Welcome to the Equinox Gold Third Quarter 2020 Results Conference Call and Webcast. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there'll be an opportunity to ask using the ask a question tab on your screen. I would now like to turn the conference over to Rillen Bailey, Vice President, Investor Relations for Equinox Gold. Please go ahead.
Thank you very much and thank you very much everybody for joining us on the call this morning. We will of course be making a number of forward looking statements today. So please do take the time to visit our continuous disclosure documents on our website on SEDAR Anon Edgar. I will now turn the call over to our CEO, Christian Bylau, for opening remarks.
Thanks, Rylan, and welcome everyone today to our third quarter results webcast heck of a day Friday and today. And, certainly, the world is not a dull place. So, stay tuned. We had a very solid quarter overall in quarter 3 and I'm pleased to present that to you today. Starting on slide number 3 here, our health and safety record again for the quarter was very good and strong.
We had 2 lost time injuries and over 3, over 3000000 hours worked. So good performance, again, by the team. In terms of COVID impacts, there were no COVID related restrictions during the quarter, so all the mines did operate. Quarter 2 is when we had our disruptions. Los Filos was ramping up during the 1st part of this quarter, quarter 3.
And, we've really put in place a strong protocol and we've been proactively testing at each of our sites. We're even instituting labs where needed or accessing private labs so we can make sure that we're proactively testing our workforce. And we've seen the caseload come down very significantly. Both, Ross, Doug and I had a chance to visit most of the operating mines, actually, in the last few weeks here. So we were very pleased with the protocols we saw in place and the teams have really stepped up and operate in a very safe and positive manner during this difficult operating environment.
And in terms of the operating results, we sold 128,000 ounces and produced just under 125,000 ounces, a very respectable quarter considering didn't have any production from Los Filos in September. And as alluded to in the press release, all the mines were operating in line with guidance, except for Los Felos. You know, Los Filos was temporarily suspended due to a community blockade, which we announced in early September, and I'll discuss that a bit more and give a bit more color on that later. Other things that happened corporately here, we did get board approval and announced official construction at Santa Luz. It really continues the trend that we've had of internal growth, sort of, with measured external growth.
We've built 1 mine per year over the last few years. Aurizona came into production in 'nineteen, Castle this year in 2020 and Santa Luz should be constructed close to the end of 2021. So we're really pleased with being able continue to deliver on that clear strategy we set a few years back. And also, as I mentioned, we did pour 1st gold at Castle Mountain and kudos the team, Tom, Doug, and and the guys in California, that he did a good job in a challenging environment with COVID really kicking in in the height of construction, and they were able to deliver that mine. Basically on time.
So, really well done as well. Really pleased to see Mesquite mineral reserves and resources increase very nicely. With the results recently. And again, kudos to the team, Scotts and also the guys in California who were able to deliver that. And we'll talk about that a little bit later.
And also, congratulations to Doug Reddy who's promoted to COO in September 1st. So, he'll be talking to you about Santa Luz a bit later in this call. After Peter Hardy, as well, talks about our financial results. And also our board, we continue to evolve the board, Sally Air joined the board. Just basically, just over a week ago actually at the end of October and she brings some technical experience and lots of experience also in the Americas.
So really pleased to see her joining the board. And so welcome to her. And I'll turn it over to cover the next couple of slides, by Peter Hardy on the financials.
Thanks, Christian. So we're moving to slide 4 where we highlight our Q3 financial results. Despite the issues at Lowe's Filos, Equinox had a strong financial quarter, so it exceeded its Q2 results on virtually every metric, including revenue, earnings from mine operations, profitability and cash flow. Revenue for the quarter was $244,000,000 on the sale of 28,000 ounces of gold, which is an increase of almost $30,000,000 over Q2 revenues. And the key driver for the company's financial performance gold price.
We had an average realized price per ounce in Q3 of about $1900, an increase of almost $190 over Q2 $1712 an ounce. Earnings from mine operations for the quarter were $98,000,000, EBITDA $71,000,000, and on an adjusted basis, $99,000,000. We improved our profitability. We had income of $12,000,000 and on an adjusted basis, $39,000,000. This translates to earnings per share Cash flow from operations before changes in working capital was $90,000,000.
That's $1,000,000 a day. In Q2, it was $61,000,000. So that's a strong performance by the company for the quarter. And those strong financial operating results for Q3 further strengthened our balance sheet. As of September 30, we had $311,000,000 in cash, and that's after paying down $200,000,000 on the revolving credit facility.
At least the company was over $500,000,000 in liquidity. Net debt was $232,000,000 at the end of the quarter, that includes convertible notes that are well in the money with an average exercise price of US650 a share. If you assume those notes are converted to shares, as of September 30, we actually have a net cash position of 22,000,000. Our investments are also strengthening our balance sheet. We equity account for our investment in Solaris Resources.
It has a book value in our financial statements of $9,000,000. On Friday, the market value of the 26,000,000 shares we hold in Solaris was USD109 1,000,000 or CAD 142,000,000. Another item that might that can contribute to our liquidity going forward or warrants that expire in October 2021 they have a $15 strike price and are exercisable into 60,000,000 shares and could bring in up to another $180,000,000 onto the balance sheet. So we had a good quarter and we retained a very strong balance sheet. On our next slide, We start our operational results by mine.
Generally speaking with the obvious exception of Los Filos, we're very much on track in our minds. Horizona was the star of the quarter producing and selling 33,000 ounces of gold at a low cash cost and at an all in sustaining that's well on plan. The low cash cost for the quarter is attributable to higher volumes, better grade, and favorable foreign exchange. The increase in all in sustaining was expected with a plant tails lift and plant stripping. And I'll note it's actually still lower than what our guidance is for the year.
The other Brazilian operations are stable and performing right on plan. Mesquite itself produced and sold 31,000 ounces of gold, which is a little which is lower than the prior quarter, but planned as we started stacking non side material, which has a longer leach cycle. And Christian will speak to that, I believe in a moment. But the cash costs and all sustaining costs are on track The increase over Q2 is actually due to water well improvements for pumping that are going to aid in increasing our irrigation volumes for the leach pad. So on the year, we produced 3,341,000 ounces of gold, sold 337,000 ounces of $590,000,000 in revenues.
Our year to date total cash cost across the company is $8.54 and our all in sustaining cost is $9.93 ounce. So all in all, performing right on plan for what we were hoping other than Los Filos. I'm gonna turn the presentation back over to Christian to discuss continue the discussion of operation results by mine.
Yes. Thanks, Peter. I just want to walk everyone through each of the mines briefly here and give you a flavor for what we've seen and what we plan to see in the upcoming, near term here. So starting with Los Filos on slide number 6. Was suspended for quarter 2 due to the government restrictions in COVID.
It was ramping up in July August, and then we obviously went on to suspension on September 3rd. So it's been down for almost maybe just over 6 months this year. And I just want to give you a bit of color on the situation at Los Filos here. So As announced on September 4th, mining activities have been suspended since the 3rd as a result of a blockade by members of the Carzilio community, one of the 3 primary communities that we draw our workforce from. We've had a land access agreement and social collaboration agreement in place, both of which were signed last year and run until 2025, but the community is now asking for increase to their benefits under the social collaboration agreement and more control over employment and contracts.
We continue to have regular and respectful meetings with the community to understand and discuss the grievances and concerns that they've raised. Unfortunately, to date, the blockade is still in place. We continue to seek a resolution to the blockade, so us feel as can resume normal operations. And continue to provide substantial benefits to all its stakeholders. We really are seeking a long term solution here, not a quick fix, does not, or does not affect our ability to operate effectively a meal or health safety and government or governance obligations.
And his background here, just remember, Los Filos is a significant employer and economic contributor in the region employing almost two thousand people. And using more than 100 local businesses to support mine activities. Over its production life Los Filos has provided significant benefits to Carzilio and the other neighboring communities through social collaboration agreements for education, medicines, health care, cultural programs, and infrastructure improvements. Now while we believe we can accommodate some or many of the community's requests, others would potentially affect health, safety, and proper contracting processes. Or impact good corporate governance practices.
In particular, we must be able to screen our potential employee for standard health and safety checks, vision, hearing, etcetera, conduct background checks, ensure they have adequate training before, or as we hire people, and send them underground or operate large equipment. These are just normal procedures that we expect to have in place at all our locations, and we'll put the same standards in place here. We also use local businesses as much as possible. We support local contractors and equipment suppliers, but we cannot bypass requirements under the law. Is the new trade agreement between the U.
S, Mexico and Canada that prohibit certain types of soul sourcing and monopoly services and pricing mechanisms. We must be able to effectively operate, patrol our operations and abide by our corporate governance policies. Any amendments to the existing social agreement, must result in a solution that is fair, long term, for all our community partners. We're choosing to be patient here and resolve this in the right way. Rather than rushing to get back into operations and ending up with issues again down the road.
In short, we really do believe that all stakeholders as portive of the return to operations, and we remain optimistic and open to constructive dialogue. Our preference is to achieve a resolution through face to face discussions with the community as we believe this is the best way to build a long term positive relationship with the community partners. And also, we've been keeping informed that Governor, union leaders, other communities, the Secretary of Interior, who all are important stakeholders as well. So we appreciate the pace of everyone as we work through this and work to get a long term resolution with the community. Despite that Los Filos has produced just under 50,000 ounces this year.
And, we did withdraw guidance, as Peter mentioned earlier. The one thing that will be impacting to think about the future is we were, providing or doing work to access the higher grades in Guadalupe open pit and Bermal Undergrounds. Those were supposed to be worked on for, bulk of this year and accessing those higher grades in the last part of this year. But it looks like those will be pushed into sort of mid-twenty 21 or a little bit later. So a bit of a delay in that process.
And then turning on to, turning to Aurizona in Brazil. As Peter said, a strong quarter. Really pleased to see the mill averaging almost 9000 tons per day and that's almost 10% above nameplate. During this dry season, which is ongoing at the moment, we're working on stock piling ore to prepare for the rainy season, which comes in the early new year. We've probably got, a target of about 600,000 to 700,000 tons that we want to have on the stockpile and we're probably about 2 the way there.
As well, exploration has been ongoing. You know, we've really had a focus on both the underground and, extensions along strike. We've also started the prefeasibility study, which we hope to issue publicly next year as well on the underground deposit. And Mesquite in California, again, performing well. It really has exceeded our expectations since the acquisition in late 2018.
As Peter said, it's transitioned to non oxide material, so slightly lower quarter and quarter 3. We should see that increase in quarter 4. I'm really pleased with the mineral reserve increase of almost 30% and the MNI resource increase of almost 100%. And really thanks to the team, Scott and the team in California for focusing on that. We've allocated the dollars to drill and we've seen the results come through and we expect to see continuing results drilling as we move forward here.
You know, remember, when we bought this line in 2018, it had about a 2.5, maybe 3 year mine life, you know, we're almost that far into it now. And we still have visibility to another 3 years plus of mine life. So we're going to continue investing in this site. We'll continue allocating exploration dollars, and we expect to see results from that. And we plan to start investing in the new fleet next year as well.
So we're really building the confidence in this asset. Turning back to Brazil and Fazenda on the next slide. Again, a strong quarter, quarter 3, as Peter mentioned, It will get more and more attention in terms of exploration. There's a real district belt between Fazenda and Santa Luz that we plan to explore over the next few years. RDM had another strong quarter as well.
Recoveries were improved. We have sufficient water to operate continuously throughout the year, even when Ross Doug and I were down there, it was raining. So we're pleased to see that, and the water reserves were filling up. The other key milestone that we achieved quarter was we received the permit for the pit pushback and that was an important milestone that allowed us to access higher grade ores in the next sort of 18 to 24 months. There will be elevated scripting over the next 18 to 24 months as we work to move that waste and access the ore.
And then Pilar had another good quarter, again, higher mining volumes and good performance by the mine overall. Turning on to slide number 8 in terms of guidance. Again, Pete's comment on this, as we know, Los Filos' guidance has been withdrawn. The other all the other numbers we expect to achieve this year. And please note that, all the legal assets that are in here only for March 10th onwards the acquisition closed in March.
So it's really 3 quarters of a year for those assets. And when we look at the growth and development projects on slide number 9, just a quick update, Castle Mountain, Port Gold, October 15th. Congrats to the team. We expect to do 5,000 to 10,000 ounces this year in 2020 and then it'll be about 40,000 ounces per year on average from 2021 onwards. The pre feasibility study for phase number 2 should be available in quarter 1 next year.
We're just working on the optimizations at the moment. And that'll demonstrate a 200,000 plus per year producer for many years to come. So we're really excited about the Castle Mountain project in the long term. And then Los Filos expansion in Mexico. This has potential to take this mine to about 350,000 year ounces per year on average.
As I said, we're opening up the new open pit and an underground mine there. Those are slightly delayed due to the current suspension, but, could be in place as early as mid next year. The new study will be released as soon as it's available. That'll indicate 8000 ton per day CIL plant. Which could process the higher grade ores.
And we've also been able to reschedule the mine plan and hope to increase the reserves as well, study update. At the moment with suspension, obviously, there's no further investment as we speak today, but as we get a resolution, certainly, we'd be like to look at reinvesting again in this project. And now I'll turn it over to Doug just to run you through the Santa Luz update.
Thank you, Christian. If we can go to page 11. The Santa Luz has a construction period of 14 months. With 1st gold scheduled for q 1 of 2022. The project will involve, mining 1,300,000 ounces in reserves at a grade of just over 1.3 grams per ton.
That'll be mined by open pit using contractor mining. The strip ratio is 4.7 to 1, and we'll be mining at 7400 tons a day. That's about 15,500,000 tons per year for a total of ore and waste. I'm looking at the base case at $1500 per ounce. Average gold production for the 1st 5 years is just over 110,000 ounces per year and average annual gold production of 95 1000 ounces per year.
Gold recovery is net is 84% and the initial mine life 9.5 years initial CapEx, $103,000,000. And our cash cost will be $7.76 per ounce. And an all in sustaining cost life of mine of $8.77 per ounce. The after tax NPV at 5% discount is 3 and 5,000,000. And at $1800 per ounce, it would be $475,000,000.
The IRR at after tax is 58 percent or 85 percent at $1800 per ounce. And the payback period is 1.6 years. Going to Slide 12. This is a brown a brownfields project. Therefore, we do have a low initial capital with the majority of infrastructure already in place.
So that includes grid power. There's 138 kilobytes power line coming into site. And we have, tailings storage facility and water storage facility already in existence at the site, as well as a CIL plants. So the plant alterations in the CapEx total $37,500,000 to convert the plant from CIL to resident leach. We will be doing a tailings and water storage facility raise this year, so it's $7,500,000 and pre stripping of $20,000,000.
It totals up to a 103,000,000 on initial capital cost. The water storage facilities, have already, 3,000,000 cubic meters available for when the the project starts up. Operating costs for mining is $2.41 per ton mined, processing costs of 13.43 per ton processed, and G and A is 2.75 per tonne processed. So the plants will include 2 stage crushing, That will be jaw and cone crushing. 2 stage grinding.
That's a sag mill in combination with a ball mill. Putting in a gravity circuit, and we'll have a resonant leach circuit. And importantly, the ore feed will be blended to maintain 0.6 percent total organic carbon with a feed from daycidic and and carbonaceous source. To it, and that will be to achieve the 84% recovery. So if we go to page 13, with project sensitivities.
It's most sensitive, obviously, to gold price, but also to operating cost foreign exchange and capital costs. And you can see the base case has been done at $1500 an ounce, and we provide the $1800 per ounce as the upper end on the sensitivities here, showing the, NPV going from 305,000,000 to 475,000,000 and the IRR from 58% to 85% based on the gold price alone. If you turn to page 14, There are additional opportunities at Santa Luz. We can look at the development of the C1 deposit, which is the main deposit being mined at Santa Luz and going down dip. There is a PEA that's already been prepared on the underground deposit.
I'll talk about that in a moment. But as Christian mentioned, we are doing a largest expiration program in the Santa Luz to Fazenda Belt. It's about 70 kilometers of Greenstone Belt between the two mines. Scott Happening and Carlos Barranos are embarking on a multiyear program that will, work on on several targets in that, that greenstone belt and could not only benefit by extending life at Santa Luz, but it could also add in to resources and reserves at Fazenda. So we're excited about that program that's beginning this year.
On the underground preliminary economic assessment, it was done as an update at $1400 per ounce. Total potential production is, over 500,000 ounces. The mining rate, 2500 tons a day. And that's with a gold grade of 2.6 grams per ton. And the initial life is nine and a half years in that PEA with a pre production capital of $74,000,000.
Net cumulative cash flow, that's before tax. Would be $289,000,000 and after tax NPV of $178,000,000 with an IRR for the project of 39% So we've got some more work to do on advancing that particular opportunity.
And if
you look at page 15, So our board has approved construction. The budget is a 103,000,000 of CapEx, $10,000,000 will be spent in 2020. We've already been doing the early works, and we've, commenced with plant site clearing and leveling. Process plan detail engineering is 99% complete. We have already been working on the engineering for the tailings and water storage facility expansions, and that's nearly complete.
May most of the major equipment is already on-site. An additional, long lead time equipment has been ordered. Our owner's team has already mobilized the site. Contractors will be mobilizing in November. The first gold pour is targeted for Q1 of twenty twenty two.
And as you can see in the chart down below, we have a 9.5 year initial life of mine, and we look forward to being able to extend that through additional exploration and the opportunity in the underground. And with that, I'm going to hand it back to Christian.
Yes, thanks, Doug. Just concluding on slide number 16, focusing on our near term catalysts, obviously a number of things have been achieved this year. I know it's really pleasing to see the Goldport Castle, getting the construction started at Santa Luz, and this is a really low CapEx intensity project. So really in our sweet spot to complete over the next sort of 15 months here. And also commenced the Orisso and underground prefeasibility study, which we're very excited about the underground potential there at Oris upcoming catalysts and things we want to focus on the near term here.
Obviously, you get Los Filos back and restart it after we resolve things, but we'll certainly take our time to do that right. The expansion study for Los Filos is another thing to follow on in the New Year. And as well, Castle Mountain Phase 2 feasibility study should be out early in the year as well. On the exploration front, again, we're sort of building momentum right now. We've had to focus on Mesquite and Arizona over the last sort of year or so, but we're certainly building up our multi year sort of midterm plans.
And we'll focus on the shorter life mines to continue to extend the mine lives most of the mines that we have are actually quite prospective. So, they need some attention starting in 2021. And corporately, we've achieved a lot this year. The vehicle merger and integration has gone well despite the COVID situation, but included a number of indices. We started to get our ESG reporting, disclosed more publicly.
We started to carbonize and combine the actual reporting that we have, and you'll see more and more information on our website as we move forward. And we continue to look at accretive M and A on a a disciplined basis. We've got a lot of internal growth that we're focusing on at the moment, but we'll certainly keep our eyes open for good opportunities in the market, whether it be producing mines or whether it be development projects that are going to fill our pipelines. We continue to deliver on building and putting mines into operation sort of one on an annual base assets for me to be interested in, obviously, would add diversity and diversification to our portfolio, fit our pipeline of development, enhance the portfolio quality of assets. So eyes are open on that front, but we certainly got a lot of growth internally that we
can focus on as well.
So overall, I'd say we've had a strong operating performance in Q3. We've got a rock solid balance sheet coming out of the quarter, as Peter outlined earlier, and we'll continue to focus on our in growth as we continue to deliver on our strategy of becoming the Premier America's gold producer. Now, I would like to thank you for your time and open the floor to questions. Thank you.
You.
Questions.
Thank
you. We do have a few questions from people online. A lot of over the last couple of months is people wondering why we haven't been providing more regular updates about Los Filos and also responding to some of the things that have been said in the press?
Yes. Thanks, Rillyn. You know, certainly we'll update the market when there's any material changes, both positive or negative. But we do believe and released pretty strongly that we don't want to be negotiating in the press or media. It's not part of our strategy.
We'd much prefer respectful dialogue face to face discussions with the community as we work through this, this challenge at Los Filos and certainly believe that's been the most effective method so far. And we continue to be optimistic and work on those post discussions locally and, we won't be negotiating the press. So you'll see things as they change materially both positive and negative.
We've also had lots
of questions about the allegations that there's water contamination at Los Filos. Can you address that?
Yeah. Sure. I mean, historically here, you know, there's a water source that was moved for the local community It's about 3 kilometers away from the mine site. It's, I think, 150 meters above our current elevation in that. And Originally, I think Goldcorp put in place the actual system to, to access that water.
Probably need some updating right now and Certainly, we've agreed to do that. And actually, that was in the social collaboration agreement last year to upgrade the system. So Basically, once we're able to get back to work here, we'll continue on with that process. The community has grown quite significantly and we plan to be putting in place any upgrades that allow that community access the water for years to come. And there's been a couple of allegations, I guess, in the press as well related to arsenic in the water.
It's obviously not something that were involved in, we do not, use arsenic in any of our processes as we process the ores. As well. It's naturally occurring and it's called a trace amounts in the local rock and area. So there is probably naturally a little bit of arsenic in the water it's safe to drink. So, no, we're pleased with all the standards we've put in place.
And obviously, with our operating permits and health and safety requirements. We have regular reporting to the regulators. We monitor it on a very regular basis and, obviously, make sure that all our communities are accessing good, clean, healthy water. So, we'll make sure that we continue to work with them on upgrading that system, but, the water sources in place right now are days.
Thank you. Operator, we'll take some questions from the phone lines, please.
Certainly. Our next question comes from Dalton Baretto of Canaccord. Please go ahead.
Thank you, everybody. Question, I'm
sure you're not going to be
surprised, but I'm going to start with the Las Vegas bucket as well.
And I appreciate the commentary you provided in
the scripted comments there, but there's a number of things that are still unclear to me. But maybe my first question, can you what triggered this? Well, it's always hard to know exactly. Certainly with the change in ownership and there was a change in senior leadership down there and maybe it disrupted some of the communication channels. I can't speak on behalf of the community and what their desires are.
Certainly, they're looking for enhanced social collaboration benefits. And, maybe it's an to be able to change in environment here with COVID and change in management and that down there that, this has been triggered. You know, certainly we want to make sure that we have a dialogue here to resolve it in a long term manner. And, we have members of our team from up here in Vancouver as well as senior leadership down there working on it right now as we speak. That's probably the flavor of it.
Okay. And then you mentioned
some of their asks and it sounds like they're incremental to the current contract.
But it sounds like their stance is that you're not living up to
the current contract. Is this just fostering?
I think there's some pretty standard grievance mechanism that's in all the contracts with all the communities and it's pretty normal across the world really. But Certainly, I know it's in place there in a regular sort of monthly review. There could be differing views and opinions on whether certain clauses are being met and managed, things like numbers, scholarships or amount of medicines, etcetera, being provided, but I believe there's a very strong mechanism for resolving that. So it's a bit disappointing to see this go to the point of asking for incremental benefits and taking it outside of that grievance mechanism for resolution. But, we'll work with them on that.
We believe in supporting the communities as well. So we do think it's good to see, people get education to get extra benefits if it makes sense.
Okay. Then maybe just one last one for me on this topic here.
On the assumption that you're still meeting with them regularly, what needs to happen to move forward? Are they fairly entrenched or is there kind of give on both sides?
I'd say
there's a lot more give on our side and there's regular meetings. I'd call them quite intense and, ongoing as we speak. There are certain areas like I sort of alluded to that we can't give in on that have any impact on health and safety or certain governance policies. We have to make people are vetted before they're employed. You know, when they're operating big equipment or other underground, it has to be a health and safety first focus.
And, you know, we have to do background checks, etcetera. So those kind of areas we, we can't compromise on to a certain level and also just around sourcing of contracts and that we certainly need to be very careful around how we source contracts and we need to have full control operation, some of the other social collaboration benefits. Obviously, there's more flexibility on. They tend to be some good things that we provide to the community.
Understood. Thank you. I'll jump back in queue now.
Our next question comes from Arun Lamba of TD Securities.
The mid quarter minus, obviously the low single stuff. Just two quick ones for me. You talked about M and A and what you guys might look for. Just wondering, how you're thinking about the portfolio otherwise in the sense that, would you look to potentially, does that maybe some of the smaller assets, because they might take the same amount of time as a larger asset or at these prices, are you kind of just happy with the free cash flow generation that they all generate?
I guess, thanks, Aaron. I guess in this environment, there's a bit of that luxury is, all the assets are performing pretty well. You're even a small one. So we're pretty happy to see that cash flow generation and contribution to the portfolio. And certainly over time as the portfolio diversified grows, enhances, we could look to, disposal of an asset or 2, but at this stage, certainly, we are pretty happy with the performance of all of them, all of them, even the small ones, but, over time, I think you could see that happen.
Great. And just a quick one. You guys mentioned Solaris has kind of ran up a little bit. It's now over $100,000,000 to you guys on your position. Just comment if the plan is still hold out longer term?
I know the balance sheet is kind of net debt, free. Would you look to stay as your shareholder or would you look to kind of divest at these prices?
Anna, we're a pretty happy shareholder right now. Richard and Dan are doing a great job with it. And we were really pleased in the last 6 months or whenever they took over. So, to see it go into hands, it could focus on it. And Certainly, we believe it could turn into what it already has, but we still have a lot of, belief in the upside to that single asset there in, Ecuador being ORINSA, but also it's got 4 more assets in the portfolio.
We're really excited about a couple of the other ones as well. So, we have no plans to be divesting. We're also committed our shares to, Escrow, I think, for a couple of years at least. So we're certainly very committed to them right now.
Great. That's it for me. And, hope to get the lost people's blockade results soon, but congrats anyway.
Our next question comes from Kerry Smith of Haywood Securities. Please go ahead.
Thanks, operator.
A question for the underground at Santa Luz, did you only just update the gold price assumption in that PEA and didn't update the costs.
I'll let Doug, do you want to take that one?
Sure. It was updated with the economics on on the project. So, yes, gold price and and and costs but it's something that we'll need to do more work on. Essentially, we were updating the, rest of the study. So we asked, RPA to go back and and do an update on on that as well.
And we know we have to do more work. We wanna do a dual program there and then revamp the whole, the whole thing in, in light of the opportunity that it can add while we're operating the open pit.
Okay. And just just maybe on that underground PDA, the 511,000 ounces of recoverable gold, what per end of that would have been inferred. Is it all inferred or is there any indicated at all?
I'd have to go back and check. I I will check, Carrie, and I'll get back to you.
Okay. Okay. And so I guess my second question was what is the plan going forward? And are you planning to complete an infill drill program to try and convert a bunch of the inferred and then complete some sort of further economics that or a PFS, let's say?
Yes, I think when we're not interfering with the construction, we would look at doing an infill drill program with one was designed, a while back. I I've handed all that over to Scott Heffernan to Scott and his team will have to review that for, how to logically, do the, the, the follow on drill program so that we can move it towards doing a PFS. But At the moment, we'll wait while they're, in the midst of, of construction, so we don't interfere with the site.
Okay. Okay. Okay. Because I guess the timing then you said there was a couple of years of development to get into the ore body. So it sounds like you did be another maybe 18 months of drilling and engineering work before you could even make that decision to start that decline then.
Would that be fair, Doug?
Yeah. That would be fair. But there's also lots of additional opportunities for, open pit targets on the site as well. So while it would it would be nice to, to bring the underground on and have it dovetail for the nine and a half years with the open pit. There are other, low hanging fruit in in nearby to the, the process facility that we would look for open pit opportunities as well.
Okay.
Okay, great. And then just maybe, maybe Peter or Christian, what is the holding cost per quarter for Los Filos while you're on this blockade.
Peter, do you want to take that one?
Yeah. It's Peter here. It's about 750,000 US a week, Karen.
Okay. And that's for just the asset protection and then you, I think you're still paying the salaries, I guess, or the wages to the employees as well. Is that correct?
We've actually sorry, go
ahead. Okay.
I was going
to say, Terry,
we've actually suspended
payroll to certain people that obviously can't access site, can't work, etcetera. And, you know, so we've slowly started to reduce that. Payment. And obviously over time, we'd reduce that further if necessary. So there is some flexibility in that number that Pete gave as well.
We could eventually reduce it a bit more, but, that's kind of a reasonable carrying cost.
Okay. So that's $750,000 a week then. What how much of that would actually be payroll then if I can ask it that way?
I don't know, Pete, if you remember that number off the top of your head?
I don't, Terry. I'll have to get back to you on that one.
Okay. I'm going
to venture, I guess, 50 to 60% of that, but yeah, we should verify it.
Okay. Okay. How did you decide which half of which how many people are not on the payroll? Like is it half of the employees are now off the payroll then or how would what is that number?
Well, certainly, most of the actual people who work in the operations can't access site at the moment. So, those would not be working and not stay at this stage. There are certain groups that have to keep the the site, safe, which are obviously key to key to having them on-site, you know, security, certain other management numbers obviously involved in the processes ongoing at the moment as well.
Okay. So the only the people that are being paid are people that are able to access site every day and effectively.
Yes, and then have a meaningful job to do right now.
Right, right. I got you. Okay. And what is the timing on the PFS for the underground at Aurizona? You'd mentioned 2021, but is that a second half or Q44, Q3?
Like, can you sort of be a bit more specific there?
The drill program is just being finished up right now. So we will be digging into it, with the neutral data in the coming months. PFS wise, probably in Q2, but, so that I'm and I would say I'm not percent certain on that. I think that's a target date at the moment, but we've got a lot of work to do on it now that we've gotten the drill program results rolling in.
Yes.
By the way, Carrie, your question about, percent inferred on Santa Luz and the underground. If you look at the exclusive resources. The indicated underground is of of about 484,000 ounces. The inferred underground resource is 461,000 ounces. So, I'll I'll say a big chunk of its inferred, but also, it could be as much as fifty-fifty between between the two, but I'd have to go back and check.
But just noting that there is, essentially over 950,000 ounces of indicated and inferred in the underground at Santa Luz.
Okay. Okay. Thank you Doug. Okay, that's it. Thanks very much.
I appreciate it.
Thanks, Carrie. Okay, I'm now going to take a question online as from an investor in the United States. It's great to see Santa Luz moving ahead.
How do you expect to
sequence all of the growth projects in your portfolio, how many active projects do you have been with to manage?
Yeah, I think, the way we're managing them is there is a project team and a country head that's in each country. So we certainly have a a lot of bandwidth in each country to manage almost a project at each time, but we're certainly like the idea of sequencing them like we've done. So Castle Mountain gets done phase 1. Santa Luz gets going. And then we'll be done wrapping up towards the end of next year.
Potential Los Filos expansion may overlap a bit with that, but obviously a different country, a different project team that could happen with some overlap, but kind of will happen a lot. It will happen at the end of the Santa Luz build. So it's been really nicely sequenced over time here. And obviously, that's helpful on a capital management front as well as just people management front.
Great. Operator, we can take Dalton's call. Certainly. Our next question is a follow-up from Dalton Breto of Canaccord Genuity. Please go ahead.
Thanks. Christian, I wanted to ask a little bit about
Castle Mountain, just really two questions. So it sounds like you're putting the final touches on the study there. What's the latest on the water situation? And has your permitting situation changed in the context of the Biden government?
Well, let me start with the water. We continue to drill various water sources as we were doing the study. So we've been drilling on our property on the claims that we have, you know, the close closest to the plant site as possible. We've had good results from that. The hydrogeologists are actually doing some of the pump tests and recharge, rates.
They're checking on that, but we've had water in every hole. So that's along the southern end of our property. So we've got some really positive indications coming out of that. So we believe some of the water will certainly come from there, maybe even up to a 1000 gallons per minute. And then, we've also been testing a few other locations.
One key one is obviously off-site on some private lands, say about thirty miles away, I believe it is. And, we'd be able to pipe that water in along sort of right away where the power line would go as well. So, we're pretty confident that amongst various water sources, including the existing well field and as well the West well field, which is a historical well field, between those sort of four areas that they're multiple sources of water, and we want as much flexibility as possible. So, we're feeling pretty good about that so far. We've not completed all the test work, so that'll come with the study.
And in terms of permitting, well, I don't know for sure what the change will be like, but one thing I do know is that this is an operating mine now got existing permits and it's been in operation now twice. And it makes a huge difference to have a brownfield site when it goes to a mending permit. We're not looking for brand new permits. We plan to stay within our sort of EIS boundaries that we already exist. So we'll be looking to amend those and Remember that Mesquite said on and off operations for 30 years, Cassel was producing for about 10 or 12 years in the 90s early 2000s and now producing again.
And I don't remember all the governments during that period, but there were certainly a mix of Democrats and and Republicans and, you know, we can work with both sides and both parties and you know, again, we bring good jobs to Eastern California there. And, you know, we've had great support from San Bernardino County as well as Imperial County where where Mesquite is. So maybe it'll change slightly, but I actually don't expect a ton of change in terms of permitting process. You tend to deal with the BLM and the local regulators. More than the federal government.
So, I expect sort of almost business as usual, really.
Okay, great. And then maybe just one last one for me. The gold collars and swaps, they're looking pretty punitive right now. Any way in terms of offsetting that?
At the moment, those have, they run-in, so I think it's mid-twenty 22. It's only like 10% or 12% of production. So think we'll just let those run out and deliver into them on a quarterly basis. They're historically from the legal merger and we're put in place related to the financing they did. So It's something I have to live with and we'll just deliver into it and they become smaller and smaller every quarter in terms of impact.
And there was a big run up, obviously, in the gold price in the last 8 months where we did have a quite a negative impact in the P and L. But obviously, when these current gold price environment seems more sort of stable or around these sort of higher $17 to $2000 levels, there's less and less of an impact on a quarterly basis and we'll just let those run out to termination in 2022.
Our next question is a follow-up from Kerry Smith of Haywood Securities. Please go ahead.
Christian, just on the blockade again, are you actually currently meeting regularly with the community? And if you are what is the frequency of those discussions? Are they weekly or quarterly or how do you rate, how do you schedule this?
Again, I don't want to give up too much detail, but, over the last week, I think we've been meeting almost every day and continue to do so, including today.
Okay. Okay. So it's pretty frequent then. Okay. And you had talked about a new you were committed to a new fleet at Mesquite in 2021.
When you say new fleet, is that haul trucks and loading gear or just the truck fleet?
No, it's the there's an old parrot fleet there for those that have visited that sort of coming towards the end of their life and you're starting to look at big engine rebuilds and, quite a lot of investment to keep them going and they'd always were planned to run right through to the end of the mine life when we acquired it. But now this mine life seems to be double what it originally was. And we still see some upside beyond that. It's certainly time to be looking at investing into the trucks at the moment. So the cat, you know, a cat fleet instead of the old Terex's.
Absolutely.
And the rough CapEx next year for that equipment upgrade, well, can you give me a rough number?
Yes, we'll put that out in our guidance, but probably more in that sort of $30,000,000 to $40,000,000 range, but we'll give you more exact numbers in the guidance.
Okay. Okay. And then you'd also talked about an exploration budget for Scott at Santa Luz or along the Greenstone Belt too from there to Susenda. What might that number be, just so I can sort of quantify it? Is it $5,000,000 a year or less?
I might let, maybe Scott comment on that. I mean, how much will we give them?
We're right now in the middle
of the budgeting and planning process for 2021, but as Christian mentioned, we have started with the regional program. There's a 1000 square kilometers to explore there. And lots of lots of good work to do. So we've got a lot of compilations to synthesis work underway. The crews are doing the surface work sampling, mapping, prospecting, sales thing target drill target definition work that will follow-up with next year.
So, I hope it would be a significant program, several 1,000,000 of dollars in the least. There's lots of a little hanging fruit to chase both near mine Santa Luz and Azanda as well as the district. So it's we're going to put a big emphasis on it and, the team is really digging into the data right now.
Scott, is it fair to say is it fair to say there's probably a good $5,000,000 to $10,000,000 worth exploration we could do there. It's just a matter of how much we're going to allocate next year.
We haven't decided that quite yet.
Right. Okay. But it's likely that 2021 would not be a drill program. It would be more reconnaissance in prospecting and target generation then.
No. We're moving we're moving as fast as we can to, drilling. We will have some modest amount of drilling going on this year. And we expect to drill as aggressively as we can next year.
It's a matter of building out the pipeline
of drill targets in advance have seen drills chasing the field crews. But there's sufficient drill ready targets already. That we can start on and pretty comfortable that we'll be able to keep a significant number of drills turning throughout the year. Moving through the 45, 50 exploration permits.
Okay. Thank you, Christian. We're nearly out of time, so I'm going to turn it back to
you for, closing remarks.
Yes. Thanks, Rylan. And, thanks everyone for your time. Lots of good questions today and, exciting, exciting future here. Lots of catalysts coming.
So Please keep an eye on this space. You know, we've got a number of projects on the way, lots of exploration ongoing. And, you know, we hope to get to a resolution here on Los Filos. So Please keep it on the space and, look forward to speaking to you at the year end. Thank you.
This concludes today's conference call. You may disconnect