Good morning and good afternoon, ladies and gentlemen, and welcome to the OceanaGold 2018 First 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 April 26, 5:30 pm Eastern Time. I would now like to turn the conference over to Mick Wilkes.
Please go ahead.
Thank you. Good morning, good evening to everyone and welcome to OceanaGold's Q1 2018 results webcast and conference call. It's a pleasure to be here with you today to discuss what I think is a very positive start to the New Year. I'm joined here today by members of the Oceana Gold executive team who will provide specific commentary on our operational and financial results. Michael Holmes, our Chief Operating Officer, will walk you through our operational results and what we are expecting from each asset for the remainder of the year.
And Scott McQueen, our Chief Financial Officer will discuss the continued strengthening of our balance sheet from our strong financial results achieved in the Q1. I'll also very briefly discuss the start of permitting for the Waihi mine life extension, which is a major milestone for the project. Before I start, just reference to the presentation adhere to International Financial Reporting Standards and all financial figures denominated in U. S. Dollars unless otherwise stated.
Also note that the presentation contains forward looking statements, which by their very nature are subject to some degree of uncertainty. There can be no assurances that our forward looking statements will prove to be accurate as future results and events could differ materially. Please refer to the disclaimer on forward looking statements in our presentation. So let's get started. On Slide number 3, the highlights.
I'm pleased to report that we had a positive start to the year with production in line with our expectation, increased cash position and continued advancement of our organic growth initiatives. Continued to advance the 10 year mine life extension at Waihi with the start of the permitting process, and I'll discuss that a bit more later. Operationally, we had a strong start to the year from our high quality assets with production generally in line with our expectations and opportunities to further improve on this performance going forward. Financially, we delivered another robust quarter while making prudent capital investments. Also in the quarter, Didipio continued to be recognized globally for its environment, safety and social performance, receiving additional awards and nominations.
In addition to the Q1 results, we also announced changes to our Board. Bill McCatton, Diane Garrett and Joey Levistae will not be standing for reelection from the Board at the next AGM in June. While Ian Reid has been appointed to the Board joining Nora Chen Castel, who was appointed a month ago. Nora brings over 25 years of experience in the public and private sectors including significant mining experience. Ian has held several senior level positions in Caterpillar Distributors and served as President of Finning Canada for 11 years.
Both Nora and Ian will strengthen our Board and we are excited to have them on our team. We, of course, do wish Bill, Diane and Joey all the best in the future. Moving on to Slide 4. Just an overview. On a consolidated basis, our operations produced 125,600 ounces of gold and 3,900 tonnes of copper.
We are particularly pleased with the production from Haile, which delivered a strong quarter despite a severe weather event at the beginning of the year, which resulted in reduced mill availability. Cash and all in sustaining costs were higher this quarter from a slight increase in costs and the timing of sales at Haile. We do expect costs will come down over the course of the year. We are very comfortable in driving our unit costs lower at our at all of our operations. With slightly higher production and sales expected in the second half of the year, we would naturally see lower costs.
We continue to deliver strong financial results with revenue of $197,000,000 which is partially aided by higher gold price. We recorded an EBITDA of US101 $1,000,000 and a net profit of US45 $1,000,000 Our adjusted earnings per share on a fully diluted basis was a healthy $0.06 which was slightly better than the consensus of $0.05 while our adjusted cash flow per share was $0.15 per share, which was a solid beat on the consensus of $0.12 per share. We continue to deliver strong returns on invested capital, which in the Q1 was 10%. This follows our trend of positive returns in each quarter dating back to 2010. Our robust return on invested capital demonstrates that the investments we are making are prudent and designed to generate long strong returns.
Our EBITDA margin for the quarter was a solid 51%. Now EBITDA margins are one of the highest in the gold sector. Now expectation is that we will remain near the top given our high margin, low cost structured business. I'm very pleased with our results and continued positive momentum. With our strong start to the year, we're well positioned to continue delivering consistent positive results.
Moving on to Slide 5 and a discussion about Waihi and the mine life extension there. Very pleased with the continued advancement of the Martha project at Waihi. The start of the permitting process for an additional 10 year mine life extension was a major first step and milestone. The permitting process includes community consultation at which we have now hosted several events. The feedback we've received thus far been very encouraging with strong support from the town of Waihi.
As always, we continue to engage with the community to discuss our plans as effectively as we can and address any concerns they may have. The town of Waihi is all too familiar with the mine plans of this nature, given that Waihi has been in operation since 1988. And during this time, the town has seen 4 pit cutbacks and several underground mining operations, including Carrenso, where mining activities are directly beneath the town. In this permitting phase, we have asked the consents to allow us to mine under the Martha Pit, where we are targeting a resource of 500 to 700,000 ounces to be mined from underground. Additionally, we are seeking to safely reopen the Martha Pit and access the 77,000 ounces currently sterilized by the pit wall failure that took place in March 2015.
The drill drive development beneath the Martha Pit continues to advance well with the 920RL drive 85% complete, while the 800RL Drive is about 35% complete. We have completed fan drilling from 4 drill cutties along the 9 20RL and continue to intercept veins with similar widths and grades that we've previously published and have been mining over the past 2 years. Drilling from the 2 underground drill drives will continue over the next 18 months with an objective of resource definition and conversion over that period. We'll also have completed project studies during this period and we'll provide further updates to the market in due course. The advancement of the Martha project is an exciting opportunity for everyone involved.
We expect it to deliver significant value to our shareholders and significant socioeconomic benefits to our host community and stakeholders in the broader region. So now I'd like to turn the presentation over to Michael Holmes, our COO, to discuss our operating performance in the Q1. Thanks, Michael.
Thank you, Mick, and good morning, good afternoon, everybody. I'll spend the next few minutes just going through our operational performance, which has been mentioned is in line with our expectations despite some severe weather events at Haile and some operational challenges at Waihi. We move on to Slide 7. Our safety and health performance remains an important focus for our business. At the Q1 at the end of the Q1, our rolling 12 month total recordable injury frequency rate was flat at 3.96, driven by an excellent safety performance at Waihi, which had no total recordable injuries in the quarter.
The behavior of our workforce continues to be a driving force in delivering a work environment that is free of injury. One important area for introducing a behavioral safety program is the encouragement of looking after yourself, your work colleagues and reporting all hazards, incidents and injuries, some of which may not have been previously reported. When we do this right, we are better able to assess our safety performance to make the necessary changes to deliver a strong improvement. It is also important that we have a look at the principal hazards and the fatal risk management and the controls we put in place with that. And we're doing this through a process of auditing and the potential investigations.
Looking at the operational performance, moving on to Slide number 8. The gold production delivered at Haile was in line with expectations of 37,049 ounces and a result of higher than expected grades from the Mill Zone pit and continued strong recoveries. The operational performance, however, was hampered by an unseasonal cold event in South Carolina that took place in early January. The process plant experienced an unplanned stoppage due to water pipes freezing. This event and the following operation works impacted the mill throughput through the mill to the equivalent of a 2 week shutdown or approximately 125,000 tons of throughput.
Following this event, we made the necessary reparation and modifications to the piping design with lagging and hinge tracing to ensure the pipes don't freeze again. With this event and the subsequent reparation, mill utilization dropped to 78%. Despite the shortfall in mill feed, higher than expected grades out of the mill zone and recoveries at 82% kept the gold production in line with our expectations. The severe weather event did have a slight impact on mining activities as well, which resulted in less ore mined being less ore being mined. Following this event, we experienced a spike in maintenance within our mining operations.
During the quarter, most of the ore was sourced from the mill zone, including an area in the northern zone of mill zone, which improved in grade with further in pit drilling and grade control. Mining from the Snake Pit continued and this low grade material ore was stockpiled. Costs at Haile were higher than originally planned and due mainly to the challenges I have mentioned. As the quarter progressed, we did see some significant improvements to the contained costs. For example, our average mining costs were at $2.49 per ton for the Q1.
However, our mining costs in March were down around $2.09 per ton, which is in line with where we expect our mining costs to be for the year. Although the severe weather event was unexpected, operator performance and productivity and maintenance programs are still areas that we continue to focus on and do require some improvement as we progress through the mine. We are confident that these areas of focus will transition into our high standards of operation in the near future. This is not too dissimilar to Didipio where we train the workforce to our standards of operations including safety performance. We are also looking at implementing the MINESTAR, which is a GPS and data collection technology designed to monitor and optimize equipment productivity for further improvements.
Processing unit costs are also expected to decrease as we progress process more material through the plant and maintain improved utilization rates. We are finding the ore to be a bit more abrasive than expected, which is leading to wear and tear of some of the parts within the plant. This occurrence is not unusual for a new plant and although it does cost some additional capital today, it is not expected to hinder our overall plant performance over the long term. Looking ahead for the rest of the year, we expect production from Haile to be similar in the second half as is in the Fetus part and our costs are expected to come down towards our guidance range. Moving on to Slide 9.
The expansion of Haile continues to progress as planned, and we expect to commence the permitting of a large open pit, the underground mine at Horseshoe and the associated mining infrastructure in the middle of 2018. In the meantime, we have 2 projects planned for the year as part of the debottlenecking process to achieve higher throughput rate and enhanced recoveries. We continued to achieve grind sizes of 19 microns as well as achieve close to design recovery rates. To achieve the throughput improvements to 4,000,000 tons per annum, we will be installing a pebble crusher, which is expected to be in place in the Q3. The pebble crusher will allow us to achieve higher rates when processing harder ore.
It reduces the workload on the side mill and allows us to open the grades, allowing additional material to pass through. The current regrowing circuit is unable to handle the higher throughput rate with the grind size reduction. So we progressed the engineering procurement of a tower mill and a nizer mill we expect which we expect to commission in the Q1 of 2019. Moving on to Slide 10, and Didipio in the Philippines. The operation remains the top performer for generating strong cash flows while delivering a strong performance in health and safety, environment and community.
Operationally, we are pleased with the start we have had at the Didipio, particularly with the early performance of the underground. Ramp up of the underground is progressing to plan in the Q1, and we successfully completed the first trial stope and with the commissioning of the paste fill plant, filled this stope. We are progressing the development and drilling, and we are targeting the production from 3 stopes for this quarter. We also commissioned the primary pump station, which is capable of pumping at a rate of 6 50 liters per second, thus allowing us to open additional stoping areas, increase the mining rates as planned. Costs are generally aligned with expectations thus far.
And for the rest of the year, Didipio's production in the first half is expected to be slightly stronger in the second half. If we go to the next slide, you'll see the diagram and the image of the underground as we're progressing through it to the end of March. What you see in the gray is the underground workings that have been developed and the orange represent the planned development for 2018. In the Q1, we advanced approximately 1600 meters of development in the underground. The construction of the Panel 2 of the underground is also progressing to plan, and we expect to have this second mining phase completed by the end of 2019.
At that time, the underground will source 1,600,000 tons of mill feed with the remainder of the ore being sourced from the stockpiles to be fed into the plant. We closed out the first quarter with more than 21,000,000 tons of open pit stockpile, which will be blended with the high grade ore from underground for processing for the remainder of the life of the mine. Moving on to Slide 12 and Waihi, located on the North Island of New Zealand. The Waihi operation had an excellent quarter, as mentioned, for safety. And some of our safety initiatives that I've mentioned earlier are having a noticeable positive impact.
With respect to production, Waihi gold production decreased quarter on quarter, which was expected and due to the mining in the lower grade ore zones in underground in the Daybreak, Graysian Pyle and Christina veins. Having said that, the Q1 production was slightly lower than budget due to lower equipment availability. We were fundamentally down 1 BOGA for much of this quarter and this led to a drop in tons and tons processed, which has resulted in higher unit costs. Today equipment availability has returned to normal levels, and we're experiencing strong productivity improvements at the operation. We do expect to make up the production shortfall from the Q1 over the course of the year.
We also expect the unit cost to decrease as the year progresses. Production in both halves of the year are expected to be similar. And as Mick mentioned earlier, we have commenced the permitting process for the 10 year mine life extension at Waihi, which is a major milestone and an exciting opportunity for many people involved within the project. Moving on to Slide 13. In Macraes, located in the South Island of New Zealand, you see that the operation started the year on the lifeblood of good production on the back of some high grade material from Coronation North, then processed in better than expected recoveries at 85%.
Oil tons mined for the quarter were lower quarter on quarter as a portion of ore to waste or waste to ore increased and due to the mining waste areas at the Coronation Mall to establish future ore mining areas. We also experienced a drop in ore tonnes mined from Fraser's underground due to unplanned maintenance of underground equipment as well as scenarios where the ground conditions were poor. Costs were in line with how the operations performed and we expect it will decrease particularly with the unit costs as the year progresses. The main drivers to achieve the higher production and sales less waste mined at Coronation North and better productivity at Fraser's underground. With these changes through the year, we expect the second half of production will be better than the first half production, and we're expecting very strong cash flows from Macoes over the next couple of years.
I'll now turn it over to Scott McQueen to discuss our financial performance. Thank you. Scott?
Thank you, Michael. Hello, everyone. Moving to Slide 15, which provides a summary of our financial results. While on a quarter on quarter comparison, our financials reflect lower consolidated production and sales, this was expected and Q1 is consistent with guidance. Despite this, our financial performance in the Q1 remains strong.
Revenue was a solid $197,000,000 which on an annualized basis is actually higher than 2017. Naturally, higher gold prices were a key contributor. As you can see at the top right of the slide, this is reflected in an average gold price across the quarter $13.40 per ounce. As Mick mentioned earlier, we continue to deliver strong margins with our Q1 EBITDA of $101,000,000 again representing a margin above 50%. However, despite this strong result, we recognize our costs for the quarter were higher than planned in some areas, primarily additional maintenance costs Michael spoke of.
So we continue to focus on bringing those costs back in line to further enhance our already strong margins. Net profit for the quarter was $45,000,000 reflecting the strong revenue margins generated. We also saw a reduction in depreciation quarter on quarter, reflecting the lower production as the majority of our depreciation is allocated on the units of production basis. We also saw lower corporate and G and A and finance costs. You recall, in the previous quarter, we recognized a deferred tax asset of just under $18,000,000 associated with the initial recognition of tax losses and timing differences at Haile.
That tax benefit was reflected in the high Q4 profit figure also. In the Q1 of this year, we didn't have any similar one time tax benefit. And as a result, our net profit after tax includes a tax expense that reflects the prevailing tax rates applicable to accounting profits in New Zealand and the U. S. Moving to Slide 16, which provides a summary of the key attributes of our cash flow.
As shown, cash flow from operations was strong at $77,000,000 on the back of solid operating results combined with the higher average gold prices received. This is despite approximately $18,000,000 in the quarter of negative working capital movements and 4,400 ounces of gold, which was produced at Haile, but not recognized as sales in the quarter. Cash flow used in investing activities is lower than the previous periods, reflecting a significant decrease in growth, capital and general operating capital. As noted in the books, the largest uses of capital for the quarter included pre strip at Macraes and Haile. We also continued developing the Didipio underground, which included both capitalized mining cost and some growth capital associated with advancing Panel 2 and the commissioning of the primary pump station.
I'll cover a little bit more on the capital in the latter slide. Also included in investing capital, as you note in the last call up there, was $4,300,000 in equity contributed to Gold Standard Ventures in the quarter that was to maintain our 15.7% stake in that entity. Cash flow used in financing was also lower, mainly reflected repayment of equipment leases during the quarter. We didn't make any debt repayments against our credit facilities in the quarter. The next payment we expect to make $50,000,000 late in the second half of the year.
Moving to Slide 17, which covers the key features of our liquidity and debt. You see we ended the quarter in a stronger financial position than we started. Cash balance increased from $73,000,000 at the end 2017 to $89,000,000 at the end of the quarter. Our total liquidity increased to $119,000,000 at the end of the quarter. Includes $30,000,000 of undrawn credit facilities.
As you note on the slide there, excludes around $71,000,000 in marketable securities that we hold strategic investments. There's only a modest reduction in our debt via lease repayments. You see our net debt position at the end of the quarter stood at 146,000,000 dollars Total debt being the $200,000,000 we have drawn on our facilities and $36,000,000 in equipment leases. Previously mentioned, we expect to make another $50,000,000 payment against our facilities at the end of the year. In terms of the hedging book, at the end of March, we had approximately 108,000 ounces of gold remaining from Macraes over the balance of the year.
You can see from the summary there on the right, New Zealand dollar gold price that we're in the collar during the quarter and there were no realized gains or losses on the gold hedges. In regards to copper, we had 9,000 ounces, so that's just under £20,000,000 for our North American participants remaining on our 2018 swaps at the end of the quarter. These are a fixed price of $3.19 per pound. In Q1, we realized only a modest gain, dollars 200,000 It is worth noting, however, that fairly substantial drop in the copper spot price later in the quarter did result in us recognizing a material unrealized gain on the open position of approximately $6,000,000 Moving to Slide 18, in CapEx. In total, we can see the quarter on quarter CapEx has fallen around 30 percent, dollars 52,500,000 as illustrated in the more detailed table at the bottom, growth capital for the quarter was predominantly deployed at Didipio and Haile and related to the continued development of the underground at Didipio and the commencement of the expansion of the process plant at Haile.
Bulk the corporate growth shown on the last column there relates to rehab at Reifton. In terms of pre stripping, you can see the bulk of the activity during the quarter was at Macraes and that related to Coronation North and also Haile in relation to the Snake Pit. This is consistent with plan and we do anticipate more of the pre strip costs being incurred in the first half of the year. Exploration costs were mainly focused on expansion opportunities around Waihi, where we continue to see good results that support the target of 10 year mine life extension that's been previously mentioned. We also continue to drill around Haile looking for further enhancements there.
So overall, we're tracking in line with our capital guidance. With that, I'll turn back over to Mick to provide a wrap up. Thank you.
Thanks, Scott and Michael. Before we move on to Q and A, we'll just I'll just take you through the outlook for the remainder of the year. So on Slide 20,
as you've heard, we've had
a good start to the year and I'm very happy with where the business is now, and I'm excited about what's to come. As I've mentioned before, we have created a highly profitable business and one that operates in a balanced way where we pay down debt, return wealth to shareholders and continue to make prudent investments in the business. Production in the path to the Q1 is where we expected it to be, and we do expect production in the second half to be slightly better than in the first half. Our organic growth projects are expected to create significant value and are progressing to plan. We will provide updates on all these projects as the year progresses.
We're on track to deliver our guidance and strong cash flows. We continue to be one of the highest free cash flow yielding gold companies, the one that delivers EBITDA margins at or near the top of the sector and one that continues to achieve strong return on invested capital. So that concludes the formal presentation segment of the webcast. We'll now take some questions over the phone. I'll turn the webcast over to the moderator to facilitate this session.
Thank you.
Thank Your first question is from Michael Slifirski from Credit Suisse. Michael, please go ahead.
Thanks very much. I've got 4 straightforward questions if I may please. First of all, starting with Haile. I'm slightly confused about what that profile might look like. So if you have the pebble crusher installed in, I think you said Q3, does that allow you then to operate at 4,000,000 tons or is permitting required before you can get to that 4,000,000 tons?
And if you're at 4,000,000 tons at that point in time, do you sacrifice recovery because you can't maintain the grind size? So can you just talk about that profile between permitting, debottlenecking the grinding circuit and then adding the fine grinding what that looks like from throughput and recovery please?
Thanks Michael. So the permit there is no permit required to take the plant up to 4,000,000 ton per annum. We have permits in place that will allow for that throughput and that occurred through an amendment to the designation of the Haile Mine as being a rural in rural area as opposed to being in an urban area when it initially permitted. So we don't need to permit a higher throughput. What we do need to permit is the larger open pit and associated waste facilities and the underground.
Secondly, the pebble crusher is to expand the front end of the plant and that will allow us to go well above the 3,000,000 ton per annum at least from the Q3 onwards. However, we're still constrained by throughput in the back end, particularly the fine grinding circuit. So we don't expect to be operating at full production rate in the Q3 as would be allowed by the addition of the pebble crusher. The new fine grinding circuit with the tower mill and the IsaMill will be commissioned in the Q1 next year and that will be a considerable boost to the capacity of the plant and allow us to increase throughput, reduce the grind size of the concentrate material and improve recoveries. And then we'll see how the plant performs next year, but we've always said we'll invest capital to debottleneck the process plant and push the plant as hard as we can before investing further capital.
Yes,
that's I think that's clear. So basically say from sometime Q1 you'll be at 4,000,000 tons and that that improved recovery. So those 2 events happen together.
Well, we're not saying we'll be at 4,000,000 ton next in the Q1 next year, but we'd certainly be expecting to be up around the 3,000,000 to 3,500,000 tonne range.
Okay. Thank you. Secondly, with respect to Didipio, I think you said last year that you were applying for a change in the permit to allow you to go beyond the 3,500,000 ton license limits. You've delivered a pretty strong quarter throughput this quarter above that rate annualized. Has there been any progress on that?
And can you get that permit adjusted while you're still operating under the suspension order?
I'll ask Michael to answer that question. Michael, thanks.
Yes, certainly. Thanks, Nick. Thanks, Michael. We are still under the 3.5%. We've reapplied with the increased ECC sorry, the increased throughput through the ECC.
So that is going back through the government process. So we're and they've accepted the application and so they're just working through that at this point in time. That's about as far as I can give it, say, Michael, until we sort of get some further understanding. That being said, the government is showing some positive signs with regards to, I suppose, working with the mine. And as far as the suspension order is, we've had the audits that have come out.
The have put their audit group out and the government's working through the outcomes of those audits as we speak.
Okay. Thank you. And clearly with on Waihi and the permitting required there, I'm seeing a public consultation going well. Where are the potential showstoppers? I'm trying to understand where the power lies if the public are offside, does that make the government offside?
If the public are onside, can the government still say no?
Michael?
Yes. The part of the process is to start the consultation. And then following the consultation, we put the application forward. And that the consultation process is to get all the concerns from the community. And I suppose the areas of concerns that we are seeing is residents on the north wall and residents under the potential REX ore body.
And so and a lot of that is just understanding what the impacts are going to be. And the beauty I suppose we have got is that we are mining Carintho, which is the town at this point in time. So we know what the impacts of those of that mining is going to be. So as we work through this process, we will consider always those concerns and then it then goes through the formal application to the council and then through the process of the payment which we're forecasting to take around about 18 months.
Okay. And that 18 months, is that defined by some form of 3 timetable or is that just
No, it's our estimated timetable and it does include, I suppose, process where we do go to the environmental court. So and that's been a historical process of consenting at Waihi.
Okay. Thank you. And then the final one is on your G and A. I'm trying to understand how you've classified G and A and various versions of it I seem to be able to come up with like 3 versions. There's the G and A you give by site and what we want to sense, so normally when we see cash costs, cash costs include site G and A.
So in the way you're presenting them in this new format, are all your G and A costs site G and A costs now outside your cash costs? Secondly, when I do the math around the G and A per ton that you have in the summary table and multiply it by the tons, I come up with a different G and A figure and then there's the G and A figure that you have in your little P and A. So, I wonder if you could help me put the 3 of them together and understand what sort of protocol you're following there please?
Thanks, Michael. I'll ask Scott to speak to that.
Sure. Michael, the G and A site G and A is included in cash cost and that hasn't changed any costs associated with G and A at site. We have G and A or we said as the corporate group cost as G and A and there are separate ones that are referred to in the finance. And they ultimately are not in the cash costs, but they would be recharged through management fees and other mechanisms and ultimately end up in the all in sustaining cost calculation.
Okay. So the stuff that you have in those little tables between the cash cost and the all in sustaining cost, that's simply corporate G and A recharge is what you're saying. But some of those individual corporate G and A recharges then leaves an amount for real corporate corporate. Is that how we should think about it?
Yes, that's correct. You're referring to the MD and A, Michael, is that right?
Yes, I am. Yes.
Yes. The G and A that's separately disclosed down there is the recharge corporate G and A. All of the G and A that you would think of as site G and A is up in the cash cost area.
Yes. Great. Thanks, Scott.
Thank you.
Thanks Mark.
Your next question is from Mike Perkin from National Bank. Mike, please go ahead.
Hi, guys. Thanks for taking my call. I was just kind of wondering on Haile with the regrind towers you're planning to put in there in the Q1, is there going to be can you tie those in? Like is there enough room in the plant where it won't be a disruption to the throughput? Or would there be any kind of major downturn that we should kind of factor in into our Q1 estimates for tying in the new one and pulling at the old series?
Mike, in the slide pack on Page Slide number 9, the picture on the top is the actual design, the engineering design for the new fine grinding circuit. You see it comes off to the side of the main process plant. So that is under construction now. And the only shutdown required will be the tie in, which would be 1 or 2 shifts. So it won't impact on the production significantly.
Okay. My other questions have been answered. So that's it for me. Thanks guys. Good quarter.
Thanks. Thanks Mike.
Thank you. Your next question is from Mick Skroba from Macquarie. Mick, please go ahead.
Hi, Mick, Michael, Scott. A question on Didipio. So it appears that one of the key operational challenges at Didipio is the water management and potentially ground control. What level of water ingress are you currently experiencing? And what was it like taking that first trial stope?
And how are you managing that with the fill and blasting going forward?
Okay. Thanks, Michael. So we've got a detailed water model, which was developed prior to the start of development of the underground. And we've been tracking the water flows against that model. And that's within the boundary within the margin of estimation.
So we're currently pumping around 3 50 to 400 liters a second, and that's from all the mined out areas. So we're developing at 600 meters a month in development drives. We're mining a stope a month roughly and the water flows are within expectations. The water flows have not affected the ground conditions and nor have they affected the pace fill. But of course, it is, as I've mentioned before, the biggest risk for the Didipio underground is water.
And that's why we've got 100% redundancy in there with this pumping system and then some to make sure that we stay on top of it.
Okay. And so I guess it's within the model so the cost the life of mine cost would remain unchanged?
Yes, the cost that we've estimated include of course the cost of pumping water and the power associated with that. We do expect it to flatten out around the 450 to 500 liters a second. That's what the model suggests.
Okay. Thank you.
Thank There are no further questions at this time. Please proceed.
Okay. Thanks, everyone. That concludes our webcast and conference call for today. We look forward to another strong quarter and the rest of the year as we progress. You can see a replay of this website, sorry, this conference call on our website later today.
So on behalf of the team, Michael Scott and the rest of the team, thanks for joining. And if you have any follow-up questions, please don't hesitate to contact either Sam or Jeff and Investor Relations team in Toronto and here in Melbourne. Bye for now.
Ladies and gentlemen, this concludes your