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Edited Transcript of ROXG earnings conference call or presentation 13-Nov-19 1:00pm GMT

Q3 2019 Roxgold Inc Earnings Call

VANCOUVER Dec 2, 2019 (Thomson StreetEvents) -- Edited Transcript of Roxgold Inc earnings conference call or presentation Wednesday, November 13, 2019 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Graeme Douglas Jennings

Roxgold Inc. - VP of IR

* John Andrew Dorward

Roxgold Inc. - President, CEO & Director

* Paul Criddle

Roxgold Inc. - Chief Development Officer

* Paul Weedon

Roxgold Inc. - Vice-President of Exploration

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Conference Call Participants

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* Geordie Mark

Haywood Securities Inc., Research Division - Co-Head Mining Research

* Stephen Saroki;Equinox Partners;Analyst

* Tara Hassan

Raymond James Ltd., Research Division - Mining Equity Research Analyst

* Tyron Breytenbach

Cormark Securities Inc., Research Division - Director of Institutional Equity Research

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Presentation

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Operator [1]

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Good morning and welcome to Roxgold's 2019 Third Quarter Earnings Results Conference Call. My name is Jack, and I will be your conference operator today. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the call over to Graeme Jennings, Vice President, Investor Relations. Graeme, please go ahead.

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Graeme Douglas Jennings, Roxgold Inc. - VP of IR [2]

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Thank you, operator. Good morning, everyone, and welcome to Roxgold's 2019 third quarter results conference call. Please note that certain statements made on today's call may contain forward-looking information subject to known and unknown risks, uncertainties and other factors. For more information, we refer you to our detailed cautionary note within last night's press release. Also, please note that all amounts are in U.S. dollars, unless otherwise stated. Today on the call, we have John Dorward, President and CEO; Vince Sapuppo, Chief Financial Officer; Paul Criddle, Chief Development Officer; and Paul Weedon, Vice President, Exploration, all of whom will be available for questions following the presentation.

With that said, I'll now turn the call over to John.

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John Andrew Dorward, Roxgold Inc. - President, CEO & Director [3]

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Thank you, Graeme, and good morning, everyone. Thank you for joining our 2019 third quarter results conference call today. I'd like to start off by welcoming Graeme to the Roxgold team. Graeme joined us last week as Vice President in Investor Relations, and we're excited to have him as a member of the team. Before getting into the results of the third quarter and our future outlook, I would like to take a moment to remember the victims of the attack in Eastern Burkina Faso last week and to offer our deepest condolences to their families, friends and colleagues.

While this tragic event did not directly affect our people or operations and was located a significant distance from our operations, we are deeply saddened by the senseless loss of life and stand with SEMAFO in its firm support of Burkina Faso's security forces.

In terms of the third quarter, Yaramoko continued its strong operational track record once again, achieving record mined and throughput tonnage during the quarter. Cash operating costs were $510 per ounce produced, and all-in sustaining costs came in at $834 per ounce sold, generating cash flow from mining operations of $21.1 million or USD 0.06 per share. I'm pleased to report our strong safety performance continued at site with no lost time injuries reported during the quarter.

Gold production for the quarter totaled 33,036 ounces compared to 30,532 ounces produced in Q3 last year. Ore mined was a record 131,366 tonnes, representing an increase of approximately 49% over the same period last year, which is a result of the Bagassi South expansion.

At 55 Zone, 90,311 tonnes of ore were mined with approximately 76% coming from stoping activities within 5 open stopes available at the end of the quarter. Bagassi South, 41,055 tonnes of ore were mined with 1,679 meters of development completed with stoping building later in the quarter, and I'm pleased to say that we achieved commercial production for the Bagassi South mine in September.

Average head grade for the quarter was 9.1 grams of gold per tonne. For the last quarter, we anticipate grades to increase with Bagassi South contributing a greater portion of high-grade stoping ore.

The processing plant continues to achieve record throughput rates, with 114,036 tonnes processed during the quarter, averaging approximately 1,240 tonnes per day, which is 13% above nameplate capacity of 1,100 tonnes per day.

During the quarter, plant availability was 93.2%, and we maintained a high gold recovery rate of 98%.

Turning now to our financial results. The third quarter was another strong quarter for Roxgold, with EBITDA of $17 million, reflecting the increased margin from the higher gold price while continuing to lower our costs. Adjusted EBITDA was approximately $22 million for the quarter, with an adjusted EBITDA margin of 44%. Cash flow from mining operations was $21 million or USD 0.06 per share. Adjusted basic earnings were USD 0.02 per share for the quarter. We continue to maintain our focus on operating cost improvements, with our operating costs on a per tonne basis reduced by 16% from $177 in Q3 2018 to $148 this quarter.

There are a number of improvement opportunities that have been identified to improve mine productivity as well as identifying sustainable cost reductions across our business, which we were pursuing over the coming -- which we'll be pursuing over the coming quarters. This focus on cost improvements and the improving gold price with an average realized gold price of $1,481 per ounce resulted in a very strong operating margin of $895 per ounce during the quarter. We reached a cash inflection point in the quarter after completion of preproduction capital at Bagassi South. Our cash on hand balance increased to $29 million from $19 million at the end of the second quarter, whilst we continued to fund our accretive growth opportunities with $6.1 million in pre-production capital at Bagassi South and $4.1 million on exploration spend, focused on advancing the Séguéla gold project.

Additionally, we also repaid $2.6 million of debt, bringing us back into a positive net cash position. This positive trend is expected to continue for the remainder of the year, with the fourth quarter off to an excellent start.

October set a new gold production record at Yaramoko, with over 16,000 ounces of gold recovered for the month.

Moving to exploration. We continue to be excited about the organic growth potential we have at Roxgold. At Yaramoko, all the results of the extensive auger drilling programs conducted in the first half has been received and collated, leading to the identification of several promising anomalies which will form the basis of the remaining 2019 and 2020 regional program. Highlights include the 5-kilometer by 2-kilometer anomaly on the Yaramoko Shear to the south of Bagassi South and several anomalies at the 300 Zone, interpreted to be associated with shearing within the Diorite as well as a large 4-kilometer long anomaly at Houko on the regionally significant Boni Shear.

In addition, work has started on analyzing the extensive multi-element geochemistry dataset elected during the quarter to help further refine path-finder vectors. Pilot work has shown certain vectors may be useful in helping identify blind deposits on the regional land package.

At Séguéla, drilling at the nearby Boulder and Agouti prospects continue to highlight the potential to add satellite deposits within close proximity to the Antenna gold deposit. RC drilling at Agouti returned numerous high-grade results, including 13 meters at 15.3 grams per tonne from 19 meters in hole SGRC315 and 4 meters at 37.2 grams per tonne from 32 meters in hole SGRC303.

Similarly, RC drilling at Boulder returned 13 meters at 3 grams per tonne, including 1 meter at 26.2 grams per tonne from 168 meters in hole SGRC245. Results from the drilling at Agouti and Boulder have also confirmed a revised structural interpretation of the greater than 10-kilometer long Boulder Agouti Gabbro trend, where recent aircore drilling on 200-meter spaced fences across the 1.2 kilometer area between Boulder and Agouti identified broad zones of anomalies.

At Ancien, located approximately 7 kilometers south of Antenna, a 10-hole first-pass RC drilling program was completed. Work to date suggests a similar geological setting to Boulder and Agouti, with the first 6 of the 10 drill hole program returning several high-grade intervals, including 18 meters at 5.8 grams per tonne from 61 meters in hole SGRD244. The results from the remaining holes are pending.

These results, plus 2 historic Newcrest RC holes, one of which returned 16 meters at 9.3 grams per tonne, represents an additional near-term satellite deposit target. Further North at P3, a recently completed aircore drilling program has successfully identified a steeply dipping shear-hosted quartz vein extending along approximately 1 kilometers of [struck]. Highlights from this drilling include 5 meters at 4.2 grams and 3 meters at 6.7 grams per tonne.

Follow-up RC drilling is currently underway. Further afield, an airborne geophysics program has been completed over 5 of the permits, including Séguéla, to improve the understanding of the key controlling structures and geology and to assist with refining target generation. Whilst the data is currently being processed, preliminary results are very encouraging, highlighting the effectiveness of this process for rapid mapping of key structures. The success we've had across the satellite deposits, in particular, Agouti Boulder, Ancien and P3 has led us to revise the timeline of the upcoming preliminary economic assessment on the broader Séguéla project. As you know, we were initially planning to have the PEA out to market late in the fourth quarter.

However, with the opportunity to grow the satellite deposits in the near-term to potentially add 3 to 4 new spore sources, we now expect to have a PEA ready in the first half of next year, which will provide the time for our team to properly assess the optimal sizing of the Séguéla processing facility and associated infrastructure.

By early December, we will have 4 drill rigs turning at Séguéla, and we expect the expanded project to come together quickly.

With our gold production of approximately 101,000 ounces in the first 9 months of the year, we continue to remain on track to meet the lower end of our annual production guidance to be between the range of 145,000 to 155,000 ounces for the year. As mentioned earlier, this view has been supported by an excellent start to the fourth quarter, resulting in approximately 16,000 ounces of gold recovered in October at an average head grade of 11.5 grams per tonne.

Meanwhile, we continue to be focused on costs and reiterate our guidance on cash operating costs to be between the range of $440 to $470 per ounce produced and an all-in sustaining cost between the range of $765 to $795 per ounce sold as we anticipate the higher grades witnessed in October to continue through the rest of the fourth quarter.

Our exploration spend is forecast to increase from $12 million to $14 million due to accelerating the drill program at Séguéla in Q4 following the recent successful drilling results.

In closing, the first 9 months of 2019 saw solid operating performance at Yaramoko, where we are continuing to pursue both operational efficiencies and cost control measures. With a strong fourth quarter of production expected, we are on track to reach the bottom end of our stated annual production guidance range and the top end of our cost guidance range. On the growth front, we are continuing our exploration activities regionally at Yaramoko as well as advancing the progression of the Séguéla gold project, our second development project, where we are generating a significant number of assay results, which we will be releasing over the coming months. Thank you for your time this morning, and we would now like to welcome any questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from the line of Tyron Breytenbach with Cormark.

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Tyron Breytenbach, Cormark Securities Inc., Research Division - Director of Institutional Equity Research [2]

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Guys, congrats on the quarter. It's really nice to see you show that this lower cost framework is sustainable. And obviously, it offset a lot of the grade challenges I know you had in Q3.

So there's just 2 questions from me. The first one is on Q4. And obviously, the grade looks awesome in October. And I'm just wondering, is that purely a result of the switch to stoping versus development? Or is it also linked to just maybe a higher contribution from the 55 Zone as a result of sequencing.?

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John Andrew Dorward, Roxgold Inc. - President, CEO & Director [3]

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Look, essentially, Darren, it's really just a function of sequencing where we are in both mines. So the 55 Zone has continued. It's had a really strong year this year. And Bagassi South, we've started to see some really high grades start to be returned as we've started the stoping, as you mentioned. So it's a little bit sort of -- it's not down to really one thing or the other. It's essentially -- we're now starting to see those high grades coming through from Bagassi South that we were always expecting that we would, just took us a little longer to get to. So -- but really, it's really just -- as expected, both mines have been performing well both in terms of the amount of material moved to [mine], the number of stopes that we have now, and as we saw earlier, over the last few years of the 55 Zone, as that stoping-to-development ratio improves, we typically see the grades come up, and we've seen that happen at Bagassi South. So it's a little bit of a combination of both, but we're certainly seeing on the sort of -- looking at the daily reports, some of the grades from Bagassi South have been very, very encouraging.

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Tyron Breytenbach, Cormark Securities Inc., Research Division - Director of Institutional Equity Research [4]

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Okay. That's helpful. And then just on Séguéla, I mean obviously, there were some pretty hot results earlier this week. And I think that's an asset that we probably could all use more information on. So I mean I'm looking at some of the images here in your presentation, and it looks like Antenna is really sitting in a sedimentary unit, and some of these satellites with these flash results this week are more in a kind of volcanic or intrusive package. So I think I've wrapped my head around Antenna and the strip ratio there and what it's going to look like. And obviously, we have the 43-101. But I'm just wondering, should we think about these satellites as maybe narrower, higher grade and therefore maybe shallower puts? So they're always going to be supplemental rather than kind of duplicating what you've got at Antenna. So any kind of color there would be helpful. And then I'm just wondering if you've done any early met on these satellites as we start to think about Séguéla as your growth asset.

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John Andrew Dorward, Roxgold Inc. - President, CEO & Director [5]

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No worries. Thanks, Tyron. I mean I'll have a little sort of high-level answer to the question. And then I've got both Pauls with me actually, so I'll -- they'll be able to correct wherever I go a little bit off [pieced] on that. But I think you're right. I think Antenna is certainly a sort of a more of a bulkier sort of baseload supply that we've looked at or source of ore. And you are right. I mean some of the satellites that we've been mining do -- or been drilling, sorry, do look like narrower, higher-grade opportunities. I think whether -- how shallow or deep there are remains to be seen because they're still open and we're still drilling them out. As we currently stand, we still think that it's likely that Antenna will be sort of the base load, and these other satellites will come in and provide supplemental feed. I think it's worth noting that probably Ancien has sort of risen above the pack in terms of its potential, and it is early days. It's not as densely drilled as, say, Boulder or Agouti, but that's really why we sort of hit the pause button on the PEA was because we -- Paul and his team -- Paul Criddle and his team have made a lot of progress on sizing the plant for a PEA that was essentially driven by Antenna. And the open question is whether the economics stack up to either potentially increase the throughput or look to these satellites to add mine life. So that's still a bit of an open question at the moment. I think we'll know a lot more in 6 months with the benefit of what the 4 rigs are hopefully going to find for us. But I'll let Paul Weedon talk a little more elegantly about the geological setting and context.

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Paul Weedon, Roxgold Inc. - Vice-President of Exploration [6]

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Yes. Thanks, John. Good morning, Tyron. From a geological point of view, the line of workings where Boulder and Agouti sit is actually predominantly mafic -- various mafic units with some felsic intrusives sitting within it. And broadly speaking, it's fairly similar to what we're seeing out at Shear Antenna, the mineralization's quite similar. The grade tenors are in the same range. So we're not seeing a lot of variability coming out of this, which is great from a predictability point of view. And we've just flown the geophysics, and I've seen the raw data, and that tends to support that thesis as well. But what it also does confirm is we're seeing some very strong structural controls on this mineralization. So we think the secret here is to really dig down to that structural side of things, understand that, and that will help the predictability. And we're seeing that also starting to emerge at Ancien. So yes, so basically watch this space before rigs turning.

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Tyron Breytenbach, Cormark Securities Inc., Research Division - Director of Institutional Equity Research [7]

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Okay. That's very helpful. Then just the last one from me. Maybe just quick high-level permitting expectations at Séguéla.

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Paul Criddle, Roxgold Inc. - Chief Development Officer [8]

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So it's Paul Criddle here, mate. Not dissimilar to the discussion around the deferral of the PEA, important for us to understand all of the combined pieces. The moment, the PEA kind of leads -- sorry, the ESIA, which informs the PEA, is built up from Ancien, Boulder, Agouti and Antenna. And some of the other components are very nearby and easily bolted on to the baseline PEA. But at the moment, the component pieces are as I just mentioned. So we proceeded on that basis. But as John mentioned before and Paul. Ancien, in particular, is a pretty exciting target and is forcing itself to the front of the queue. So look, at the moment, we're proceeding on those 4, but should the others come into the equation, we'll move on those. You're quite early, mate, on metallurgy. Mineralogically, looking at the core and processing the data, our view is the same. We are in the process of doing some test work on Ancien, Boulder and Agouti, and our impressions -- our early impressions are that it's one and the same. And again, it's in the regions -- it's coarse, clean gold in a quartz vein. So I don't expect it to be any different to what we've seen in Antenna.

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Tyron Breytenbach, Cormark Securities Inc., Research Division - Director of Institutional Equity Research [9]

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That was all very helpful, and congrats again.

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Operator [10]

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(Operator Instructions) Stephen Saroki with Equinox Partners.

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Stephen Saroki;Equinox Partners;Analyst, [11]

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I wanted to ask you about -- you had relatively consistently positive grade rec over time and whether or not you actually considered updating the resources and reserves to reflect that or what that would take to actually do in terms of drilling.

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John Andrew Dorward, Roxgold Inc. - President, CEO & Director [12]

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Yes. So Stephen, the grade reconciliation has pretty much been in line, sort of flat. So it is, in the sort of the universe of gold deposits, it's relatively coarse for a high-grade quartz-vein-hosted gold deposit. It's probably at the lower end of the coarseness in terms of its distribution of grade. So what you see is you would expect to see some variability in terms of reconciliation quarter-to-quarter. But if you look at it over the life of the mine, basically, we're within a couple of percent across there. So really, probably not -- I mean, which is, really, in terms of planning around your business is a great result. And that speaks to really the consistency that we've seen over the years at the 55 Zone. So we're very confident with our resource estimate that we have. We don't sort of employ a mine factor or a mine core type of arrangements to sort of judge around that because what we see, typically, as you start to move out the sample or the sample period, the actual mined grade or mine reported grade lines up extremely well with the mill's reconcile grade. So basically, essentially, what you see is what you get on a global sense, absolutely. So we always look for positive surprises, but the first thing that I wake up in the morning, to be honest, is to see if there's been any negative surprises, and then everything else is upside from there.

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Stephen Saroki;Equinox Partners;Analyst, [13]

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Okay, that's helpful. And then in terms of drilling at depth at Yaramoko, do you plan on doing that at any point in the near future to see if that can be extended?

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John Andrew Dorward, Roxgold Inc. - President, CEO & Director [14]

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Absolutely. So really, the second half of next year -- of 2020 is quite a significant underground drilling program planned. I think we -- from memory, we are at about the 600 meter level below surface, and that would be our second underground drilling platform. The first one we drilled from earlier this year. And so as the decline keeps progressing, depth, by around the halfway mark of next year, we're at 600 meters, we put a drill drive in, and we start to drill the deeper portions of the ore body. First and foremost of that program will be infilling the inferred to convert to indicated and ultimately into reserves. And then we're starting to push the deposited depth because we are trying to push along strike and also down at depth. So -- and then, in probably 18 months after that, is a second -- third iteration of the underground drilling as we continue to, hopefully, infill what we drill out next year and then keep pushing the ore body down. So we -- and as we've discussed in the past, we had a pretty good go at the ore body from the surface. And we've now reached the point, I think, where we've all acknowledged that it's getting a little deep. And this is material that's planned to be mined in 6 or 7 years' time, so to put it in context. So that surface drilling is not really open to us anymore. From the second half of next year onwards, there should -- we're going to have an active drilling program, which we should see that conversion, as I say, and also, hopefully, some extension. Paul Weedon and his team have also been working on some additional targets higher up in the system. Maybe Paul can speak quickly to that. This is a little more in terms of potential growth and potential upside.

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Paul Weedon, Roxgold Inc. - Vice-President of Exploration [15]

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Yes, Stephen, what we've been looking at for the last few months is trying to piece together the more subtle characteristics of the ore body. And what we've identified is the relationship between the mafic and the granite. And we're seeing some of that reappearing approximately 600 meters further to the west along strike. So we've got some speculative holes, it's going to go -- that are going to go into there later in the year. And we're also seeing some similar process happening around Bagassi South at [deck] and chasing some deep blind potential targets there as well as expanding further into the wider areas but looking through 100 meters below surface down to 200 or 300 meters below surface in some of these more conceptual targets. So we've spent a lot of this year really trying to understand and synthesize what we've learned the last 5 years and applying that to new potentially blind structure type targets that we're seeing coming through.

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Stephen Saroki;Equinox Partners;Analyst, [16]

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That's really helpful. I just have one more final thing. I think there was some concern when you released your production numbers that you would miss annual guidance, but if you look at October, it seems like you're well in line to actually meet your guidance, obviously not the top end, but you'll definitely meet it. It seems like this might actually be an opportunity to repurchase shares. And I was curious how you were thinking about that.

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John Andrew Dorward, Roxgold Inc. - President, CEO & Director [17]

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Sure. So you're right. In terms of October, the performance in October, where we're really seeing both 55 Zone and Bagassi South firing on all cylinders, has been very encouraging for us. A little diversion, if you will. Last week, we had the Melbourne Cup, which is a very famous race running Melbourne, not surprisingly. And I -- and I remember looking at the form guide a few years ago, and I was looking for a tip, and the person I was [trod] to said that you can go through all these things on the form guide and pick your horse, but at the end of the day, what you should probably do is pick a fast-finishing horse because when you're at the races cheering the horse on, one that finishes fast is at least exciting. So you're guaranteed a little bit of excitement. So that sort of really encapsulates, I think, the year for Roxgold 2019, we are hoping to be a fast-finishing horse and hopefully bring home the chocolates, but it's certainly -- we've timed our run, I think, well, and we're coming through. So that's probably enough of the racing analogies.

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Paul Criddle, Roxgold Inc. - Chief Development Officer [18]

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In line with our -- in the [player].

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John Andrew Dorward, Roxgold Inc. - President, CEO & Director [19]

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That is exactly right. So we have that. So back -- probably back more on track with the share buyback. I mean we've sort of looked at our recent trading performance and probably share a lot of the people -- a view of a lot of people on the call, we think the share price of Roxgold in the mid- sort of 80s, considering especially what we think is coming down the pike with Séguéla. I mean we are on the cusp of, I think, unveiling a very exciting exploration story, and that's something that Roxgold hasn't had in its story for a few years, really back to the sort of the hay day of the 55 Zone when it kept pounding out sort of 5 meters at 25, 30 grams, and everyone gets very excited about that. I think with Séguéla, we see some very good potential to follow on from what we've already delivered earlier this week and really start building some ounces there. I think what -- the work that Paul and his team have done in terms of looking at Antenna and what that could look like as a stand-alone project, then you subsequently augment it by the satellites that we're working up, I think, is very compelling. And on a relative basis for a company our size, considering that we will have the ability to finance that project without going back to our shareholders, is very compelling. And I think the opportunities, to your earlier question about extending the 55 Zone at depth, I think when I look at it in the mid-80s, I see very compelling value. So that is something that we would like to address. I think the NCIB, we've got some powder dry on that. We have a good balance sheet. We have been in blackout, as common practice, in the lead-up to our financials. This week, the shackles come off. So I think we'll see what happens without giving the punchline away.

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Operator [20]

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Tara Hassan with Raymond James.

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Tara Hassan, Raymond James Ltd., Research Division - Mining Equity Research Analyst [21]

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John, can you maybe touch on Bagassi a bit? I know it was a bit slower to come online with some equipment delays. But certainly, it sounds like in Q4, you're hitting into the good stuff in the stope. So can you maybe just talk about what you're seeing on the mining cost side per tonne and sort of how the setup looks for accessibility to stopes and where you are in those cycles in the stopes?

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John Andrew Dorward, Roxgold Inc. - President, CEO & Director [22]

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Sure. So I mean I guess, as a general comment, we're very happy with where we see Bagassi South coming up. We have had a significant personnel change on site. We've added a new General Manager, Operations, David Whittle, who has come to us from -- previously from Kinross in Russia. And David has really had a big impact over the last couple of months since he joined the company. And I think, with Bagassi South, it's -- looking back, and I don't want to drill too much on history, we were a little slow out of the gates on that, which was a bit disappointing, but that's certainly been rectified now. And I think we've seen that with our development rates underground and the ability to have the stopes open. In terms of the mining costs, I don't have that sort of split out on a mine-by-mine basis. Typically, look at Yaramoko as a whole, and that's the way the contract's structured. So they're not sort of separated out. But mining costs has looked very, very good for us. I mean Q3 mining costs were $93 a tonne compared to $98 in the previous quarter and $115 for the same quarter last year, Q3 2018. So it is -- it has been sensitive to the increase in volumes, but there's also been some benefits like with the renegotiation of the mining contract and some other sort of enhancements where we've seen that. So we've been happy with that performance on cost and looking to continue to really sort of bite down on those costs and make sure that we maximize our margin. But I think at Bagassi South in terms of stopes, we had 2 stopes open at the end of September. And I think we had 5 stopes open at the end of -- in October, sorry, at 55.

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Paul Criddle, Roxgold Inc. - Chief Development Officer [23]

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I think that the -- one of the -- It's Paul here. One of the things to note is that the mill in this time, and John pressed it before, has really ran particularly hard. So both 55 and Bagassi South are continuing to sort of match that fairly linear ramp-up that we're seeing in the mills. So I think, yes, we are mining in ore spots than the plan, say, at three months, considered it at Bagassi South -- are go -- consider Bagassi South, but there are many at the moment. So we're pretty happy how both projects are performing from a productivity basis. And as John mentioned earlier, on a reconciliation basis, we're also happy in that sense too.

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Operator [24]

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Geordie Mark with Haywood Securities.

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Geordie Mark, Haywood Securities Inc., Research Division - Co-Head Mining Research [25]

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Questions may have come up earlier. So sorry for my repeat, if I do. Maybe following on, first ,from Tara's questions on mining and certainly as a segue on to -- from what you were saying, that $93 a tonne for mining costs. Do you see any further sort of cost reduction relating to that renegotiated mining contract?

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Paul Criddle, Roxgold Inc. - Chief Development Officer [26]

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Look. Yes, Geordie, it's Paul here. We do, following on from -- we produced our updated [life of mine] here. Last time we revisited this exercise, we got about a 12%, I think, reduction for a much shorter extension than what we are contemplating. So we do expect that we are able to generate a fairly substantive reduction unless there are indications from the contrary to this stage, but we've got to get through that. But we're fairly confident we can turn up with something fairly substantive in the next year.

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Geordie Mark, Haywood Securities Inc., Research Division - Co-Head Mining Research [27]

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Okay, great. And obviously, the plant's going well at north of 1,400 average for today, I guess, for October. Do you think that's kind of the ceiling there and a sustainable rate? And I guess it's going to marry with the mining rate that you're doing?

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Paul Criddle, Roxgold Inc. - Chief Development Officer [28]

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No, it's pretty exciting, actually. I think the project turns into a fairly normal mining project these days where the mine is all [stressed out right]. The mill going past what's normal. It has -- things have advanced a little bit past what the initial design criteria was. And what's -- I think there's a thesis evolving that as the project, i.e., both Bagassi, given that 2019 has been a big development year at Bagassi and in some respects for Zone 55, producing bigger, coarser material, feeding the mine -- the mill, sorry. Throughputs have been challenged by that bigger material as we move into an environment where it's a more steady state, it can be a stoping environment. And I say that particularly at Bagassi South. I think the throughputs come up -- I think throughput has come up linearly with that ratio. So I think that will continue. We've got some pretty clever experts in [RMC] and [RF Tech] involved in some work at the moment. And excitingly, that bottleneck, I think, isn't necessarily at the SAG mill. I think it is extending to other things like tailings, pumps and CIL screens and other things like that. So I think we've got some real opportunities from a -- to debottleneck the project that's outside of breaking rocks out of the mine.

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Geordie Mark, Haywood Securities Inc., Research Division - Co-Head Mining Research [29]

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Great, great. And can you remind me what the kind of fixed cost base is there for the plant?

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Paul Criddle, Roxgold Inc. - Chief Development Officer [30]

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At the moment, we are about 40% -- it's just under 50% fixed cost compared to the price (inaudible).

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Geordie Mark, Haywood Securities Inc., Research Division - Co-Head Mining Research [31]

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Sorry, man. I lost you there.

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Paul Criddle, Roxgold Inc. - Chief Development Officer [32]

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That's 48%, 49% fixed cost in the mines.

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Geordie Mark, Haywood Securities Inc., Research Division - Co-Head Mining Research [33]

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And maybe over to the other pool. Just maybe further to the question on Yaramoko, any additional work on the geology to look at internal geological controls and plans direction of high-grade shoots within Yaramoko there? And is it helping you to better assess grade distribution within that -- I guess, within that plane? And is this dilution grade distribution, et cetera?

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Paul Weedon, Roxgold Inc. - Vice-President of Exploration [34]

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Yes. Look, it's a really topical point for us right now. The guys underground are doing a remapping exercise for a lot of their stuff. And we're pushing quite hard now on reworking the geo stacks and marrying that back in with what we're seeing from the mapping itself so key structures, short-range interval controls, what are the orientations and how we can project from level to level. And we're starting to see something coming up that, really, it is quite supporting what we're seeing -- what we saw in the resource modeling process earlier this year, which is really encouraging. But it's also giving us a greater degree of predictability. The other thing that's coming out of this is the fact that the guys are now starting to really pay attention to what's happening on the previous levels, both in terms of the geotech conditions as well as the grades themselves, and they're now able to, with an increasing degree of confidence, project that down to the levels below and get ready for what's coming through and try to make some more sense of the more isolated but higher-graded infills that we've been getting, which previously we've kind of gone, well, we're not really sure what's there. Now we're looking at it and going, actually, we know what's there, and we can go out and get something decent out of it. So in short, yes, we're starting to push quite hard on that. It's showing some benefits. It's starting to be fed back into what the resource and the grade and draw modeling is showing.

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Geordie Mark, Haywood Securities Inc., Research Division - Co-Head Mining Research [35]

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Okay, great. Maybe if I can ask one more. Stepping back on a more holistic sort of corporate sort of thesis there. Obviously, acquisition of the asset in Côte d'Ivoire, it seems to have been going very well, and it seems to be adding value, obviously, between, I guess, Monday, and now the -- obviously, the thesis for the company was to take a bit more time to integrate the results coming in from the satellites. We can't see much detail on Ancien and et cetera, but can you give us some more detail in terms of the geology and how that -- how those, I guess, visibles are aiding you to give you some more confidence to delay the PEA and considerations on what sort of systems they are? And second to that, I guess, what's the sort of scale you would be looking at for the PEA in terms of throughput and et cetera?

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Paul Criddle, Roxgold Inc. - Chief Development Officer [36]

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Yes. Look, I'll pick up the geology part of it, and I'll pass it over to the other Paul for the PEA discussion. So around Ancien and [Mozan Z] it broadly is all hosted in the same overall package. Within that, we've got a series of quite broad shear zones, very similar mineralization between those shear zones and within those shear zones. Specific with Ancien, we've got drilling now for 200 meters, strike length. It's looking really quite sexy through there. There's results coming through at the moment, it's looking good. We're seeing more of the same. We've got no sense at the moment of just how deep this thing can go. We've drilled down to about 100 meters, 100 vertical meters. And we've done a total of 10 holes. So it's a little bit premature to speculate, but I'll tell you what, it's a pretty nice looking little deposit so far. With respect to how it's pitched in the PEA. I'll hand you over to Paul on that one.

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Paul Weedon, Roxgold Inc. - Vice-President of Exploration [37]

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Geordie, the way the philosophy to date, as we've talked about a few times, and you can see from the technical report, Antenna is a really robust anchor to the project. And then we're taking the philosophy that let's size for the moment, let's size the infrastructure, made the plant, power and the -- [can't] and the rest of it around that as a starting point, and we will backfill what we -- should be a sensible mine life and production rate with these other items. Now the fact of the matter is we've mined the asset for less than a year, and we've turned up with half a dozen pretty sexy targets that are coming into a mine plan as we speak. And so I think it's going to be a bit of a balance as to -- not rushing, speeding towards what's a very exciting 6-, 7-, 8-year target to something that it could be potentially more exciting. But I think, if I look at the first half dozen things that Paul and the guys are throwing towards the team to turn to mine plans, you know they're really solid supplementary items that won't necessarily change the scale of the infrastructure we're contemplating at Antenna, but Ancien is something that's pretty interesting. We'd like the guys to get a bit more of a handle around that before we sort of put a line item in the PEA. So I know I'm sort of talking in pretty broad terms, but we think we've dialed in the scale of the project around Antenna. But we'd like to get a little bit more meat on the bone, something like Ancien, in particular, before we put a line item on that.

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Paul Criddle, Roxgold Inc. - Chief Development Officer [38]

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100%.

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Operator [39]

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This ends our time for questions. Mr. Dorward, I turn the call back over to you.

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John Andrew Dorward, Roxgold Inc. - President, CEO & Director [40]

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I'd like to thank everyone for joining the call today. Hopefully, you've got a bit of a flavor for all the excitement that we feel for, especially across Séguéla and the recent sort of operating performance in Yaramoko. We think we're well positioned to finish out this year and then also deliver a very interesting 2020. So if there's any follow-up questions, please don't hesitate to address them through either myself or Graeme, and we look forward to speaking to you again when we report our year-end results. Have a good day. Thank you.

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Operator [41]

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This concludes Roxgold's 2019 third quarter earning results conference call. We thank you for your participation. You may now disconnect.