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Edited Transcript of AGB.V earnings conference call or presentation 14-May-19 3:00pm GMT

Q1 2019 Atlantic Gold Corp Earnings Call

Vancouver May 16, 2019 (Thomson StreetEvents) -- Edited Transcript of Atlantic Gold Corp earnings conference call or presentation Tuesday, May 14, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Chris Batalha

Atlantic Gold Corporation - Corporate Secretary & CFO

* Maryse Belanger

Atlantic Gold Corporation - President, COO & Director

* Sean Thompson

Atlantic Gold Corporation - Director of IR

* Steven G. Dean

Atlantic Gold Corporation - Chairman & CEO

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Conference Call Participants

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* Andrew Rostislav Mikitchook

BMO Capital Markets Equity Research - Analyst

* Chris Thompson

PI Financial Corp., Research Division - Head of Mining Research

* Kevin Mackenzie

Canaccord Genuity Limited, Research Division - Analyst

* Raj Udayan Ray

Desjardins Securities Inc., Research Division - Analyst

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Presentation

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Operator [1]

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(Operator Instructions) Good morning. My name is Leoni, and I'll be your conference operator today. At this time, I'd like to welcome everyone to Atlantic Gold Corporation Q1 Financial Results. (Operator Instructions)

At this time, I would like to ask Director, Investor Relations, [Steven] Thompson to begin the conference. Please go ahead.

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Sean Thompson, Atlantic Gold Corporation - Director of IR [2]

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Welcome everyone, and thanks for calling in. My name is Sean Thompson, Director of Investor Relations for Atlanta Gold. I'd like to refer you to the statements of disclosure in the May 13, 2019 news release, the financial statements, and management discussion and analysis. Please note we will be making forward looking statements on the call.

At this time I'll pass the call over to Chairman and CEO, Steven Dean.

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Steven G. Dean, Atlantic Gold Corporation - Chairman & CEO [3]

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Thank you, Sean. And welcome everybody to the Atlantic Gold Q1 2019 Conference Call. Also on the call is Maryse Belanger, our President, and COO, and Chris Batalha, our Chief Financial Officer. I'm going to introduce the results and then hand it over to Maryse and Chris to get a little more granular in terms of those results.

I'm pleased to announce and confirm that we -- in Q1 2019, produced 19,612 ounces, our net income was CAD 5.3 million, our adjusted EBITDA was CAD 15.7 million, our all-in sustaining cash gross margin was CAD 713 dollars per ounce which is US$535 per ounce at the 75% exchange rate.

Our cash costs were CAD 689 per ounce or US$517, and our all-in sustaining cash cost for the quarter were a little higher than average guidance at CAD 874, US$655 and Maryse will go into more detail as to the reasons behind that. We are pleased to confirm our guidance for full year, and we remain confident in achieving our all-in sustaining costs and cash cost guidance of between CAD 695 $755 per ounce for the full year or approximately $521 to $566 per ounce US at [CAD 0.75] exchange rate. During the quarter, we also made an investment in Velocity Minerals.

We earned a 20% position approximately there plus a convertible debenture that is converted would allow us to own approximately 37% of that company. And we'll talk a little more about the rationale behind that investment later in the call.

But at this point, I'd like to hand the call over to Maryse and she will talk about our operations and safety during the year -- actually the quarter, sorry.

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Maryse Belanger, Atlantic Gold Corporation - President, COO & Director [4]

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Okay. So thanks, Steven. I'll start with the operation. We know that in the first quarter the company experienced higher than average guidance cost. And I wanted to say that those costs reflect a planned lower production and this is due to our mining sequence. Mining occurred mostly in the southwest part of the pit, where we had a large number of historical underground workings that required backfilling, in order to operate safely, and that resulted in increased drill and blast cost, also slowed things down, so lower average daily mining rate and increased dilution.

Also, due to our reserve increase that we previously announced and pit design modification, we also had an influx of low-grade material under run of mine to the point where that stockpile in front of the primary crusher at one point, it would be equivalent of 45 days of production. And to continue to operate safely, we had to take it down and we could not really discriminate. We just needed to move that material and processes. So it resulted also in slightly lower grade than what we had planned.

Finally, in the pit, we also cleaned up the entire west side where we are now at ultimate pit wall. So, no more work to be done in the future in the north and the west. So great progress in the pit slowed down by underground workings, but overall, previous quarter all in all. We -- operations were also affected by a couple of other events.

Then to operations and conditions that were pretty challenging with freeze and thaw, and also we had planned some major maintenance shutdowns for the quarter, including our very first mill liner change and a slight rebuild for the mining fleet. So those are slight rebuilds on our -- it's essentially mining trucks going on a rotation to rebuilt up to 12,000 hours of operations.

We had some unplanned downtime because of several power outages, brutal Atlantic storms and we also experienced damage to our transformer at the mine. And finally got over these difficult operating conditions. Obviously, the denominator is cash cost per ounce are also partly higher due to lower number of ounces produced.

So the majority of the challenges in the first quarter are not representative of what we expect for the remainder of 2019. And-- because most of these issues are seasonal and non-recurring. So I'm happy to reiterate our guidance for this year and demonstrate it by April and now we're mid-month of May, I fully expect that those numbers for guidance will be met. So all in all, the operations produced 19,612 ounces compared to the prior year at 18,183, and the company sold 19,173 in the quarter compared to the 17,187 in 2018.

During the quarter, we pretty much mined the same number of tonnes of or as per 2018. Material moved to a slightly lower, but as mentioned earlier, this was due to maintenance activities and to rebuild on the mining fleet. In terms of the process, 527,950 tonnes that were processed at an average rate of 1.2 milligrams per tonne. That compares to the 419,150 last year at an average grade of 1.44. Miller recoveries are still excellent. During the quarter, we once again exceeded design. A design criteria for recovery at 94% sorry -- design criteria of 94%, and we achieved 95% recovery, and the mill throughput averaged approximately 5,866 tonnes per day.

And we all are now by into spring conditions, and we do expect to return to our planned average throughput rate of 6,300 tonnes per day. I'll say you a few things on environmental and permitting, so all of our major environmental permits are in place for mining and processing of Touquoy, and the baseline environmental data EBITDA again, has been collected since late summer, and early fall of 2014.

The permitting process is underway at Beaver Dam. And as of February 28, a revised EIS was submitted, and that had the responses to information request received by the federal and provincial regulators. Approval from both the federal and provincial environmental assessment offices are expected to be received in Q1 2020. And at this point, Atlantic intends to submit the environmental impact statement for Fifteen Mile Stream and Cochrane Hill in Q2 and Q3.

A bit on the outlook and after that I will pass on the -- the call to Chris Batalha, our CFO. On the outlook, we are maintaining our target production at 92,000 to 98,000 ounces of gold. Other cash cost of CAD 550 to CAD 610, again that's Canadian dollars, and all-in sustaining costs between CAD 695 and CAD 755.

It is going to be a continued focus on the company's balance sheet through planned debt reduction. As mentioned completion of the EIS for Fifteen Mile Stream and Cochrane Hill, and also progressing and finally obtaining the approval for Beaver Dam.

On the Phase 3, which is the resource and the reserve expansion program at our projects, we still have to convert the existing inferred mineral resources to upgrade them to indicated and measured category. And did -- this work will happen this year and we will have subsequent reserve estimates update. Cochrane Hill, we also need to further test the robust zones mineralization which is interpreted to be open at depth into the east.

In addition, we have an improved and updated structural understanding of the deposit that leads us to believe that there is additional areas to be drilled and remaining potential at Cochrane Hill. For Touquoy, where we had the reserve increase at the end of the year, we still have inferred mineral resource to drill off and we do it with the objective once again at the end of the year, to increase our reserve base. And we need to complete the detailed evaluation of the 149 Deposit to define a Mineral Resource and further explore to the east along strike for similar mineralized body.

By the way, the 2019 program has already commenced and our initial program is 5,200 meters and this is to further evaluate the strike extensions of both the Limb and Axis Zones and also to look for similar deposits along strike to the east. The results of this work will be reported when all the assays are available, and that's later in Q2.

And concurrently with the drilling program, we need to complete further engineering studies that will lead to the completion of a feasibility study on the Fifteen Mile Stream and in Cochrane Hill. And the studies will cover all aspects of mining, processing, tailings and water management to arrive at a detailed cost estimate that will support project development.

The technical report that we filed last week includes placeholders for operating costs and capital costs. We know they are going to change as stated in the report, and we also expect the operating costs to benefit from the change in the flow sheet to single stage crushing and SAG milling as opposed to the three-stage crushing plants we have in offering at Touquoy. We see some real benefit in changing the front and design and flow sheet and that should greatly benefit in terms of not only operating costs, but ease and -- of operation, and also simplicity and also limit having to deal with dust issues, for example.

The Phase 4 corridor program, we have received encouraging results from Seloam Brook, Mill Shaft, Cameron Flowage, and we plan on following up during the year. And we have a number of targets in the vicinity of the Beaver Dam deposit. In the corridor globally, we have identified 11 exploration targets through the -- a 3-month exercise that included completion, interpretation, and targeting for some of these areas. So 11 top-priority targets that we plan on drilling this year. That program could ultimately comprise 100,000 meters of diamond drilling distributed through the Touquoy-Beaver Dam-Fifteen Mile Stream Corridor.

And we also plan on commencing regional exploration of the recently acquired land position in the southwest of Nova Scotia where our geologists believe there is unexplored potential to hold gold deposits very, very similar in style to those contained in the Moose River Corridor.

So very, very busy year, not only busy spring, but busy year in front of us. So that was my summary on operations and at this point I'll pass it off to Chris Batalha, to discuss financials.

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Steven G. Dean, Atlantic Gold Corporation - Chairman & CEO [5]

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Maryse, before Chris takes away, I think you are going to also comment on safety.

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Maryse Belanger, Atlantic Gold Corporation - President, COO & Director [6]

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Oh, yes. Thank you Steven. As I keep saying to everybody here at the mine and out of the mine today, there is no gold production that's not safe production. We ended up the year and the quarter with very, very good safety record, and once again, the province has nominated us for T.J. Ryan Safety Award. So very, very good performance also in terms of safety.

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Steven G. Dean, Atlantic Gold Corporation - Chairman & CEO [7]

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Thanks, Maryse. Chris, would you like to talk on the finance?

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Chris Batalha, Atlantic Gold Corporation - Corporate Secretary & CFO [8]

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Thank you, Steven. I will start by talking about cash position and change in cash. (inaudible) that the change in cash is not only reflecting continued operating cash flow from operations at Touquoy, but it's continued investment in growing the business through exploration development of the other deposits along with, as Steven alluded to, meaningful our investment -- our strategic investment velocity. Our cash and cash equivalents decreased CAD 14.2 million from CAD 50.3 million at December 31 to CAD 36.1 million at March 31.

Again due to our strategic investment of both in Velocity of CAD 9 million, a net settlement of CAD 9.6 million of investing expenditures, the majority of which were accrued in the fourth quarter of 2019 and settled in Q1 and that comprised of CAD 5.4 million in investment and exploration activities on the company's Phase 3 and Phase 4 drilling programs as well as CAD 4.2 million in development expenditures relating to environmental permitting, desktop engineering studies on the other 3 deposits.

We also spent CAD 3 million investing activities, most of which relate to in the quarter growth and sustaining capital expenditures, primarily for the redesign of the water reclaim and decant systems and for dam raising activities at the TMF and CAD 2. 2 million in financing activities mostly covering interest and other financing charges on the company's revolving credit facility and equipment lease facility. All those outflows are partially offset by our operating cash flow after working capital adjustments of CAD 9.7 million.

Moving on to the P&L, in terms of revenue during the 3 months ended March 31, the company sold 19,173 ounces of gold at an average price of CAD 1,587 an ounce, compared to 17,187 ounces sold at CAD 1,619 an ounce. Again all figures are Canadian dollars. This resulted in net revenue of CAD 30.4 million for the quarter compared to a total revenue of CAD 28 million in Q1, although please be aware, CAD 28 million won't show on the comparative statement as we only present on the P&L the period for which we commence commercial production which was just the month of March. So that's why you will see only CAD 12.8 million in the comparative period.

In the first quarter, we delivered 14,876 ounces of gold into fixed price contracts under our hedge facility and the remaining ounces were sold at spot. In the first quarter of last year, we delivered roughly half and half between hedge and spot. Please note net revenue is net of treatment and refining costs.

From a net earnings perspective for the 3 months ended March 31st, the company had net income of CAD 5.3 million, and comprehensive income of CAD 5.9 million dollars. Net income increased by CAD 2 million when compared to the comparative period. Again most operating income activities in the comparative period reflect 1 month's worth of commercial production.

Mine operating earnings during the 3 months ended March 31st was CAD 9.7 million compared to CAD 5.9 million in the same quarter for prior year. Finance costs increased CAD 1.249 million from the same quarter in the prior year.

And in terms of total financing costs, again it's CAD 2.2 million versus CAD 2.8 million in the prior year, given we had to capitalize some of the financing costs prior to commercial production in the prior year. It's reflective of reduced loan balances and equipment and revolving facilities and lower interest rates that we have in the quarter.

Summary, again a broad summary of our profit and loss statement. Mine operating earnings of CAD 9.7 million, net of CAD 3.3 million in G&A, CAD 2.2 million in financing, a gain -- accounting gain on investment of Velocity Minerals of CAD 2.9 million, net income before tax of CAD 7.1 million, and net income of CAD 5.3 million after a deferred income tax loss of CAD 1.8 million. The composition of mine operating earnings is CAD 30.4 million in net revenue as discussed less CAD 13.7 million in cost of sales, and CAD 7 million of non-cash depreciation and depletion.

In terms of general and administrative costs, the company incurred CAD 3.3 million compared to CAD 2.4 million in the prior period, again due to increased professional fees as we required as a growing operation, and reflective of additional management fee salaries and benefits to align compensation with our current stage of operations.

The current G&A costs also include stock based compensation of CAD 1.8 million versus CAD 1.1 million in the prior year. And that's again led by the fact that we have additional stock option grants in the period, which increases the number of options that are still vesting, as well as a higher share price at the time of grant which increases the value per option. Deferred income tax, deferred loss we've noted as CAD 1.7 million to the non-cash accounting loss versus the recovery of 743,000 in the prior period. Again the expense we stated in the prior quarters doesn't represent current taxes payable, but it's recognized as a result of temporary taxable differences resulting from the income generated at Touquoy continuing loss which are categorized as deductible differences.

I will repeat briefly in terms of our margin, we have average realized margin per ounce sold at CAD 898. And in terms of all-in sustaining cost from margin per ounce sold is CAD 713 for the 3 months ended March 31. And another metric that we look at very closely are 2 other ones, our adjusted EBITDA, which is at CAD 15.6 million in the 3 months ended March 31, 2019 versus CAD 7.3 million in the prior period. And operating cash flow, we have CAD 9.7 million in the current 3 months versus CAD 4.2 million in the same 2 months in the prior period. We also have CAD 15.5 million of operating cash flow prior to changes in working capital in the period compared to CAD 7.3 million in the prior.

That concludes my discussion. So at this point, I'd like to pass it back to the operator, who can open the lines for any question.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Andrew, BMO Capital Markets.

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Andrew Rostislav Mikitchook, BMO Capital Markets Equity Research - Analyst [2]

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Congratulations on a reasonable start to the year and looking forward to better things. Maryse, can you just comment on the progress of moving through these voices whether that's completely behind you in Q1 or is there an extended impact into Q2?

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Maryse Belanger, Atlantic Gold Corporation - President, COO & Director [3]

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No, we believe this is over. We resolved these issues with our geotech consultant where we decided to go with very, very large production [blocks] that allow the material to just flow normally by gravity, and those underground workings being backfilled pretty much on their own. With that material, the amount of material that we blast at once. So I do not expect any of this for the remainder of the year.

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Andrew Rostislav Mikitchook, BMO Capital Markets Equity Research - Analyst [4]

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Okay. And then, just in terms of the permitting sequence, would there visible milestones of further, I don't know, public commentary periods, or disclosed questions and requests coming from the government throughout the year, like what should we be expecting to see?

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Maryse Belanger, Atlantic Gold Corporation - President, COO & Director [5]

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Steven, do you want me to address this question?

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Steven G. Dean, Atlantic Gold Corporation - Chairman & CEO [6]

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Yes. I think, we both can have a go at it. The process Andrew, as you know, is a 365-day timeline from the filing of the finally registered EIS. And for each of the projects starting with Beaver Dam, that project description was conformed and agreed, and then we had to conform the filing of the EIS, which was conformed. But then were subject during -- and that's when the 365-day timeline starts -- were then subject to requests for further information, as stakeholders filed those requests through the CEA agency, and then the CEA agency met with them. And then if they're important, they will pass them on to us as the respondent. And when that happens, usually the clock on that 365 timeline stops. That's exactly what happened with Beaver Dam, that was a little more complicated so far as the some of the rules in relation to groundwater modelling changed within Canada and we had to respond to those, and so that was an extended stoppage in the timeline due to the additional groundwater drilling that we had to undertake, the permitting for that et cetera, et cetera. That clock is now ticking again, having supplied that information back to the agency. The EIS 4, Fifteen Mile, and Cochrane Hill, when filed will be subject to the same stoppages. I have to say though in the recent news, you may wish to add a comment here, I think we've learned a lot and the agency, and the Maritimes they've also advanced their thinking in terms of the process and I think the process will be a much more efficient streamlined one for Fifteen Mile and Cochrane Hill, going forward. Maryse, you have a comment on the timeline of sales of those 2 properties?

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Maryse Belanger, Atlantic Gold Corporation - President, COO & Director [7]

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Yes. I wanted to add, Andrew, that our expectation is that the Beaver Dam 1 will be completed in the first quarter of 2020. So, we have gone back, responded to all of their requests with Beaver Dam, completed the groundwater modeling, and now we know that we just have to address the questions. So, Beaver Dam should be in the first quarter of 2020. As Steven mentioned, we've learned our lesson. So we don't expect to have those gaping holes in the documents that will be submitted shortly. I expect that Fifteen Mile Stream will be filed in the next few weeks and Cochrane Hill after that. And once the process starts, we would expect that within a year and a half we would be very, very close to the finish line.

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Steven G. Dean, Atlantic Gold Corporation - Chairman & CEO [8]

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And Andrew, just more specifically to answer your question in the event that there are substantial requests for further information in the timeline, then we would update in our quarterly reports if and when that happens and the sorts of timing that that will impact.

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Operator [9]

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Chris Thompson, PI Financial.

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Chris Thompson, PI Financial Corp., Research Division - Head of Mining Research [10]

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Congratulations on a good start of the year despite, obviously, challenging weather conditions. Just 2 quick questions. I guess one really relates to the technical report and maybe CapEx allocation obviously for Cochrane and Fifteen Mile. Have you got a sense of how we should be apportioning this by year?

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Steven G. Dean, Atlantic Gold Corporation - Chairman & CEO [11]

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Apportioning what per year?

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Chris Thompson, PI Financial Corp., Research Division - Head of Mining Research [12]

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The CapEx. I mean I have CAD 315 million. I guess the question would be looking at 2020, 2021, 2022, how should we be spreading out that?

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Steven G. Dean, Atlantic Gold Corporation - Chairman & CEO [13]

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Well, I don't think we're going to get -- we're going to give you that granularity of a schedule at this stage. As Maryse just said earlier in her report, Chris, we've got quite a bit of work still to go on fine tuning particularly the flow sheets at 51 Cochran Hill. And as you said the federal report contained numbers, the OpEx and CapEx which were more or less based on the PFS that we filed in January 2018, not material changes actually from those. And as she said they are placeholders essentially because what we expect as a result of these studies that are underway right now is that we'll probably elect to go with a slightly different flow sheet than those -- than the assumptions in that 2018 study had and likely to go a 2 stage crushing with SAG mill versus 3 stage in (inaudible) at Touquoy. And so to answer your question it's premature to be giving you too granular a CapEx schedule that's being worked on. But for your broad modeling purposes, I would sort of assume in the first half of the construction period about a third of that CapEx and weight it to the back end because that's typically what you see in a consulting project with most of the CapEx two-thirds going to the second half of the 12-month construction period.

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Chris Thompson, PI Financial Corp., Research Division - Head of Mining Research [14]

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Thanks. Thanks, Steven. I appreciate that. Have you got a sense of when you'll be tabling the feasibility study with the refinements, just a matter of timeline?

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Maryse Belanger, Atlantic Gold Corporation - President, COO & Director [15]

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Chris, Maryse here. We are looking at 4 months.

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Chris Thompson, PI Financial Corp., Research Division - Head of Mining Research [16]

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Four months. Okay. Perfect. Thank you. And then just finally guys just an operational question. Your strip I think was 0.55 in the quarter. How should we be looking at that for the remainder of the year?

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Maryse Belanger, Atlantic Gold Corporation - President, COO & Director [17]

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I would expect the stripping to remain between [0.5 and 1.21], Chris.

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Operator [18]

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Raj Ray, Desjardins Securities.

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Raj Udayan Ray, Desjardins Securities Inc., Research Division - Analyst [19]

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So a few questions from me. First on the operations side, how should we look at the great profile over the next 3 quarters given that you have reiterated the guidance? Is it going to be the same or do you expect some variability quarter-over-quarter?

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Maryse Belanger, Atlantic Gold Corporation - President, COO & Director [20]

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Hi, Raj. Thanks for the question. First on the grade, I would expect that we will end the year at average grade -- average -- sorry -- at an average of around 1.4 for the entire year.

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Raj Udayan Ray, Desjardins Securities Inc., Research Division - Analyst [21]

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So, does that mean the next 3 quarters is going to be similar grade to get to that average 1.4? Or is 1 quarter higher than the other?

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Maryse Belanger, Atlantic Gold Corporation - President, COO & Director [22]

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I expect the third quarter to be higher.

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Raj Udayan Ray, Desjardins Securities Inc., Research Division - Analyst [23]

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Okay. And then on the exploration for Phase 4, how does the news flow look for the rest of the year?

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Maryse Belanger, Atlantic Gold Corporation - President, COO & Director [24]

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I'll just say 1 quick thing. On the 149 Deposit where we started drilling last month, I would expect before the end of Q2 to (inaudible). And further up, I would expect the news flow to be more towards -- lead to Q3 and then Q4.

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Raj Udayan Ray, Desjardins Securities Inc., Research Division - Analyst [25]

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And then on the CapEx and exploration spend, in Q1 it was close to CAD 13 million, is that kind of the run rate for the rest of the year or on a quarterly basis or it's going to be lower?

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Maryse Belanger, Atlantic Gold Corporation - President, COO & Director [26]

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I'll say 1 thing and then I'll let Chris finish the answer. One of the things that has happened at the mind in operation is that we finalized the tailings dam race to the 124 level. So that is done and I don't expect to spend a lot of money on tailings dam for the rest of the year. So that was 1 of the big ticket items. The good news on this is that we now have 4 meters of [free board] and lots of capacity, but for the rest and remainder of that answer, I'll let Chris go ahead.

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Steven G. Dean, Atlantic Gold Corporation - Chairman & CEO [27]

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And Maryse, I might add before Chris gets more granular. Q1 was a heavy -- relatively heavy CapEx and sustaining CapEx quarter for the reasons that Maryse just described. For example, the TMF raise was achieved ahead of schedule and exploration expenditure was also heavier in the first quarter because of the overflow from the intense activity up to year-end for all of the resource and reserve drilling which supported our resource and reserve update in March of this year. And as we have said, other than that our -- we basically down tools for the compilation interpretation and targeting program in the first quarter with the exception of 149. So the exploration expenditure will be back ended, ramping up in Q2, but much more intense activity in Q3, Q4 as we drill off those targets and we infer mineral resources, and we target the depth that remains for the extensions at Cochrane. And Chris, it is that a broad enough and accurate enough statement in terms of the timing of CapEx?

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Chris Batalha, Atlantic Gold Corporation - Corporate Secretary & CFO [28]

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Yes, Steven. In fact, I'm not sure how much more to add other than I can -- just reiterating that the cash outflow from an exploration development perspective was quite heavy-handed in the first quarter given cash outflows settling payments from Q4 of last year, but there will be some ramped up activity toward later half of the year from exploration. And there'll be that maintained activity from a cost related permitting and engaging on the feasibility study. So I think, from our exploration cap -- exploration development perspective, and the investing area, it will be lower than Q1, but it will still be active.

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Raj Udayan Ray, Desjardins Securities Inc., Research Division - Analyst [29]

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And 1 last question if I may. Back to the comment that -- Maryse, you mentioned on the front-end design changes. Is that front-end design changes applicable to 2 core at Fifteen Mile and Cochrane altogether?

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Maryse Belanger, Atlantic Gold Corporation - President, COO & Director [30]

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No. it's just on the crushing and grinding. So [communication] at Fifteen Mile Stream, Seloam, and Cochrane Hill only.

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Raj Udayan Ray, Desjardins Securities Inc., Research Division - Analyst [31]

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Okay. So the capital -- so you can probably get a benefit not only on the operating cost, but on the capital as well if you decide to go with a single space crush?

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Maryse Belanger, Atlantic Gold Corporation - President, COO & Director [32]

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We don't know yet. And we do not find out this is really premature to talk about detailed CapEx, because at this stage we have completed a trade off study. We have completed some of the testing, because we need that crushing and grinding to work. But still a little too early to discuss detailed cost.

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Steven G. Dean, Atlantic Gold Corporation - Chairman & CEO [33]

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And just -- and Raj, just to be clear, it's two-stage crushing, and then secondly what the other option I guess is the current 3 stage platform.

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Operator [34]

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(Operator Instructions) Kevin Mackenzie, Canaccord.

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Kevin Mackenzie, Canaccord Genuity Limited, Research Division - Analyst [35]

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Most of my questions have been answered, but starting with operations, what was the mine's grade for the quarter?

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Maryse Belanger, Atlantic Gold Corporation - President, COO & Director [36]

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I didn't want to be quoted on this, but the number that comes to mind is 1.06 and I can't verify that for you. Okay.

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Kevin Mackenzie, Canaccord Genuity Limited, Research Division - Analyst [37]

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Perfect. And then do you have any idea with regards to I guess what was processed from the stock, probably the total tonnage?

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Maryse Belanger, Atlantic Gold Corporation - President, COO & Director [38]

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You mean what was processed?

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Kevin Mackenzie, Canaccord Genuity Limited, Research Division - Analyst [39]

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Yes. (inaudible).

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Steven G. Dean, Atlantic Gold Corporation - Chairman & CEO [40]

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What was extracted from the stock stockpile, Maryse. I don't think we know that answer right now. Do you?

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Maryse Belanger, Atlantic Gold Corporation - President, COO & Director [41]

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No, I don't because I cannot split right now from the top of my head direct feed versus stockpile.

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Kevin Mackenzie, Canaccord Genuity Limited, Research Division - Analyst [42]

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Okay. Next question I have is just going through the production schedule, the 2019 life of mine plan, my read through for 2019 here is for much higher strength and grade. How does that reconcile with kind of the guidance you've provided here? Am I reading it wrong?

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Maryse Belanger, Atlantic Gold Corporation - President, COO & Director [43]

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Okay. So I think the key thing, and that's really as much clarity that I can provide, so our life of mine plan is based on the resource model, whereas all of our detailed planning and what we know (inaudible) is done on our great control model. And those 2 are in a way quite different because we have data very, very close space data. And we do get our grade control data 6 -- on average 6 months ahead of mining. So what we know is and what we work with on a day to day basis is a different model. So based on what we know 6 months ahead of mine ops going in (inaudible) and extracting what we know is what I quoted with that between 0.5 and 1 to 1 strip ratio based on the resource model giving you a different answer.

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Unidentified Analyst, [44]

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Right. Okay. Just moving forward I'm just trying to figure out how to reconcile that. I mean is the idea that life of mine is reconciled to the life of mine plan or is there I guess some potential differences to be thought about here?

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Maryse Belanger, Atlantic Gold Corporation - President, COO & Director [45]

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They have differences in those 2 models but because we know if you take all of the last year where our grade control model reconciled with the mill production within 1%, we do trust our grade control model. To give an example we do we need for business planning, not the resource model.

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Steven G. Dean, Atlantic Gold Corporation - Chairman & CEO [46]

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Kevin, just to help try and explain. And I think, Maryse has already answered on the previous questions what you're asking. The grade is expected to average for the full year 1.3 grams to 1.4 grams; one. Two, the strip ratio for the remainder of the year as she said will be between 0.5 and 1 to 1. Three, in relation to the grade control and resource model reconciliation as we have disclosed in previous press releases and in our teaching, what we are finding is that the higher density up to (inaudible) spacing of the great control drilling. We are identifying quite a significant additional tonnage of lower grade material, material between 0.3 and 0.75, and that material for the most part goes to what we call the low-grade stockpile in which we have about 3 million tonnes accumulated mine today. And we expect that to grow to as much as potentially 10 million tonnes, and all of that was assumed in the resource model to be waste. So that's a good example of where the resource model will differ from the grade control model because we're seeing and picking up that lower grade halo of mineralization in our grade control that would have otherwise gone to the waste stockpile. Part of that, of course will end up depending on the cut off, part of that tonnage that low grade halo will end up in the run of mine ore and add additional tonnes to that tonnage, but also by adding additional tonnage, it may impact the grade because we're taking some of that assumed waste in the resource model and putting it through the mill. So you're seeing a dynamic of a cut-off strategy, of grade control granularity, and high definition gives us more information about the fact that there is a lot more tonnes in 1 year. The first year of operation we generated in excess of 2 million tonnes at 0.5 -- I think at 0.55 grams, which we have stockpiled and which we'll process at year end. So, that's the dynamic that I think it needs to be appreciated.

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Kevin Mackenzie, Canaccord Genuity Limited, Research Division - Analyst [47]

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And just last question and Chris have asked it, but just want to get some clarification. Did you say that the feasibility is expected in 4 months. Is that right?

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Chris Batalha, Atlantic Gold Corporation - Corporate Secretary & CFO [48]

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Well, the stock that -- Maryse I think you meant the study work on the trade off will be completed in 4 months, yes?

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Maryse Belanger, Atlantic Gold Corporation - President, COO & Director [49]

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And so as far as getting the release results, when to expect those?

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Steven G. Dean, Atlantic Gold Corporation - Chairman & CEO [50]

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Maryse?

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Maryse Belanger, Atlantic Gold Corporation - President, COO & Director [51]

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Sorry. I was on mute in default.

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Operator [52]

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Andrew Mikitchook, BMO Capital Markets.

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Andrew Rostislav Mikitchook, BMO Capital Markets Equity Research - Analyst [53]

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Yes, I mean just to follow up, these scheduling or stockpiling that you were faced with in Q1, where you said you had to essentially consume some of the stock mile that was now sitting in front of the mill. Is that situation also resolved or are you at least in Q2 or onwards expecting some sort of constraints of about growing the stockpile to -- I think Steven quoted something like this could grow to up to 10 million tonnes?

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Maryse Belanger, Atlantic Gold Corporation - President, COO & Director [54]

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Okay. Andrew, when I made the stockpile, it was the run pad stockpile where you know we have very limited space and 270,000 tonnes where that was excessive. So that stockpile now is down, it's very manageable and it's down to around 110,000 to 120,000 tonnes which we can easily manage. So I don't expect another build up like this in in the rest of the year.

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Steven G. Dean, Atlantic Gold Corporation - Chairman & CEO [55]

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Andrew we appreciate the difference. Well I was talking about what we call a low grade stockpile and what Maryse is talking about from an operations perspective are run pad stockpile which are quite different, had some different stockpiles.

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Andrew Rostislav Mikitchook, BMO Capital Markets Equity Research - Analyst [56]

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Okay. And appreciating the difference between the great control mine plan and the resource based mine plan. All else being equal, should the rate of low-grade stockpiling we've seen essentially since you turned on the mine, is there any reason that at least for the balance of the year that would just continue that there'd be in your expectations a continuous significant build in low-grade stockpile for at least this year?

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Maryse Belanger, Atlantic Gold Corporation - President, COO & Director [57]

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Yes. We expect a significant build.

Thank you.

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Operator [58]

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Thank you. There are no further questions at this time. Please proceed.

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Steven G. Dean, Atlantic Gold Corporation - Chairman & CEO [59]

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Thank you, Leoni. And on behalf of the team, I'd like to thank you all for dialing in and listening in. And I also thank you for your questions. And we look forward to the next call. Thank you everybody.

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Operator [60]

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Ladies and gentlemen, this concludes your conference call today. We thank you for participating and ask that you please disconnect your line.