Allied Gold Corp (AAUC) 2024 Q3 法說會逐字稿

Thank you all for joining us this morning. Before I turn the call over, I need to advise that certain statements made during this call today may contain forward-looking information, and actual results could differ from the conclusions or projections in that forward-looking information, which include, but are not limited to, statements with respect to the estimation of mineral reserves and resources, the timing and amount of estimated future production, cost of production, capital expenditures, future metal prices and the cost and timing of the development of new projects.

For a complete discussion of the risks, uncertainties and factors, which may lead to actual financial results and performance being different from the estimates contained in the forward-looking statements, please refer to Allied Gold's press release issued yesterday announcing third quarter 2024 results as well as the management's discussion and analysis for the same period and other regulatory filings in Canada.

I would like to remind everyone that this conference call is being recorded and will be available for replay later on today. Replay information and the presentation slides accompanying this conference call and webcast are available on Allied Gold's website at alliedgold.com.

I will now turn the call over to Peter Marrone, Chairman and CEO. Please go ahead, sir.

Operator, thank you very much. Joining us this morning are Johan Stoltz, Daniel Racine, Jason LeBlanc as speakers. We have other members of management here to answer questions. I will provide a preview, an update on corporate matters, and then I'll pass the call over to management. Let's dig right in, beginning with production.

Production compares well to the comparable quarter and for the nine months. Sadiola, Bonikro and Agbaou production was above -- were above the comparable period, and they're trending up. Korali-Sud, what we were referring to historically as the Diba area, provided nominal contribution to Sadiola in the quarter. There were no meaningful operational issues. It was entirely timing of the introduction of a new mining code in Mali and the timeframe for the production coming from Korali-Sud to contribute to the Sadiola production.

Korali-Sud production is consistent with plan. It will contribute meaningfully in Q4 and into 2025, and it's doing what it's supposed to do, which is to bridge production while we engage in the expansion for Phase 1 at Sadiola, while that is completed. As you read in our public disclosure, Phase 1 is now in progress. We expect to have it implemented by late 2025, and there will be an overlap with Korali-Sud. So the production increases are expected next year and into 2026.

Timing of sales plus Korali-Sud, the nominal contribution coming from that, they did contribute to costs. So the costs were higher than we wanted them to be for the quarter. We deliver costs based on ounces sold rather than ounces produced. And so with that timing of sales and with a lessened production in the third quarter as the new mining law was introduced and we were going through the permitting process, it did contribute to costs. But once again, in terms of what we're seeing on production more generally, we're seeing costs in line with what are our expectations and with an increase in production in the fourth quarter, we expect that the unit costs, the ounce -- the cost per ounce will decline.

We began mining at Korali-Sud. We did incur costs. We stopped with the introduction of the new mining code pending permitting and the result of all of that contributed to the costs for the third quarter. That will not be true going forward. So going forward then, in the fourth quarter, we expect a production platform, as Johan will more fully speak to, of 98,000 ounces to 102,000 ounces.

That will represent a 17% increase over Q3, and it rounds out the year. It will establish Sadiola plus our Cote d'Ivoire complex, the two mines in Cote d'Ivoire at a sustainable production platform of 375,000 to 400,000 ounces per year. A lot of effort has been made on improvements to mining, to processing, exploration and in-country relationships and relations, and also in managing our financial position with cash flow, tax management, advancing financing plans. We continued with the advancement of the Kurmuk project, and as I mentioned a few moments ago, starting the Sadiola first phase expansion. They are on schedule.

They are on budget. And with better outflows management with Kurmuk capital expenses this year now well below forecast, we expect that we will be delivering a year with less capital spent, but projects remaining on schedule. Upfront costs, including deposits were less than we anticipated and certain mobilization costs us less than we expected. So the good news is that the projects are on schedule and the capital for this year will be less than what we had forecast at the beginning of the year. We completed an orderly succession plan to our Chief Operations Officer.

Johan is now fully in the seat, but he has been implementing mining improvements for the last several quarters from the beginning of the year. He will give his take on what those mining improvements have been and what that does to strengthen our production for the fourth quarter and for the years to follow. We strengthened our Board of Directors with a West African mining executive with experience in countries in West Africa, but of course, most prominently in Mali, so that we can improve our in-country presence. And this coincides with updated, more conservative block models and mine plans. And all of this coincides with execution on our financing plans that will -- that with improved production and cash flows from that production will fully fund our growth.

And it allows us to pursue other projects and plans to improve and increase value per share. And moving to slide 4, there are several in-country initiatives that were advanced in the third quarter. They include a long-term power purchase agreement in Ethiopia and awarding the construction of the power line. We have introduced backup power in Cote d'Ivoire so that we are not dependent on variabilities relating to the grid. Our protocol agreement in Mali secures its transition, secures the Sadiola transition to a world-class mine.

So -- and that's an important part to discuss. But that protocol agreement in Mali conforms with the new mining code. And while we are advancing our expansion plans, we're continuing with production, and we're establishing essentially goodwill in the country. I want to make sure that this is clear. It should be obvious.

Sadiola has Proven and Probable reserves of 7.4 million ounces. It will have close to 400,000 ounces of production per year over several decades and with upside that is not yet fully realized that includes higher recoveries, mine life extension and all at well below world-class -- worldwide all-in sustaining costs. It will soon become a world-class mine. And our protocol agreement secures the transition of that mine into that world-class status. And then when it reaches that status, it will continue to secure its future.

But it also affords us, as I said a few moments ago, goodwill to pursue other opportunities in country with the state support and encouragement that includes in relation to nearby deposits in areas like Diba, like Korali-Sud that can supplement ore feed to Sadiola. And we are advancing those opportunities with the cooperation from the various ministries in the country and the state-run mining company, which owns some of those deposits. So with that as a preview, an update on corporate matters, let me pass the call now to Johan for more insights into our mining and operational efforts, results, expectations and opportunities.

Thank you, Peter, and good morning to everyone. As Peter mentioned, we've undertaken several initiatives to de-risk and enhance our production profile. The operational side, we focused on the mining, processing and exploration and administrative improvements to support this strong fourth quarter and beyond. The key advancements, including the ramping up of mining, ore and waste movement into the higher-grade areas that will ensure that we produce at lower cost alongside substantial gains in our processing plants. In Cote d'Ivoire, these efforts already delivered results.

And we've seen in the processing plant upgrades have increased the milling rates with 15% and 39%, respectively, from Agbaou and Bonikro from the first quarter to the third quarter. We anticipate these throughput rates will continue into the fourth quarter and substantially into the 2025 business year. If we move on to the operational performance on slide 5, I've implemented the safety initiatives and embedded the safety culture that will drive and empower our employees to think safe and -- think safety and work safe.

I have also reviewed and improved the mine planning, our grade control models as well as our grade control strategy. Over the last quarter, we've seen that the mine planning improved from sub-80% beyond 90% on spatial compliance, which will enable us to access higher grade ore and sustain the production profiles required through the fourth quarter.

I've also appointed a competent local mine technical team that will monitor, enhance and also ensure that we sustain the business profile through the fourth quarter and into 2025. We've reviewed the operational cost base and developed improvement plan that will optimize future production costs in Cote d'Ivoire, and that will move over to Mali in early Q1 2025. We've implemented the preparation plan for success production in 2025.

That will ensure that we de-risk the business, set ourselves up for early development, grade control, hydrology and geotechnical preparation within the business profile of 2025 and beyond. If we go to the production profiles, looking ahead of the expected production continues to improve as we advance the stripping at Pushback 5 in Bonikro throughout 2024.

This is expected to expose higher grades material from the processing plant -- for the processing plant in 2025 and 2026, further supporting the long-term production goals at Bonikro. At Agbaou, we produced 18,640 ounces of gold in the third quarter in 2024, and that's up from 17,320 ounces at the same time last year. While the increase is modest compared to the previous year, it represents a more significant improvement from the second quarter as in-country grid power issues were mitigated.

We've also improved quarter-on-quarter mine profiles to ensure that we access the higher-grade ores within Agbaou. During the third quarter, total tonnes mined continued to increase, enable us to expose all planned ore for 2024 and demonstrate mine -- that mine's full potential.

I've managed to fast track the higher-grade oxide ore from Agbale, and this will be fed into the Agbaou plant and ensure higher throughputs as well as higher grades, increasing the improvements spoke about earlier in the note. If we look at the fleet performances, saw implementation of short-term interval controls.

This includes ready to reverse the early hour targets, and this will ensure that we are more efficient with our mining fleets. In terms of the plant, processing and mine achievements records through the third quarter, driven successful fragmentation strategies and throughout the mine planning capabilities. This increase in process capacity has been further supported by ahead of schedule oxide feed from Chapelle.

In addition, improvements were observed in the stripping ratios, ore mined and grades with expectations for continued enhancements in the upcoming quarters as we build, refine our operational plans. Looking forward into the final quarters of the year, the company estimates the fourth quarter production to be in the range of 98,000 to 102,000, making the highest quarter output of the year, supporting the company's previously disclosed production platform of 375,000 to 400,000 ounces from the current operations.

This increase is largely attributed to the more sustainable -- substantial contribution from Korali-Sud, which has provided only a nominal contribution to the production year-to-date. This estimate fourth quarter production also considers a reduced throughput due to a clay content in Korali-Sud ores, which are currently processed separately from the Sadiola ore under the tolling agreement. The company actively seeking approval from the mining authorities to blend these ores both -- from both deposits, optimizing the throughput and enhancing production efficiency.

This production profile reflects current operations and excludes the anticipated step increase expected from capital programs, notably Kurmuk and also the Sadiola plant expansion. I will now pass over to Jason LeBlanc to discuss the finance performance.

Thank you, Johan, and good morning, everyone. For the quarter, we generated revenue of $188.9 million and gross profit, excluding depreciation and amortization of $66.3 million, which are increases of 7% and 56%, respectively, from last year. Net loss for the quarter was $108 million or $0.43 per share. However, after adjusting for non-cash and non-recurring items primarily related to the Mali agreement, adjusted net earnings for the quarter were $0.20 per share. Operating cash flows before income tax and working capital adjustments saw a significant increase in the third quarter to $87.2 million compared to an outflow of $36.8 million in the same period last year.

This improvement was driven due to higher realized gold prices and proceeds from the streaming agreement with Triple Flag. We saw improvements in financial performance during Q3, and we expect a further improvement in financial results during Q4 on the back of our strongest operations quarter of the year and higher gold prices compared to the averages seen in Q3.

At quarter end, cash and cash equivalents stood at $95 million after spending $54 million in Q3 on CapEx and exploration with the majority of that related to the expansionary capital at Kurmuk. Pro forma cash was $257 million following the equity offering that closed in October. Our financing strategy provides ample funding to support Allied's optimization and growth initiatives, including the development of the Kurmuk project, phase expansion and continuous improvements at the Sadiola mine as well as portfolio-wide exploration and mine life extension efforts, particularly in Cote d'Ivoire.

By having financial flexibility, Allied is positioned to unlock significant value and drive future growth and not be overly reliant on internally generated cash flows. Importantly, this financing strategy also boosts trading liquidity and expanded our investor base. With increased liquidity, we attract a broader range of investors, positioning Allied for index inclusion and further market visibility. Our goal is to build a resilient optionality-focused business. Our balance sheet and cash flows position us with a fully funded platform backed by strong shareholder support, enabling us to create a solid foundation for sustainable growth and long-term value.

This approach also allows us to capitalize on opportunities and capture more optionality sooner, which is the key to maximizing the value of our assets. Additionally, we are further strengthening our position with a stream and gold prepay package between $225 million and $250 million, which are expected to close during Q4. Together, these financing efforts ensure that Alllied is well equipped to achieve its growth initiatives and support ongoing expansion efforts. With that, I'll pass the call over to Daniel Racine.

Thank you, Jason. Good morning, everyone. Before talking about our growth project, as Johan has outlined, a lot of work has started on operational excellence and improvement to our mine planning. Our processing capabilities have been enhanced, and our entire team is working to support him in his effort and in his new role. I'm pleased to have him in place to drive the changes on the mining front.

Turning to our growth initiative, Kurmuk remain on track and on schedule with the EPCM and physical progress proceeding as planned. Capital expenditure for the year are now expected to reach approximately $100 million, below the original estimate of $155 million. This is explained by timing of payment between the work done and invoicing, meaning that some work done in 2024 will be paid in 2025. Our construction team continues to optimize planning and scheduling. For example, contracts were negotiated and awarded to local contractor, saving time on mobilization and guaranteeing quality of work.

Some earthworks were redesigned to optimize the site layout. We are very happy of the advancements so far. The initial water dam was built and completed before the rainy season this year. That was a key milestone. Earthworks at the plant site and general facilities have started.

Camp construction is well underway and the kitchen served its first meal this week. Procurement of the major services and critical equipment is progressing well. In the fourth quarter, activities on site will increase significantly. Camp construction will continue. Construction of some subsidiary building will commence.

Concrete work and civil activities will ramp up. Steel fabrication will commence. The momentum will continue into 2025 with the construction of the tailings storage facility, the main water dam, concrete, steel and equipment installation at and around the mill complex. This will include mechanical and electrical discipline. Mining is also planned to start mid-2025.

We'll keep you posted on the progress. Supporting this development, we recently secured a 20-year Power Purchase Agreement with the Ethiopian Electric Power, which will provide sustainable energy for Kurmuk at a highly competitive rate of $0.04 per kilowatt hour. This agreement positions Kurmuk amongst the lowest cost operation globally by ensuring access to one of the world's most affordable and sustainable power sources. The power line is currently under development and is expected to be completed and energized ahead of first production in mid-2026. Additionally, we have selected Mota-Engil Group as our mining contractor after a competitive and comprehensive tender process.

With nearly 80 years of operational experience, Mota-Engil would bring substantial depth and expertise to Kurmuk. Like I mentioned above, mining operations are set to commence mid-2025. At Sadiola Phase 1 expansion, pre-construction and engineering progressed in Q3 with mobilization beginning late in the quarter and construction plan to start in early Q4 2024. Completion is expected in the second half of 2025, allowing Sadiola to process up to 60% higher grade fresh rock while increasing throughput to 5.7 million tonnes per year. We are also advancing a full expansion optimization at Sadiola, which includes ongoing metallurgical testing and pre-feasibility studies aimed at improving recoveries by over 10% through flotation and concentrate leaching.

These initiatives are expected to enhance capital efficiency and support the achievement of similar ultimate production level, building upon the performance of Phase 1. Going to sustainability, all of our operational improvement and growth are grounded in our ongoing commitment to sustainability and the communities we are operating -- where we operate. We are actively advancing our sustainability management system across all sites, which include the communication of an updated health, safety, environment and social responsibility policies and the preparation of a new sustainability framework. A full set of updated standards is on track for finalization in the fourth quarter of 2024. In terms of safety, a new culture is in development.

All our sites are committed to continuous improvement in safety practices. We are proud to report that there were no significant environmental incidents for both the three and nine months ending September 30, 2024. Allied Gold is focused on enhancing safety and environmental standards, demonstrating our commitment to aligning with evolving international best practices, standards and external reporting frameworks. I will now pass the call back to Peter for closing remarks.

So ladies and gentlemen, let me pick up on something that connects to Johan and to Daniel. Daniel mentioned that we have a mining beginning at Kurmuk in the middle of 2025. And the approach that we take on development is stay ahead of what you will need. And so part of that then is to look at how we can bring a mine contractor into the fold sooner rather than later. We went through a detailed evaluation of mine contractors in the Kurmuk process, and that led then to a repositioning of our mine contracting overall.

Our mine contractor is a prominent in Africa, well capitalized, maintains proper systems for supply chain and logistics, import and export and understands mining. Our overhaul of our mining services contracts, so these are the contracts with our mine contractor will better align with our mining requirements. And that's where Johan and Daniel have been instrumental in the discussions along with Gerardo in the discussions with this new mine contractor. Mota-Engil is a public company with billions in revenues. They now become the largest mine contractor in Africa, and we will represent 25% plus of its business.

And all of this coincides with updated, more conservative block models and mine plans. So with new services agreements that are aligned with KPIs with a focus on mining, we're very confident that we can deliver the expectations for Q4 into 2025 and in the years to follow. With that, let me open the call up to questions.

(Operator Instructions) Anita Soni, CIBC World Markets.

A couple of questions for you. With respect to Sadiola, what grades are we looking at going into Q4? I think it was originally supposed to be north of 1.3, maybe in the 1.5 range. Is that still too -- is that still applicable? Or is that too high?

So, Anita, the grades forecast for Sadiola Q4 sits sub 1.7 grams a tonne. We've -- through scrutinizing the mine plans, we try to access the higher grades into Q4 and then sustain ourselves through 2025.

So we expected 1.7 grams per tonne with a combination of Sadiola ore and Korali-Sud ore.

Okay. And are you in the Korali-Sud ore now?

Yes, we are.

Okay. And then I was just wondering about the Sadiola. I noticed something last night when I was modeling. The recovery rates and production don't really seem to -- like it just seems like there's a 5,000 ounce differential between the reported production versus what would be implied by the recovery tonnes and grade. Could you clarify that to me and get back to me?

And the second question would be around the sales. The sales has been lagging. Do you know when there will be a catch-up on Sadiola on that?

So let me weigh in first, and then I'll pass it to Jason and to Johan. Yes, we expect sales to catch up this quarter. Part of the impact to sales is that Korali-Sud ore that we have been producing and has started to produce. And the delay in the sale with that related again to permitting. As we said, we had started mining.

We had started processing. We had started the delivery of production. But then we stopped as the new mining law was introduced and we were looking at what we had to do for permitting, et cetera. As we now complete the process, we've completed the permitting process, we're completing the formation of the owner company. We've referred to a tolling agreement.

So SEMOS is a company that owns Sadiola. It is a separate company that owns Korali-Sud. And SEMOS tolls that ore through its plant. Officially, there are two different companies, and we're completing the formation of that second company. And at that point then, we would expect gold to be sold and some of that catch-up to which I just referred.

We're expecting that to occur over the course of the next couple of weeks. And so yes, during this quarter, we would catch up on sales. Recovery rates, we're struggling with that a little bit because we're getting the recoveries that we expect to get from the ores that we're mining and we're processing. So perhaps we can -- if it's okay with you, take offline that discussion of why you're coming up with a different number, but we're recovering what we expected to recover, and we're producing the number of ounces that we expected to produce.

Carey MacRury, Canaccord Genuity.

Just a question on AISC. I mean, obviously, ASIC has been higher this year for a number of reasons. But how should we think about costs in 2025?

So again, let me begin, Jason, I'll pass it to you in a moment, but we're just going through a budgeting process at this point. We're expecting -- we provided an outlook for costs at the beginning of this year for next year. And so we're expecting the costs will be incrementally modestly perhaps higher than -- higher next year. What's the impact? The impact is entirely the new mining law in Mali and the impact of royalties on that.

Because one of the royalties is an ad valorem royalty. So based on gold price, what the impact to cost is, is dependent on the gold price assumption that we use and what we think the gold price realistically, what we would forecast as a gold price for next year. So we're just going through that process at this point. I think you should expect that there will be an incremental increase in costs at Sadiola. The offset will be that we will be getting better production next year because we'll have a full year of Korali-Sud and the optimizations and plans for improvements that Johan spoke of.

And by the end of the year, we will have completed the first phase expansion, and that will allow us to process more of that fresh ore to increase production as well. So we expect that there's a balance then between the unit costs coming from higher production and some of the optimizations and improvements, but also the opposite impact that comes from higher royalties. And then in that, what is the impact of this ad valorem royalty. We can't ballpark it at this point, but I would say that whatever we would have guided for our costs for Sadiola next year, it would not be outside of the realm of possibilities that it would be a couple of hundred dollars higher per ounce. That's what we're currently looking at.

And we're assuming in that a gold price that is somewhere between $2,000 and $2,500 per ounce.

Okay. And then maybe on Kurmuk, obviously, activities ramping up, you've awarded some material contract here. Just how are the costs there progressing versus your plan or budget?

Carey, it's Gerardo. Yes, we're tracking well with our estimates. But as Daniel mentioned, as we are using a higher proportion of local contractor with good productivities, we've been able to manage the timing of payments better and I think in general, lower mobilization costs. But yes, we're tracking well with the estimate and we're keeping the overall CapEx for the project as the original target. Productivity is good as well.

So we're happy with the performance.

Okay. Maybe just one more, if I can. I know ultimately, you're looking to put in grid power at Sadiola. Just is that still going to be with Phase 2? Or can you move that up now to reduce costs?

No, we're still expecting that with Phase 2. What we are looking at now in addition to grid power is solar, and that's something that we will be considering next year. And again, that's part of if we're expressing any reluctance in expressing what the costs are expected to be next year, partly that is because we're also looking at alternatives for power so that we're not as reliant on diesel, we're not as reliant on generators through next year and into 2026 before Phase 2 comes into play. So grid power is with Phase 2. Grid power is with a larger plant.

But what we have as an option is alternatives. And the alternatives include solar, and we are in discussions with several companies that are in that business on how they would provide a turnkey to us, and then we would pay an amount for that. We do expect that solar power would be significantly lower in cost than we would get from generators and from diesel. And we should make one more observation, which is that we're also evaluating at this point, again, part of the process of optimizations and improvements. We have a plant that is a high-quality plant.

We will have upgraded that plant to take on more of the fresh ore. One of the things that we're looking at is how do we solve for a problem. The problem is 300,000 to 400,000 ounces per year. And we have said that Phase 2 gets us there as a result of that larger plant, but that also requires $390 million, $400 million of capital expenditure. That would begin in 2026 and extend through to 2028.

Can we bring production forward? We were already at 2029. We're now looking at 2028. Can we bring it forward to -- sooner than 2028? And we're looking at an option where we can take the existing plant with the modifications we've made and further modifications and get to solving that problem of still producing at least 300,000 ounces of production per year.

And that would improve on capital costs. It would also likely improve on operating costs as well. So that's something that we will be unveiling in greater detail over the course of next year. But those are some of the factors that go into our thinking on the improvements and optimizations of Sadiola as it currently stands on costs and then also once we've completed the multi-phased expansion at that project.

Don DeMarco, National Bank Financial.

Welcome, Johan. Peter, could you add more color on the production at Sadiola in Q3? I see the grades eased and Korali-Sud contributions were limited, but were there other certain quarter-specific factors? And after Korali-Sud is depleted, can Sadiola maintain higher grade and production?

Yes. So we said earlier in the year that when asked the question, I don't remember it was on the first quarter call, it must have been that call, but after we gave our guidance, that we expected about 40% of the production this year coming from Korali-Sud. Clearly, that has not occurred as a result of the reasons that we've given, the introduction of the new mining law, having to get a permit under that mining law and the process -- the administrative process involved in all of that. So what to expect then going forward? We expect the Korali contribution will occur in this quarter.

It is occurring. We expect that it will occur next year and a part of 2026. But it's a bridge, as I said in the formal part of the presentation. We don't see Korali as more than a couple of years, 2.5 years. We are engaging in a modest exploration program.

Greg is here, if you'd like to ask any questions on that to see if we can extend it. But we don't see Korali-Sud as something that would extend sort of indefinitely or certainly for longer than a period of two to three years. The future of Sadiola starts with the first phase expansion. And the first phase expansion is in progress. We're starting this -- we've started this quarter, and that will continue through 2025 and begin contributing by the end of 2025 and then through '26, '27.

And then we're going to see what happens from there. Do we build a bigger plant or do we proceed in a different way, as I just described. So the bottom line to all of that is that Korali is a bridge to that expansion. The future of Sadiola is that roughly 7.4 million ounces in inventory as Proven and Probable reserves. And most of that, 90% to 93% of that is fresh ore -- in fresh ore.

And so the future is that fresh ore. And so we have to get to that point. The first phase expansion gets us there. Korali is a bridge and we've seen always as a bridge. It wasn't seen as long term, certainly short term and intermediate term as we complete that first phase of the expansion.

Okay. That's helpful. You're also looking at some financing -- non-dilutive financing options for Kurmuk. And we've seen stream financing packages recently that exclude exploration upside or they provide options for accelerated repayments with the stream extinguished when the reserves are depleted. Are you considering these types of features when you're looking at the options for Kurmuk?

So, yes, to all of the above, right? That's the reality here. We said at the beginning of this process that the reason why we are pursuing this part of this financing strategy is because it's become a competitive landscape for streaming companies. And in my view, this is our corporate view, my personal view is that they have begun to recognize that there is a shortage of quality product and quality managements. And so that makes it even more competitive.

And they have to look at places like Africa. I think it's very telling that a very high quality deal has been done in a country in which we operate, more than $600 million allocated to a stream. And the terms are friendly terms. And so we should expect that, that would continue because of that competitive landscape. And we're looking at all of the above.

How do we decrease the area of interest so that we ensure that any exploration upside. Kurmuk has plenty of exploration upside. We've described that before. Again, Greg is here if we want to go through a discussion of what's in the mining license and what's outside of the mining license. And very much almost all of that exploration upside is outside of the mining license.

And so that's something that clearly is important to us and making sure that we have certain decreases in the percentage of deliveries on the stream buyback options. These are some of the things that are important for us to pursue. So it's taken us to this point, but the reason for that is not because of challenges. The reason for that is because it is a competitive landscape, and we want to take advantage of that competition.

Okay. Good to hear. And then finally, also at Kurmuk, what are the critical path items to maintain the schedule for first pour in mid-2026?

Don, it's through the leaching circuits. So it's civil, steel and then the mechanics associated through the CIL circuits.

Sorry, I don't think I fully heard that, Gerardo. Is that -- could you repeat that, please?

Yes. No, it's the CIL circuit, the processing [plant] through CIL circuits and that we're busy doing there earthworks on the plant site right now, and we're starting concrete very, very soon. We are about to commission the concrete plant. And then we go into mechanical and direction of the tanks and we go from there. Believe it or not, it's not enough, it's not the mill, not the grinding area, it's CIL.

And the other items are all managed -- and we're managing against the critical path with a particular focus. Our project team obviously managed the whole project with EPCM contractor, but critical path items are taken in a separate sort of level of management with the corporate team and the EPCM contractor to mitigating potential risk, and we're doing a good job on that.

Ingrid Rico, Stifel.

My question is on the mining contract. And as you're making that transition to the operations, how do you anticipate to mitigate the potential changeover disruptions? And sorry if I missed it, but when do you expect to begin that transition? And also, if you could share the operating cost impact, if anything -- if any, relative to the mining contract right now?

So on the first question, we've already been engaged in that process. When we announced that we've entered into these agreements relating to the mine service agreements, we've already worked out the program and the process for the transition and the transition has already been in progress. And they've done it before, and we've done it before. So we certainly -- so two things I think are important here, Ingrid. The first is that we're already in progress on the transition.

And the second is that they've done it before and we have done it before. Same employees, same people involved, but a different owner. That's essentially the way to look at it. But a different owner with mine services agreements that better align to what our expectations are, where we should be mining, when we should be mining, blasting patterns, how we deal with haulage, making sure that we're more efficient on operations. So the result of all of that is that we don't see that as a challenge.

But you're right to point it out, that's clearly something that we see as whenever there's a transition, there's always risk with opportunity. And so that's something that we've been paying attention to.

Excellent. And if you can share just on the operating cost impact, if there's any as we're looking into 2025?

Ingrid, no, there isn't -- the rates are equivalent to the contract we got from there. There is a better mechanism for incentives and penalties for performance. So if we were to increase rate, it will be against a much stronger over delivery in all metrics, including all deliveries to the plant. So no, -- and a better contract to control that. And you didn't ask, but I guess implied the question is for Kurmuk.

The mining contract for Kurmuk, the rates are aligned to what we had in the estimates and the feasibility study as well.

And if I can ask another question, just moving on to Sadiola and Korali-Sud. So right now, you're processing separately. When can you expect to get approval to start blending and perhaps optimizing that? And is the reduced throughput from the clay content already built in into the Q4 expectations?

Yes. So as we said in the formal part, Ingrid, the production guidance, I guess, that we gave for the fourth quarter is assuming that we're running for the -- through the quarter on separate circuit for Korali-Sud. We would expect that the production would increase to the higher end of the guidance range that we've given, possibly to well above that, depending on what the timing is for the approval for blending. We can't say at this point if that occurs next week or the week after. But clearly, every week that passes or every day that passes would be a lost opportunity to get that greater throughput.

And that throughput is about 50 tonnes per hour on 300 tonnes. Is that about right, yes. Yes. So it does make a meaningful contribution. It is not material, but it does make a meaningful contribution.

It does make a difference. So I guess the best way to answer your question is if we do not get approval for the quarter, we're at that 98,000 ounces. That's where we expect to be. If we get approval, we'll be at or above the 102,000 ounces.

Justin Chan, SCP Resource Financial.

Just one more on Sadiola. I'm just curious, given the permits and movements on timing and maybe looking ahead to next year also, how much has the actual schedule of mine movements, where you're mining ore from, how much has that shifted this year? And how much impact does that have on next year's plan versus where you thought you would be maybe at the start of this year?

Did you want to deal with that?

Yes. So the blend for next year, if I can start there, it's around about a 60-30 blend with a 10% that we get from the stockpiles. If we look at the current year, around about an 80-20 split from Korali-Sud and Sadiola ore. But we must remember that we're already in the development stage of Sekekoto West and then as soon as Tambali comes online that we have flexibility within the plant.

So Justin we said at the beginning of this year -- yes, we said at the beginning of this year that there were other options, not as good grade as Korali-Sud, but there were other options within the mining license and Sekekoto West was one of those. But we had to go through a further exploration program and a development program. So regrettably, that was not available to us in the third quarter, but it will be available to us until 2025.

Got you. So just on a like-for-like because Korali-Sud took longer because a lot of reasons, most of them out of your control. But so for next year, is it fair to say it's an option to have more of it come into the blend than, let's say, your outlook that we have from the end of last year?

I think we're in a much better position than in '24. We have optionalities within the business, depending on where the rain takes us or the wet season takes us, we have optionalities within the business, and we can switch either from Korali-Sud or Sekekoto or Tambali, which is in the range of the very similar grades. So that's a very good outlook for 2025.

And, Johan, that's important. That's something that Johan has been implementing. We've talked before corporately about optionality, and we've talked about the importance of that in mining assets. You never know the rock, and you don't know what happens. And so what you want is to anticipate that if something does happen, you have an alternative.

And that's part of what Johan has been putting in place, which is what are the alternatives in the -- just in case. And so we'll have better options. And so more of that optionality as we mine and process and deliver production at Sadiola next year.

Got you. And then just given the blend, I mean, if gold is at -- let's just say it stays at spot for just for the sake of argument. I'm just curious what -- based on your ore blend, where would you advise modeling royalties at Sadiola overall if they were -- if you were to create a blended average number for next year?

A good model, a good place to start if we assume. I think you said $2,500 gold. Is that what you said?

Sure. Let's use $2,500.

Yes. So let's use that $2,500 bus, a good place would be about 10.5% in royalties.

Okay. That's very helpful. Maybe just one last one. So just reading between the lines on the contractor change and Johan, you mentioned quite a few operational initiatives. I mean was -- were the mine models kind of a major issue for the operational delivery?

Or is it fleet availability? Or it sounds like a little bit of several factors. I'm just trying to get a sense of operationally, where you're driving towards here. I mean I know where you're going, in terms of like what are the specific areas that you thought needed immediate improvement?

Yes, I think it is more to align the models with the mine plans and the execution thereof that we get closer to the reconciliation and where we want to end up with our budgets and get more predictable in our forecasting. And that's where we started off by looking at our mine plans, looking at the grade control model, does it -- how far are we off from the reserve? And do we tighten the grade control spacing or do we open it up and get that flexibility within the mine plans. I think we've been very successful in Q3 getting that embedded, and that will roll out on to the 2025 and beyond.

So Justin, again, all of the above, you're quite right. You hit the nail on the head. We can't say that it was just a mine contractor. The mine contractor does take instructions. The mine contractor follows the mine plan.

So part of what Johan and Daniel and our team have been doing is tightening the mine plans in all the ways that Johan has just mentioned. You're aware of this. A life of mine plan has a certain number of ounces, and that doesn't mean that the ounces aren't there. But the question is in terms of a shorter mine plan, are the ounces where you want them to be when you're there, when you're mining. And so that means you have to develop different approaches, as Johan mentioned, on how to make sure that we're doing that.

So with that, then we can better direct what our mine contractor does. But there is an issue with the mine contractor as well. We saw late last year, early this year that the alignment of what a mining company needs, what the key performance measures are and what the mine services agreements provided we're not there. We also saw that we needed a mine contractor that was better capitalized. That's not -- we're not suggesting that there's an issue with the mine contractor that we have, but there's always an opportunity for improvement.

And that's what we were looking to do here. So we believe now, and certainly with the Kurmuk process, and that was a request for proposal. We went through a detailed analysis of the proposals made by several mine contractors. The conclusion was that this was the mine contractor for us at Kurmuk. And as we evaluated it further, we said it's a well-capitalized company.

They understand supply chain, they understand customs, import, export, they understand logistics. A big part of their business is infrastructure builds, bridges, roads and the like. And so that translates well into the mine contracting side. They want to build out their mine contracting business because it's recurring business. And we saw this as an excellent fit and excellent opportunity.

And as Gerardo said, we're paying the same rates, but we have better pain and gain per provisions, better key performance measures and better alignment in terms of what they can deliver to what we're expecting.

(Operator Instructions) Carey MacRury, Canaccord Genuity.

Just a follow-up for me. In terms of year-end reserves and resources, obviously, you've added a lot of ounces over the last few years. I was just wondering, it's late in the year, what are the best opportunities to add ounces this year? And then secondly, just given the changes in Mali with the fiscal regime, is that going to impact your Sadiola reserves or resources?

It's Greg here. Regard the exploration opportunities, I think we're already seeing that happen inside Sadiola with Sekekoto West, which is this time last year, we weren't talking about that. This year, we are as a feed alternative for early 2025. And I think that will get bigger. Sadiola keeps producing those for us.

There's another prospect there, FE2.5, that's looking very promising as well. So at Sadiola, we continue to find oxide gold deposits to supplement what's going to be predominantly fresh feed. And if that makes better revenue for the group, then we will continue to do it. I don't think that we'll continue to find those replacement ounces for oxide for the next several years at Sadiola. In Cote d'Ivoire, once again, I think we've had another year where we've replaced all of production with new ounces, and we'll continue to do so.

And we will -- and then we grow [Buffalo] as a longer-term alternative for some of the -- for Bonikro and Agbaou or supplement it. So I think both of those project sites where we have operating mines, we're well in front of being able to replace ounces with new discoveries. And Kurmuk, well, Kurmuk has amazing potential. We are still working on the mining license. But outside of the mining license on our exploration licenses, we think exists more of the same -- same sort of scale and turning that into a world-class project with exponential growth in the reserves, and we continue to see that.

And we identify more targets than we can drill at the moment. We're still drilling 200,000 meters of exploration a year. All the rigs are drilling gold at any one time, and there's 15 of them. So yes, we're staying in front.

Greg, the other question was, do we see an impact R&R at Sadiola as a result of the royalties and possibly higher costs?

Impact on?

The total reserves.

Total reserves. No, I think because we've looked at other enhancements, Peter, that more than make up for those. And they're not baked in yet, recovery enhancements. We're still using $1,500 gold reserve. So yes -- and the processing enhancements more to make up.

And let me supplement that by saying that because of the low cost already at Sadiola once the second phase is completed, the impact of royalties is significantly less. And so our view on it, and again, we're running through that process as we complete mine plans for year-end budgeting. It doesn't look as if there's an impact on our reserves and resources for Sadiola's fresh ore.

Thank you. There are no further questions registered at this time. I'd like to turn the meeting back to Peter Marrone.

Ladies and gentlemen, thank you for making the time. It has been a pleasure being on this call with you. We look forward to engaging in early next year on our fourth quarter. It does look as if all the things that we've been saying are coming to fruition. Mining is never easy, but I'm confident in saying to you that we've got a management team that is competent and capable of dealing with the challenges, anticipating those challenges.

Some of the questions are related to risks. I think Ingrid asked a question about risk. And so we're anticipating risks, managing those, and we're confident being able to deliver on the opportunities and manage the risks. So with that, thank you very much, and we look forward to speaking with you further on our next conference call.

Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.