Good morning and good afternoon, ladies and gentlemen, and welcome to the OceanaGold 2018 3rd Quarter Results Webcast and Conference Call. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on October 25 at 5 pm Eastern Time. I would now like to turn the conference over to Mr.
Mick Wilkes. Please go ahead.
Thank you. Good morning and good evening, everybody, and welcome to the OceanaGold Third Quarter 2018 Results Webcast and Conference Call. A pleasure to be here with you again and to discuss Socionagold's continued strong operational and financial performance and exciting near term opportunities. I'm joined today by members of the executive team who provide specific details on our results. With me is Michael Holmes, our Chief Operating Officer, who will discuss our operational results and what we are expecting in the final quarter of the year.
He'll also briefly update you on the expansion project at Haile and the underground at Didipio, both of which are progressing well. Scott McQueen, our Chief Financial Officer is also with us, and he will discuss our financial results. As you know, we've been very active with exploration, and we will continue to do and we continue to have solid results. So with me today to discuss those is Craig Feeberry, our Executive Vice President and Head of Exploration, who will discuss those exploration results in New Zealand. Before I proceed, just the usual cautionary statement noting all references to this presentation adhere to IFRS standards and all financial figures are denominated in U.
S. Dollars unless otherwise stated. Also, please note that the presentation forward looking statements, which by their very nature are subject to some degree of uncertainty, and there can be no assurances that forward looking statements will prove to be accurate as future results and events could differ materially. Please refer to the disclaimer on the forward looking statements in your presentation. So moving on to Slide 3.
I'm very I'm more than pleased with our performance in the 1st 9 months of this year. Our operations are performing well, delivering on production targets and generating strong cash flows, and I'm excited finishing the final quarter of the year on a continued positive note. It's been a year of new achievements operationally, socially and financially. In the 1st 9 months of the year, we've delivered robust financial results and accumulated the highest revenue and EBITDA the company has ever achieved over the 1st 9 months of the year. We've continued our strong track record of profitability with solid net profits again this quarter despite 9% lower gold price received.
The strong cash flow generation from our business has allowed us to make discretionary repayment of $50,000,000 towards our revolving credit facility in the 3rd quarter, while we paid dividends of $12,000,000 We've maintained a strong balance sheet with total liquidity sitting at $140,000,000 which excludes $76,000,000 in marketable securities. We continue to deliver strong margins As mentioned, we continue to have significant exploration success while also reinvesting in our business to expand our operations to deliver both value and growth. Exploration has been an important area of focus for the company. This yielded significant results across our business. More recently, we have discussed some of these results in New Zealand, at Waihi and WKP.
And earlier this week, we announced some encouraging results at Macraes where we're targeting another extension to the mine life. Macraes is a very important operation that generates very strong cash flows for our business and yet is overlooked by many in the investment community. It shouldn't as we will continue to generate good cash flows from the asset and given its vast resource base, there is a real optionality to further extend the mine life beyond 2021 while maintaining wood cash flows. And finally, on the back of our strong operational performance this year, we have increased our guidance for the 2nd time this year. We are now expecting to produce between 515,545 1,000 ounces of gold, while maintaining our all in sustaining cost range between 725,000 775 dollars The main driver for the guidance increase is related to the continued strong performance at Didipio.
So moving on to Slide 4. On a consolidated basis, our operations produced 406,000 ounces of gold and 12,000 tonnes of copper after 3 quarters. As you can see, we're well positioned to come within our revised guidance range. We expect the 4th quarter production to look similar to the 3rd quarter, but with a varied production mix. Overall, the Q3 production was down slightly, which we expected and had previously forecast to the market.
The main driver was lower production at Haile on lower grades and mill feed. Mill feed was related to a planned shutdown in July for maintenance and tie in of the pebble crusher and upgraded tailings thickener. And New Zealand operations delivered strong quarters while Didipio was consistently strong. For the Q4, we achieved an earnings per share of $0.03 on an adjusted basis with the timing of sales and average price of gold being the main drivers for the quarter on quarter decrease, while cash flow per share for the quarter was a solid $0.12 which is in line with analyst expectations. Overall, we continue to demonstrate revenue and profit growth now with all four operations contributing strong operational and net profit of 33% over the same period last year.
On a per share basis, we've delivered a 13% increase in cash flows over the same period. Moving on to Slide 5. For the 34th consecutive quarter, we have delivered a positive return on invested capital, which again reflects how we run our business and how we allocate capital. We are one of the only 2 gold companies that has delivered a positive return on capital every quarter dating back to 2010. Meanwhile, our year to date EBITDA margin sits at a solid 49%, which maintains outstanding as having one of the highest EBITDA margins in the gold sector.
We expect this trend to continue next quarter and beyond given the low cost structure of our business. We're also expecting lower all in sustaining costs next quarter. I'm very pleased with our results. However, we still have room for improvement, especially at Haile, where we continue to focus on improvement productivity improvements to make that operation run as efficiently as Macraes, which we see as our benchmark for operating efficiency. We expect each of our operations to operate to the same high standard and we do expect Haile will get there with patience and with strong leadership.
Our business is in a very good place right now. Operations generate strong cash flows and are expandable. I'll now hand over to Michael to discuss the operating performance.
Thank you, Mick, and hello, everyone. I'll spend the next few minutes going through our operational performance. Health and Safety, so moving to Slide 7. Health and Safety performance remains an important focus for our business with our year to date triple rate remaining static for the quarter at 4.7, however, improving on our last year's quarter 3 performance. Through the quarter, we experienced some extreme weather events at our Haile and Didipio operations.
And with excellent site preparedness and weather event management, we ensured that there were no safety or environmental incident. We continue also to focus on our principal hazard management plans with reviews and regular audits, including emergency scenarios and drills. We're always working with our contractors on-site to ensure their safety management processes align with ours, particularly when there is a change of contract services, for example, the exploration drilling services in New Zealand. On a quarterly basis, Didipio continued its strong safety performance, while we saw a slight improvement at Macraes. We recognize that we need to continue emphasizing safety performance at Haile, and we're certainly committed to improving the safety culture there with the rollout and implementation of the behavioral based safety program during the last quarter and continuing into this quarter.
This is the same program that we have rolled out at our other sites. Several other safety initiatives have been introduced during the quarter as we track the more common types of incident, particularly focusing on programs for hand injury prevention and the prevention of splits, trips and falls. Body mechanic and movement programs were also implemented to reduce the number of sprains and strains in our workplace. Moving on to Slide 8 and the operational performance at Haile. As mentioned, production in the 3rd quarter was lower than in the Q2, which was expected with a lower head grade.
In July, we had a major shutdown of the process plant for 7 days to tie in the pebble crusher and upgrade the feed well in the flotation tail fitment as well as carrying out other planned maintenance activities such as installing the new CIL feed box, the SAG discharge screens and feed chute and bore mill feed chute and the surge tank reline. This work went well. And in fact, since this installing equipment, we have achieved daily throughput rates, which annualized are performing at a run rate of 3,200,000 tonnes. We are encouraged with what we've seen so far at the plan as we look to increase the annual throughput rates to between 3,500,000 and 4,000,000 tonnes per year. Recovery was similar to the previous quarter despite the lower head grade as we drive for operational performance improvements with our current program.
Mining activity continued to be a focus for us as we're not achieving the productivities that we expect and are used to having, particularly at our sites. Mining activities were impacted by maintenance issues through the quarter for the dig and haulage fleet, which also negatively impacted the unit cost. And towards the end of the quarter, the mine was also impacted by the weather events where we planned the shutdown of the operations for 3 days to ensure the safety of our people, plant and equipment. The management of water was also critical to ensure that there were no off-site discharges, which meant the pits were used to collect water. Subsequent rain events have meant that we were still managing the water on-site, and we are still pumping water from the Mill Zone pit.
This has had an impact on our mining rate and as such, negatively impact our mining unit cost for the quarter. Upskilling the workforce continues to be an important objective, and we're actively running recruiting roadshows and recruiting operators from states such as Colorado, Nevada and Arizona. Through further training of our workforce, the strong leadership we have on-site and more effective maintenance program. As we mentioned last quarter, we're implementing the MineStar, a GPS and data collection technology designed to monitor and optimize equipment and productivities. We've also enlisted the assistance of Lodestone, a performance management consultant, to add bench strength to our current programs.
I'm also pleased to announce the discussions relative to the optimization permit, the SEIS, which includes the horseshoe underground, the optimization pit design and associated infrastructure, is continuing and progressing well. We are working closely with the regulators and particularly the U. S. Army Corps of Engineers to achieve this process. We've recently worked with the Department of Health and Environmental Control, DHEC, who is also a cooperating agency with the permitting process to successfully attain 2 minor modifications to the current mining permit.
And this is for the placement of additional keg waste as well as a KAIG low grade cell. Looking ahead to the Q4, we're expecting a strong quarter for production at Haile. At the same time, we expect the cost to be lower and forward in our full year guidance range, which will lead to stronger cash flows from Haile to close out the year. Moving on to Slide 9. We are making very good progress on the planned expansion, having installed both the pebble crusher and the upgraded tail stickener in the Q3.
We've also poured the concrete foundations for the tower mill and in the process installing the equipment. We've commenced the foundation work on the IsaMill and expect the tower and Isa Mills to be in operation in the first half of twenty nineteen. As we go through the permitting process on the mining front, we have assumed that the Horseshoe Underground will be in operation in 2021 while we proceed with the optimized open pit. With the underground and the larger pits, we expect annual production to be over 200,000 ounces a year. And in 2021, we're forecasting production of around 180,000 ounces.
So with some ramp up of the operation, we'll be required to get us to 200,000 ounces a year. Getting the underground build will also be a very important catalyst for us on the exploration front as we expect to conduct extensive underground drilling programs to target the high grade zones that we have hit through the surface drilling. Moving on to Slide 10, you can see some recent photographs of the construction of the tower mill and the installation of the equipment on the left hand side and the foundation work of the IsaMill on the right hand side. So moving to Slide 11 and the Didipio operations in the Philippines. We had another strong quarter of health and safety performance and production from the operation.
The Didipio operation continues to be a leader in ESG and continues to win awards for environmental excellence. Just recently, Didipio has won the Philippines Chamber of Commerce and Industry Most Covered Award, the 2018 Excellence in Ecology and Economy Award in the large enterprise category. This is the first time a mining firm has won this award. Production at Didipio was similar to the 2nd quarter and will increase with increased mill feed that was partially offset by lower grades. The mining of the breccia zone from the surface was completed and fully backfilled with cement in the Q3.
High grade ore from the Bretshire pit and the underground ore supplemented the mill feed, which was predominantly sourced from the low grade ore stockpiles as we ramp up the underground mine. We will continue to blend the ore from the Brexjea zone material for the future processing. Panel 1 of the underground operation continues to ramp up the design as we completed several stopes, including a double width stope in the monsoignite zone and the first double height stope. In the 4th quarter, stoping will continue in the monsoignite zone with a second double height stope and 2 single height stopes, which are 30 meters in height. We will commence a redesigned smaller profile stope in the Brett's view zone, which will take out the side of field stope.
The water storage stope is nearing completion, and this will further assist the water management in the mine as we expand the stope in front deeper into the mine. The primary pumping system is operating at design rates and to expectations. The first real test we had was when we were touched by the recent typhoon and the infrastructure performed as expected. Costs are also generally in line with expectations thus far. And as an underground operations ramp up, we'll see the unit cost drift towards the $36 per tonne as we expect.
Hopefully, through further efficiencies such as the optimized mine plan and the stope sizes like we have done already, with this, we can achieve the lower costs. Production at Haile is expected to be lower in the Q4. However, we have increased our guidance again at Didipio sorry, production at Didipio is expected We lower in the 4th quarter, however, we have increased our guidance against the Didipio to 110,000 to 115,000 tonnes ounces. Moving on to Slide 12. Here is an overview of what I've just described that we're in the mining operations.
So within the slide, we do have the 20,000,000 tonnes of ore stockpiled on the surface for processing from the open pit. The slide shows the decline position of where we currently are in the gray and the stopes which we've mined in October. Stopes in the pink of the mines, the stopes that we will mine in 2019, and the remaining light blue is the areas that we'll be mine at the Laca mine. You can see the location of the capital pump station and how we're advancing the decline into the construction of Panel 2. You can also see the area where we believe there's additional potential for resources at depth, which will be opened up as we progress further down the mining front.
And we see that has enormous potential for us. Moving on to Slide 13 in Waihi in New Zealand. The Waihi operation had a strong third quarter on better head grades and slightly better recoveries. Mine productivity continued to improve following the lower equipment availability that we experienced in the Q1. As indicated by our exploration and news releases, we continue to achieve compelling drilling results at the Martha project.
Craig will discuss the exploration there in more detail. However, we have increased the resource at the Martha significantly and continue to drill from the 2 underground drill drives. In parallel, we have the permitting process underway for a 10 year mine life extension. We've hosted several town hall meetings and received overwhelming positive support from our stakeholders at Waihi and in the region. In mid August, the public comment period officially commenced and ran for 4 weeks, which is the standard length for the permitting process.
During this time, 284 submissions were received, again, with overwhelming support. The Waikato Regional Council and the Hierarchy District Council are the regulatory authorities tasked for the approval of our permit application. In November, they will host the consent hearing and render a decision in the Q1 of 2019. Once the decision is rendered, there is an appeal process that takes place. The permitting process in New Zealand is straightforward.
We've been through this process several times over the past 28 years, and the Waihi operation itself has had several cutbacks and on the ground mines approved over the past 30 years. So this consent is more of the same. It does, however, take time and requires strong engagement with the regulatory agencies and other stakeholders. As the permitting process continues, we will continue to prove up the resource and work on the project study. We do expect production in the 4th quarter to decrease on lower grades at Waihi.
Turning to Slide 14 in Macraes in New Zealand. Macraes had another strong quarter with its health and safety performance continuing to trend in the right direction. In the Q3, grades and mill feeds were similar to the previous quarter, while recoveries remained robust at 86%. Despite the solid third quarter, mining operations, both surface and underground, were impacted by lower equipment availability. This led to a high quarter on quarter mining costs.
So far, in the Q4, we're seeing considerable improvements and expect to reduce our unit cost. We do expect production to be slightly better in the 4th quarter as we open up more of the Coronation North pit. As mentioned in our recent press release earlier this week, we are working on a new mine plan that we believe will further extend the mine life at Macraes beyond 2021. It's still a work in progress. However, we are targeting ore currently outside of our reserves, but currently located within previously mined pits.
Project Steins is also investigating a potential underground mine at the Golden Point on the back of the exploration successes we've had over there in the past year. Craig will discuss the exploration opportunities we see at Macraes, and together, we believe that Macraes will continue to deliver strong production and cash flow for many years to come. I should also point out that Macraes has a large resource with lots of leverage to the gold price, And the price does return to $1500 an ounce level. We have about 3,500,000 ounces in resource that become economic. In addition to this, we have the round hill optionality.
I would
now like to introduce Scott McQueen, our CFO, who will discuss our financial performance. Thank you. Thank you, Michael,
and hello, everyone. As illustrated by both Mick and Michael's comments, the company had another quarter of solid operational performance and that is reflected in our financial results despite some headwinds from weaker Q3 gold price. Turning to Slide 16, here we see a snapshot of our financial results. Top line revenue for the Q3 was 187,000,000 dollars a slight decrease on the previous quarter due mainly to the lower average gold price received and slightly lower sales volumes. Lower sales volumes have a timing element to them.
As you will note, production was nearly 4,000 ounces above sales for the quarter. For context, the $90 plus full in the quarter on quarter average gold price translated to more than $12,000,000 in quarter on quarter revenue and EBITDA impact. In addition to prices, EBITDA was also impacted slightly by higher cost of goods sold. This reflected the expected reduction in mill grades at those Haile and Didipio, lower plant utilization at Haile principally related to the pebble crusher installation, but also some weather impacts, along with the general second half trend whereby a higher proportion of our sales mix came from our New Zealand operations. I'd also like to reiterate the point Mick made earlier that despite the lower gold and copper prices, our 2018 year
to date revenue and EBITDA
are both records at this point in the year. The exception of continued the expectation of continued strong returns and margins in Q4, overall, we're very pleased with our financial position and performance. Moving to Slide 17, which provides an overview of cash flow. Cash flow generation the quarter was a solid $64,000,000 despite the drop in the average gold price and the impact of the sales timing. Another material timing impact was a negative quarterly working capital movement of around $13,000,000 primarily increased receivables combined with some inventory build as already noted.
You can also see here our investing cash flow was steady quarter on quarter. As expected, we saw an increase in our investment in growth projects, which is largely offset by a reduction in pre strip costs, which are more first half weighted. I'll provide a bit more detail on the split of CapEx by nature and location on the next slide. Unsurprisingly, our financing cash flow was higher this quarter given the $50,000,000 discretionary debt repayment we made. Whilst that liquidity remains available, we had sufficient cash to allow the repayment, which will materially reduce our ongoing interest costs.
Of course, during the quarter, we also paid $12,400,000 in dividends. For the last year that takes us to a of the year to date that takes us to a total of $18,600,000 in dividends, again reflecting the strong cash flow generation business. Moving to Slide 18, includes a bit of additional information on the CapEx profile. In total terms, capital invested in the Q3 was similar to the previous quarter. As I just mentioned, in general terms relative to last quarter, we see an increase in the growth CapEx, largely offset by a reduction in pre strip.
General operating CapEx and exploration spend were pretty flat. The bulk of the growth capital spend spent at Haile and Didipio. At Haile, the focus remains on the expansion activities, while Didipio, the development of the Panel 2 underground continue. Also as picture on that was the growth capital spend at Waihi where we continue to advance the Martha Underground development. In terms of pre strip, albeit reduced quarter on quarter, the main spend was the tile and the crays as you would expect.
We continue to invest in exploration with much of that spend at and around Haile and Waihi. Craig will discuss in more detail the positive results that program continues to yield. Looking at the Q4, we do expect the outstanding capital will be lower, although we expect to fall and remain within our guidance on the full year. Moving to Slide 19, which covers key features of our liquidity and debt position. Our balance shares are robust, strong liquidity and low debt.
Over the past year and even in last quarter, you can see our liquidity is trending higher while debt is being reduced. It's in line with our practice of levering up when we're developing and delevering when the assets are generating cash flow. As at the end of September, we had $70,000,000 in cash and $140,000,000 in total liquidity, an 18% increase year on year, A year during which I might add we reduced debt by over $60,000,000 and paid nearly $25,000,000 in dividend. In total, we had $150,000,000 of drawn debt and $30,000,000 in equipment leases, leading us with a loan net debt of $110,000,000 I'll now hand over to Craig to discuss some of our exciting exploration results.
Thanks, Scott, and hello, everyone. Over the next few slides, I'll focus on our continued exploration success in New Zealand, where we have delivered a resource increase at Martha, continued to intersect high grade gold mineralization at our newest discovery, WKP and target a mine life extension at Macraes. In discussing these slides, I'd like to bring your attention to the footnotes around both resources and exploration targets mentioned. Moving to Slide 21 in Waihi with an oblique section of the Martha Pit the Martha Underground project on the left. We continue to drill with 9 rigs at Waihi, 5 in the underground from the 2 drill drives and 4 from surface.
The focus for us here has been to test a large exploration target and establish a resource within the Martha Underground. We're pleased to highlight that today drill fans along multiple drill points on the 2 drill drives have delivered the results we were expecting, intersecting both the main fissure veins of Martha, Empire and Royal and additional mineralization in linking structures between these dominant structures. In July, we announced additional resources at the Martha Underground of 140,000 ounces of gold in indicated category and 339,000 ounces of gold in inferred. You can see from the graph on the right that we're now validating the concept and quickly establishing significant resources. And with over half of the planned current program of drilling still in front of us, we're continuing to look forward to updating the market on progress.
As part of the same news release announcing the growing resource, it's important to note that we're also we also stated a significant increase in the size of our originally outlined exploration target increasing to between 5,000,000 and 6,000,000 tonnes at an anticipated grade of between 4 grams 6 grams per tonne gold. The reason for the revision is an improved understanding of the nature of mineralization both through drilling to date and an extensive compilation of historic data. Just finally on this slide, the development of the 920 drill drive is complete and the 800 drill drive approximately 62% complete, providing additional drill platforms going forward. Moving to Slide 22 and WKP. The figures on the left highlights the distribution of our pipeline of exploration projects covering around 30,000 hectares in the Coromandel Peninsula.
These projects are at various stages of exploration with the discovery at WKP shown in blue, the most advanced and located just 10 kilometers north of our Waihi operation. We're obviously very excited about the exceptional drill results we're reporting from WKP as highlighted here and in our press releases the last several months. Based on those drill results reported to date, we've started to define a major high grade gold silver vein called the East Grawan vein that strikes over 1 kilometer is open along strike and is approximately 5 meters in average width with an average grade of 14.7 grams per tonne gold and a vertical extent of approximately 200 meters with room to grow. I'll talk to this a little more in the next slide. So moving to Slide 23.
The schematic on the left is a planned view and the reason I'm showing this is that the East Graben vein located on the right or east of this figure is just one of 3 significant fissure veins shown in red with associated hanging wall and footwall structures, similar to what I was just describing at Waihi and the Martha Underground project. The 2 other veins are the Western and T Stream veins. Both are poorly explored with significant upside as demonstrated by drilling sections today. The schematic on the right side of the slide is a geology cross section through the East Grubbin vein showing the pierce points of drill holes today color coded by gram meters. That's gold in grams per ton multiplied by the true width of the vein.
As you can see, all but one hole in the preferred Rhyolite host is above our nominal cutoff of 10 gram meters. Drilling continues off 2 platforms testing further the 1 kilometer of strike in order to establish a resource and advance the project further. Although we're very excited about the opportunity at WKP, it's early days and we have a lot of drilling ahead of us, both on the East Grabin vein and its two neighboring structures. With that said, this is an opportunity to continue monitoring as we release additional updates and continue to explore this target to its full potential. Moving to Slide 24, an exploration at Macraes.
Our press release on Macraes a few days ago highlighted the exploration success that continues with drill results confirming expectations of targets such as Golden Point. You can see from this slide that we've intersected mineralization in a number of holes extending from the historic Golden Point open pit rim to the east and down dip along the shear that is both good width and grade. These results encourage us to chase resources here that may lend itself to an underground mining operation as highlighted within the blue rectangle. Going forward, we expect to be conducting further drilling here to test this concept further. Moving to Slide 25, an exploration at Coronation North.
Recent drilling has involved targeting in field programs in support of an updated life of mine plan. Drilling is highlighted here in this aerial view is predominantly within the current pit design and drill results highlighted in the captions and bulleted on the right were in line with expectations and resulted in the conversion of approximately 14,000 ounces in the measured and indicated resource categories. So that's a brief review of the results of exploration to date at New Zealand. I'd like to hand it back to Mick Wilkes.
Well, thanks, Craig, and thank you, Scott and Michael as well for those detailed updates. Before we start the Q and A session, I'd like to outline our priorities for the remainder of the year just leave you with this thought. Our operations are performing well, delivering on production targets and generating really strong solid cash flows. We expect the 4th quarter a strong 4th quarter and are positioned well to achieve our upgraded guidance. Our organic growth opportunities are all advancing well, while exploration continues to demonstrate that we are operating in prolific gold belts, we will continue to drive further efficiencies at all of our operations whether it be through productivity improvements or the implementation of technology.
It's been a strong year for the company, and we expect we will finish up the year on a positive note. So that concludes the formal presentation segment of the webcast. Now I'll take some questions over the phone, and I'll turn back the webcast over to the moderator to facilitate. Thank you.
Thank Your first question is from Mick Shroba from Macquarie. Mick, please go ahead.
Good morning, Mick and team. Three questions from me. First, you noted that the mining of the larger monzonite stopes reduced the operating mining costs at Didipio during the quarter. What were the key drivers behind the lower processing and G and A costs? And do you see those being sustainable going forward as well?
The main I suppose the main drivers for that was the throughput that we achieved. We're still sort of, I suppose, managing that within the current guidance. The and so we're expecting sort of similar or probably slightly higher in the Q4 depending on the amount of throughput that we can put through the plant So that's it's really that production base going forward. From the Montanite areas, yes, the more competent material we've successfully able to look at the increase to the stopes, to take out some double stopes. And we'll continue to sort of work with that.
The plan has always been to have a look at sort of single stope sort of mining methodology, but where the opportunity presents itself is we'll take that opportunity.
Okay. Excellent. Thanks for that. And what percentage of the resources hosted in that montonite zone itself?
Craig, can you answer that question now?
Not specifically, Mick, but it would be well over 3 quarters. I don't have the exact number.
Okay. No problem. So just a
quick question on Haile. Were the lower grades part of the mine scheduling? Or was that a reconciliation issue? And are we to expect similar grades for the remainder of the year?
No. The quarter that we had, basically, we're transitioning. So we're coming to the sort of finalization of Phase 1 in Mill Zone and as we sort of mine through into the Snake Pit. So it was the mine scheduling. Grades will be improving this quarter.
And the reconciliation is very good today.
Okay. And my final question on Haile. It seems like operator training is one of the key challenges out there at the moment given the new equipment and some of the issues with availability. Is that right? What are some of the strategies you're implementing to kind of optimize that going forward?
Yes. Thanks, Mick. It has been, I suppose, a little bit slower than what we'd hoped to. So as I mentioned, the operators, we've targeted some job fairs at the experienced areas, and we're taking some getting some good take up of that. And so those job fairs have been in the likes of Nevada and Arizona.
And so we'll continue with that. So we have picked up some more experience as we've gone through and that's both experienced operators and experienced maintainers. We've got some experts in to do the maintenance review and we've just come out with
a list of actions there
that we're following through. And as mentioned as well from an optimize we'll continue with the training but also just with the improvement processes. We have a couple of programs that we're going at site for performance improvement, and we're adding some bench strength that with performance improvement company called Lodestone. A lot of activities are happening at the moment. But yes, we are 1 is employing experience and 2 is training the people that we have
up. Okay. That's good to hear. That's all for me. Thanks.
Thank you. Your next question is from Chris Thompson from PI Financial. Chris, please go ahead.
Hi, guys. Congratulations on a great quarter and a year so far. Two quick questions. We'll start off with Haile. Just looking I guess forward at the installation of these new mills first half of next year, can you provide a little bit of color as to potential for downtime there?
What should we be modeling?
Well, the overall utilization for the plant is in sort of edging up towards 90% at the moment. We do have quite a bit of maintenance on the spine grinding circuit that's in there at the moment. And that is also costing us more than it should. So once the new fine grinding circuit has been installed, the existing circuit will be decommissioned well, will be turned off, not necessarily decommissioned. And we do expect that the number of times for downtime for that circuit will be much less.
We'll also allow the process plant to run much more steadily. And so we're expecting utilizations around 95% to be the target over the next 12 months.
Great. Thanks for that. Just then final question, just moving on to Waihi, the East Graben. Could you just sketch out, obviously, great exploration results. I mean, the permitting process, what would be required just roughly, I guess, to develop that as an oil source for Waihi?
I mean what sort of time frame what are the hoops that need to be sort of negotiated to deliver on that?
Well, first of all, it is shaping up. It's a very good deposit and I'm confident that it will be a mine one day. The development concept is for a fully underground mine, which would have virtually zero impact on surface. And the feed would be trucked back, trucked or conveyed back to the Whitey process plant at distance of 10 to 15 kilometers approximately. We're obviously in the early stages that we are preparing now conceptual development plans with a view to starting the permitting process sometime in the near future.
So that's about where we're at the moment. It is very encouraging. It's a very exciting prospect. It could add operation as we currently envisage it.
Great. Thanks for that Mick and congratulations guys.
Thank you. There are no further questions at this time. Please proceed.
Okay. Thank you, everyone, and thanks for joining us again this quarter. There will be a replay available with our webcast later today on our website. So on behalf of the team, Michael, Scott, Craig, Sam, Jeff and everyone else who puts this there, on behalf of the team, thank you for joining us. If you have any follow-up questions, please do not hesitate to contact the team in Investor Relations.
Thanks. Bye for now.
Ladies and gentlemen, this concludes your conference call today. We thank you for participating and ask that you please disconnect your lines.