our goal is for the mine to produce at least 400,000 ounces per year at an all-in sustaining cost well below $800 per ounce, which would position the mine as a top-tier asset. Moving to slide 28, you can see the progress made at the Houndé mine, which is off to a strong start for the year. During the quarter, mining activities were focused primarily on oxide material from Kari Pump and Kari West, while waste development continued to progress in fresh rock at Vindaloo Main. Production declined slightly quarter over quarter, with lower processed grades as the high-grade Kari Pump ore is blended with the lower- grade Kari West ore.
All-in sustaining costs fell in the first quarter as we processed a higher proportion of oxide ore from the Kari Pump and Kari West deposits, contributing to a lower unit mining and processing cost, as well as higher throughput and recoveries. In quarter two, 2022, mining activities are expected to continue to focus on the Vindaloo Main, Kari Pump, and Kari West pits. In the second half of the year, ore is expected to be sourced mainly from the Vindaloo Main and Kari West pits, as well as mining the next pushback continues at Kari Pump. Turning now to Ity on slide 29. We're very happy with the performance of Ity, which achieved one of its best quarters in terms of production, with 72,000 ounces produced as a result of higher grades milled, higher tonnes milled, and higher recoveries.
All-in sustaining costs also decreased in quarter one, thanks to less waste stripping. For the remainder of the year, ore will continue to be mined from the Le Plaque, Ity, Bakatouo, Walter, and Colline Sud deposits, supplemented by historic stockpiles. While Ity continues to perform well, we are always looking for ways to optimize our assets. Last year, we brought in mobile screens and a mobile crusher so that we can add ore directly via the surge bin, which has helped to increase throughput. We also identified the addition of a cyanide recovery circuit as a key initiative, and thanks to the excess cash flow being generated by the company and the cautious approach taken in staggering our growth projects, we are able to accelerate the launch of this initiative.
The additional circuit aims to optimize costs by reducing leaching and detox reagent consumption, improving the quality of the discharge slurry to the TSF, and recovering some additional gold. For those less familiar with the ReCYN process, it basically reduces the cyanide consumption by capturing free cyanide from the plant tailings using a resin similar to how carbon works in a CIL tank, and recycling it back into the leach circuit while also recovering additional gold. Given that the project is expected to result in 87,000 ounces of additional gold production and $63 million in cost saving over Ity's reserves, the $41 million upfront investment, of which $31 million is expected to be incurred this year, has screened very well with our capital allocation framework based on both its financial returns and positive ESG impact.
The ReCYN circuit is expected to be commissioned by the middle of 2023. On slide 30, you can see that production remained consistent with the prior quarter at Boungou, as mill throughput and recovery rates remained stable while grades fell slightly. We continued to mine ore from the East Pit, while we strip waste in the West Pit. As we focused on mining the lower grade areas of the East Pit, the head grades decreased slightly quarter over quarter, resulting in slightly higher all-in sustaining costs. Through the remainder of the year, we expect process grades to decline slightly as ore mining will shift back to a new phase of the West Pit. Moving on to slide 31, at Wahgnion production decreased and all-in sustaining costs increased in the first quarter, primarily due to the lower average grade mined and milled.
During quarter two, we will focus on waste extraction and mine grades are expected to remain consistent with quarter one, as ore will continue to be sourced from Nogbele North and Fourkoura, with supplemental feed from Nogbele South. Later in the year, we will source ore from Nogbele North and the new Samavogo mining area, which will be commissioned in the second half, as well as supplemental feed from Fourkoura. Moving on to slide 32 at Mana, strong production in quarter one was in line with the prior quarter, while we significantly reduced all-in sustaining costs as open pit mining activities taper off. Increased production during the quarter was driven by higher-grade ore from the Wona South open pit as it continues with depth.
As the Wona open pit is planned to be completed in the middle of the year, we'll be transitioning to the new Maoula satellite pit, where we expect to start mining in the last quarter of the year. At the same time, we are quickly advancing the Wona underground development, where we have advanced more than 2,200 meters across the two declines in the last 5 months-6 months and are on track for first ore production during the third quarter of 2022. As you can see, performance across our operations has been strong in quarter one, and through the remainder of the year, we will continue to optimize our operations to tackle the inflationary pressures while we continue to advance our growth projects, and with that, I'll hand it back up to Sébastien to wrap things up.
Thank you, Mark and Joanna. As you can see, we've made good progress during the quarter and are well positioned for the rest of the year, but our job as management is to not only manage for the remainder of the year, but also beyond and well into the future, and with this, I believe that we are also well positioned to be able to reward our stakeholders over the long term, given our long mine lives, continued focus on asset optimization, our exploration efforts, and robust project pipeline. With that, I would like to first thank the entire Endeavour team for a stellar quarter, and I would like to thank you all for dialing in and open the line up to questions.
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. As a reminder, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. We will be prioritizing questions from covering analysts at this time. Please stand by while we compile the Q&A queue. If you wish to cancel your request, please press the hash key. Once again, please press star one if you wish to ask a question. And your first question comes from the line of Ovais Habib from Scotiabank. Please ask your question.
Thanks, operator. Congrats, Sébastien and the team, on already a strong start to the year. Sébastien, just a couple of questions from me. Again, very straightforward quarter, so just looking forward to-
Apologies, the line has disconnected from the call.
... I will go on to your next question, and this comes from the line of Don DeMarco from National Bank Financial. Please ask your question.
Good morning. Thank you, operator, and good morning, team. Yeah, I'd just like to just continue to echo congratulations on a very strong quarter, great start to the year. So with that, I saw Massawa as below the guidance range this month. So looking ahead, do you expect the cost drivers that led to the low cost in Q1 to continue through the year at this cornerstone asset?
Hi, Don. Sorry, was there a specific asset you were talking about? Because the line broke up a bit.
Yeah, I was referring to, yes, Sabodala-Massawa. You know, we're looking at the great performance from this cornerstone mine in Q1. We're not expecting-
Oh, sorry.
Rainy season impact. Yeah.
I think Sabodala-Massawa will continue to have strong performance, you know, for the rest of the year. Obviously, we are, you know, getting, you know, more pressure on the fuel cost, in particular, you know, which will impact a bit. But, you know, overall, you know, we're confident that Sabodala-Massawa, you know, is in a good position.
Okay, good to hear. And regarding fuel, I think Joanna mentioned that you're expecting some modest fuel price increases, maybe $40 an ounce. So does this reflect the increases in jurisdictions where you don't have the fuel price mechanism?
No. So it basically reflects the anticipation that we have on some of the changes in the country where we operate. As you know, some of the fuel prices, which are governed by government locally, and they tend to change those prices either on a monthly or a quarterly basis. And we've seen recently some increases, you know, in April, in particular, whether it's HFO for Senegal or whether it's LFO for Burkina. So our anticipation if, you know, I would say, oil price are staying where they are, is to see around $30-$40, you know, impact, on the rest of the year.
Okay. Okay, that's fair. And just a final question: With the Fetekro DFS pending for midyear, can you talk about how you might sequence or overlap the spending between Sabodala Phase 2 and Fetekro development?
Yeah, sure. So, you know, if you recall, when we did the Ity and Houndé Construction, you know, we were comfortable in having at some point, you know, two projects in parallel being built. I think the good thing is that we, we're now progressing well on the start of the expansion of Sabodala-Massawa, and this is why we don't see any rush into building Fetekro. We are optimizing also the CapEx. You know, I think we mentioned as part of our year-end results that, you know, initially we had some thoughts about going with a full contract for the construction of Fetekro Lafigué.
Now we are looking also at, you know, doing a big part of the project ourselves in order to optimize the CapEx. Because of the strong performance of the asset, it's not like, you know, we need to rush into building this asset. So we wanna make sure that we preserve the economics of this project, and ensure that they continue... I mean, this project continues to deliver the types of returns that we are expecting on any, I would say, Endeavour, Endeavour project. We are expecting also some further drilling results over the next, you know, two months. And we believe that, you know, this will continue to strengthen the feasibility study for Fetekro.
So in short, you know, compared to the initial plan, where we might have started both Sabodala-Massawa and Lafigué in Q1, Q2, you know, we see, you know, more opportunity to continue to improve the overall CapEx number for Fetekro. And in parallel, you probably saw some new initiative, like the ReCYN project at Ity. So that's something that we feel comfortable to, you know, to move forward as the Lafigué project, you know, will have, you know, more delays than what was initially expected in order to strengthen the CapEx.
Okay. Okay, that's very helpful. Thanks for that. That's all for me. Good luck with the rest of the year.
Thank you, Don.
Your next question comes from the line of Anita Soni from RBC World Markets. Please ask your question.
Hi, can you hear me?
Yes, we can. Hi, Anita.
Yeah, I'm apparently I switched teams. It's CIBC World Markets, and it's Anita. So I guess my question is... Josh will be pleased to know. My question mostly already answered, but I'm just... You've kind of noted that you were, you know, you're running for, sorry, well over the higher end of the guidance range for the year. And I'm just wondering if, you know, is there something we should be thinking about from quarter to quarter in terms of seasonality? I think I remember that you guys were a little bit more front-weighted this year, and slightly less back-end weighted. So is there something that I should be considering, you know, in Q2, Q3, where it might be lower production?
Yes, Anita. I mean, we obviously had a strong Q4 last year, which also helped, you know, to have, you know, a good start, I mean, to the year, for 2022. So, you know, pleased to see that, you know, Q1 has been a strong quarter. We tend to have, Q2 and Q3, which usually are a bit impacted, I would say overall, by the rainy season. So it all depends on when the rainy season is going to start. Obviously, we're trying to mitigate as much as possible by doing a bit of, you know, stockpiling during, a bit of Q1 and Q2, which explains, obviously, some of the working capital movements in Q1.
I would say that in a normal plan, where rainy season is mostly towards Q3, we tend to have a Q2 which is in line, I would say, with Q1, and then Q3, which tends to be, you know, lower than Q1 and Q2, and Q4, which is back, you know, more in line with Q1, Q2.
Okay. All right, and then just another follow-up on the cost control. I mean, do you anticipate that, you know, closer to the back end of the year, that we might start to see any, you know, further inflationary pressures hitting you? A lot of the companies that I've been speaking to have been saying that, "You know, for the first half, we're fine, we've got inventories, but we may need to reassess as we look at the second half of the year.
I think we are in a similar position with one difference, which is obviously, you know, we had limited impact in Q1. We will see, I think, you know, a bit of impact in Q2. I don't think, you know, this will change our guidance. You know, we're very comfortable, you know, at this stage on our guidance. And this was, you know, factored in when we came out with our guidance, that there would be a bit of pricing inflationary in particular around, you know, Q2, Q3.
But you know, so far, we are, you know, extremely happy with a very strong start, which obviously helps to ensure that we will be well into the guidance for production costs for 2022.
Yeah, and then can I just ask, what are you assuming for your in your guidance assumptions with your diesel rates that you're assuming per liter?
So in fact, it's all. The problem is that there is a combination between FX and oil price. As you know, about 75% of our fuel price locally, I mean, is based on taxes. So what we've been, you know, working on is around, if I take in average, we are about $0.1995 a liter across the different countries for, you know, for 2022. And obviously, depending on FX, we are able to compensate a bit as our local prices are paired with the euro.
Okay. All right, maybe I'll ask that as the graph line. And then lastly, I would like to ask a little bit about sort of the situation, security situation in Burkina, and whether or not you've seen any impacts near the Boungou mine. I think there was a recent security incident at another company.
Yeah, well, I think, Anita, for the time being on Burkina, I mean, we haven't seen, you know, any deterioration in the situation, in particular around the, you know, Boungou and our ability to continue, I mean, to operate there.
Mm-hmm.
Obviously, we are monitoring, you know, carefully the situation. But, no, certainly we're seeing more and more activity from the security forces in Burkina, in trying to strike back, I would say, with some of the terrorist groups. There's been also a big initiative launched by the government of Burkina in having some open dialogue and discussion with some of those armed groups, because a lot of those armed groups, in fact, are not terrorists. They are just, I would say, you know, people in certain region of Burkina, which have been left with not much opportunities.
So there is an initiative of dialogue which has been launched by the new government to try to bring them back, you know, into a more, you know, peaceful approach. And hopefully, we'll see some of those, you know, discussions benefits over the next few months.
Okay, thank you very much. Congratulations on a great quarter.
Thanks, Anita, and well done for your new appointment.
Oh, thanks. I think they pay more.
Your next question comes from the line of Ovais Habib from Scotiabank. Please ask your question.
Hi, Sébastien, can you hear me?
Yes, I can now, Ovais.
Okay, so take two on this. A lot of questions that I wanted to ask have been kind of answered, especially on the cost side, so thank you for that. Just a follow-up question on Anita's question regarding Boungou. Now, in regards to Boungou's current mine life and, you know, with the whole security situation there, I mean, you know, are you guys progressing with exploration there on, in terms of, you know, improving and extending the mine life there? And now, does Boungou kind of fit in your, still in your portfolio? Is it still a core asset, or how are you thinking about Boungou?
Sure. Thanks, Ovais. You know, obviously, we would like to do much more exploration at Boungou because we see potential in that area. Given the security environment, we've decided for the time being not to progress, you know, outside the mine fence. Anyhow, you know, we still have, I mean, for the time being, I think about seven years of reserves at Boungou. So we still have a bit of time to see the environment to settle and still give us enough time to then, you know, start extensively some of the drilling exploration programs that we had in mind. So I, you know, I think we, we're still very comfortable with the, you know, with the asset.
It's part of the portfolio, and hopefully, you know, we're just waiting to have some more green lights on the security front to be able to, you know, heavily accelerate on exploration.
... Okay, got it. And just quickly moving on to capital allocation. I mean, in terms of, you know, obviously, you've been very aggressive on the dividend side, and you've reinitiated your buyback program as well. You know, in terms of going forward, I mean, how should we look at your dividend policy, just in terms of, you know, is there any room for increases, or should we see something more stable along with what you're already providing in terms of dividends?
Sure. Well, I think that, you know, if you recall, we did come up with this policy of having, you know, both the dividend approach and the buyback approach. I think the buyback approach was important, in particular in 2021 and probably for the first half of this year, 2022, in order to facilitate also the listing in London and the transition and the volatility and liquidity required with the London listing. My sense is that, you know, we should see probably, you know, some swap progressively in terms of numbers between the amount allocated to buybacks and the amount allocated to dividends.
So, you know, if you know we continue to generate the cash flow that we've been generating, and the gold price, you know, stays where it is, I wouldn't be surprised if we come up with, you know, higher dividend, you know, going forward.
Okay, great. Thank you. That's all for me, and thanks for taking my questions.
Thank you very much, Ovais.
Your next question comes from the line of Lawson Winder from Bank of America. Please ask your question.
Hi, thank you for taking my question. My first question is just on Sabodala. The grades were quite high this quarter, and you've noted in your release that they're expected to sort of decrease in Q2 and pick up again in the second half of this year. Can you sort of just give us the give us a sense for the magnitude for the grades in the second half? So do you expect the grades to go back to around three grams per ton, or would they be lower, like maybe closer to the reserve grade?
So, Mark, I mean, do you wanna-
Yeah. So what we were doing was relying on stockpiled ore from Sofia Main pit as mill feed going into the start of this year. And then as times progress, we've depleted those high-grade stockpiles. We're opening up the Massawa CZ and NZ pits. So it's just those top benches and getting the pits established, and then as we sort of get a little bit deeper in, you know, we do expect the grades will start to pick up. But the other piece with Massawa, which we've noted, is that there is transitional ore that we won't be putting into the CIL plant that will be stockpiled for the BIOX plant. So we will see some-
Okay, great. Thank-
Yeah. We will see some better grades, but it won't be as good as the Sofia Main grades that we had in the previous year.
Okay, great. That's helpful. And just my second question is on the CapEx. You seem to be running a little bit light versus your guidance, and just looking ahead to the subsequent quarters, do you expect the rate of spend to be sort of equally spread out, or might it be weighted towards the second half of this year?
I think overall, you know, we're not expecting, I mean, to be below the guidance, I mean, for the year. I think it's probably more about timing between Q1 and the other quarters. So, yeah, I mean, you should see, you know, you should see some catch up, I would say, in Q2, Q3, you know, for sustaining and non-sustaining.
Okay, great. Thank you so much, and congrats on the quarter again.
Thanks very much.
Your next question comes from the line of Fahad Tariq from Credit Suisse. Please ask your question.
Hi, good morning. Just, two quick ones from me. First, can you just remind us, or summarize for us, if gold prices stay at these levels, do you expect a realized loss on the gold forwards and the gold collars?
Sure, so not on the collars, because if you recall, the collars have a floor at $1,750 and a ceiling at $2,100, so at current gold price, I mean, there wouldn't be any loss, and on the forwards, we have... I would say the average of the forwards is around $1,840 dollars, so if you take, you know, $1,900, you know, current dollars, there is a small loss on some of those forwards. They are spread-
Thank you.
If you recall, they are spread mainly towards Q3 and Q4 now. So it all depends on, you know, what's anticipation on gold price for Q3 and Q4.
Okay, and then my only other question: You mentioned a few times in the presentation larger ESG ambitions. Can you elaborate on what that means and what kind of CapEx that could require?
Well, I don't think it goes into, I mean, too much into increased CapEx. I think it's, you know, we've outlined our strategy as part of our London listing back in June. We now, you know, basically implementing, you know, some of the key projects that we had on the ESG front. I would say that one which is important for us is obviously on the CO2 emissions. We currently have one of the lowest intensity number when you look at, you know, CO2 CO2 emissions per ounce produced. But we are accelerating also on solar plants in particular in Burkina Faso and in Senegal.
There is a PPA agreement, which is being, you know, currently finalizing for the Houndé mine in Burkina with the construction of a solar plant that should be up and running next to Houndé by the end of the year. This should be around 50 MW. We're also discussing with the provider for an expansion up to 60 MW for that solar plant. In parallel, as part of the BIOX plant and the, you know, Sabodala-Massawa expansion, we're investigating, you know, quickly the ability to put a 35 MW, 40MW or 50 MW solar plant in Senegal.
So those are, you know, obviously key initiatives in our ability to continue to maintain, I would say, a low intensity number for our CO2 emissions. But it's also obviously in the current, you know, oil price environment, you know, very competitive to, you know, be able to build quickly, solar plants. So that's, you know, probably one area that that we are accelerating on. And, I think that, you know, we'll do a bit of marketing once we, once we have our ESG report, sustainability report out over the next, the next few weeks.
Okay, thank you.
Thank you. That will conclude today's Q&A session. I would now like to turn the call back to management for any additional or closing remarks.
Hi, everyone. Thank you very much for dialing into our webcast and asking questions. We remain available to answer more questions offline. Thank you, and have a good day.
And that will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.