Equinox Gold Corp (EQX) 2020 Q4 法說會逐字稿

Thank you for standing by. This is the conference operator. Welcome to the Equinox Gold Fourth Quarter and Fiscal 2020 Financial Results and Corporate Update Conference Call and Webcast. (Operator Instructions) And the conference is being recorded. (Operator Instructions)

I would now like to turn the conference over to Rhylin Bailie, Vice President, Investor Relations for Equinox Gold. Please go ahead.

Thank you, Anastasia, and thank you, everybody, for joining us today for the Q4 call. We will, of course, be making a number of forward-looking statements today. So please do take the time to visit our website and to visit our continuous disclosure documents on SEDAR and on EDGAR.

I'm now going to turn the conference call over to our CEO, Christian Milau, for opening remarks.

Great. Thanks, Rhylin, and welcome, everyone, today. Just looking at Slide #3 and running through this past year. We had a heck of a busy year and lots on the go, strong finish to the year and a good performance on the health and safety front with very good mine integration and work on the safety fronts during a very taxing year, when COVID was a key impact on the business. And we tested over 15,000 people for COVID during the year, and our workforce is only just under 6,000 people. So multiple tests per person on average. And I think we've done an excellent job. So kudos to the mines for managing through that difficult year.

We had the highest production quarter-to-date and good cost performance. So we're pleased with the end to the year. As we go into a big investment year this year, we had very good solid cash generation, and Peter will talk about that in a few slides here. So good end to the year.

When we turn over to Slide #4, busy on the development and corporate highlights front. Development was extremely busy during the year with Castle Mountain Phase 1 going into production and then hitting commercial production in the fourth quarter. The feasibility study for Castle Mountain was ongoing, and we've been optimizing that and ready for release in the next few weeks. So keep an eye open for that coming out.

Los Filos feasibility study update is also underway and a little bit behind and come out during quarter 2, during the mid part of quarter 2, so just behind Castle Mountain Phase 2. We're expecting some good results from that in terms of reserve and resource expansion. And in addition to that, we've finished off the underground drilling at Aurizona, and there's a PFS study underway, which we expect to give out to the market in the second half of this year. So lots on that front, lots of new information. So exciting additions coming to both reserves and resources. So a big year on that front.

We've also saw a nice increase last year in the reserves and resources at Mesquite, and kudos to Scott and the team, they did a great job of basically increasing reserves and resources substantially there. And also, really pleased with Mesquite's performance overall. We've owned it for just over a couple of years, just over 2 years now, paid just over $150 million for it. We've generated free cash flow of almost $140 million. So almost repaid that purchase price within 2 years time. So excellent performance.

Also the Santa Luz feasibility was released with strong results, really good high-return project, $100 million of capital. Construction started, and we're now about 25% complete. We've also appointed Sally Eyre to the Board. So welcome to her this past year as well. We integrated the Leagold merger. The teams are now in one office in Vancouver. And we also announced the Premier Gold acquisition. So very busy on the corporate development front as well.

So I'll pass over to Peter to walk you through the financials on the next couple of slides.

Thanks, Christian. So on Slide 5, you can see we had a good year. We sold 135,000 ounces of gold at an average realized price of about $1,871 per ounce, which generated revenues of $253 million.

On the cost front, our cash costs for the quarter were $848 an ounce and just under $1,100 an ounce for all-in sustaining. That led to earnings from mine ops for the quarter of $95 million.

Income for the quarter was $89 million, when you -- for an EPS of $0.37 a share. When you adjust out a number of noncash charges, our adjusted earnings or income is $34 million at an adjusted EPS of $0.14 a share, fully diluted, that's $0.12 a share.

Most importantly, we generated a lot of cash during the quarter. It was our strongest quarter for that, generating $87 million in operating cash flow before changes in noncash working capital. That continued to strengthen our balance sheet which is with cash of $345 million at the end of the year, which is up from $310 million at the end of Q3.

In addition, strong balance sheet. We have $200 million net debt, which, if you assume, in-the-money converts our equity, is $55 million of net cash. Our net liquidity, after you include the CAD 75 million financing is about $600 million.

In addition, our investment in Solaris has performed really well. We equity account for it. So it only has a book value of $22 million in our balance sheet. However, the fair value of the shares that we own there are about USD 150 million. So good strong balance sheet for the pathway ahead and the development that we need to do.

Moving to Slide 6. You can see here our quarterly results by mine. Mesquite, we had a strong quarter, as you can see, with an increase in production -- or ounces sold, pardon me, from Q3 of 125,000 ounces to the 100 -- well, 36,000 ounces produced and 135,000 ounces sold. Mesquite, Aurizona and Fazenda had particularly strong quarters. Mesquite benefited from an increase in ounces -- recoverable ounces stacked in Q3, which came out in Q4. Aurizona benefited from a higher throughput and stronger grade, which we always love to see with the 37,000 ounces that produced during the quarter.

Moving to Slide 7, which highlights our earnings and operations results. Here, you can see in the comparison to prior year, really the increase in scale from the Leagold merger. One item I would point out is, we finalized our purchase accounting for the Leagold merger in Q4. Unfortunately, that created a bit of noise, because we updated our assumptions on the gold price to use the fair value of the heap leach pads of Los Filos. And when you make changes in your purchase accounting, you have to apply that -- IFRS requires you to apply that back to prior quarters, which is why previous quarters are updated as if those changes had been made on day 1. I do want to emphasize, though, that none of those changes affect cash.

Looking forward to 2021, while we had a very strong Q4, it is a year of investment. We have a lot of sustaining expenditures. You would have heard from our guidance call on our guidance news release from February. To help understand a little bit of the structure of how -- what our expectations are for the year. 61% of our sustaining expenditures in the first half of the year, but only 40% of our gold sales. Meaning that we expect to have higher all-in sustaining costs in the first half of the year versus the second half of the year. That's mostly going to affect Castle Mountain, Los Filos and Mesquite.

My final point before handing things back over to Christian is that all of the financial results that we're reviewing today and that are in our press release are unaudited. We are -- it's our first year of our stocks, and we're in the process of just finishing up the control side of the audit and with respect to our financial statements. We expect that to be done in the next couple of weeks. And you'll see our audited financials and MD&A about then.

I'll turn the time back over to Christian.

Great. Thanks, Pete. And so looking at Slide #8. Just want to run through the operations and a little bit of a look back and a little bit of a look forward in 2021. So looking at Mexico and California, first. Los Filos and Mesquite are, as Pete said, in an investment phase here, particularly during the first half of this year. Los Filos, we're opening up the Guadalupe open pit. We're also ready to start the Bermejal underground once the social collaboration agreement is signed with the community, which I'll comment in on just a second here.

We restarted the Los Filos mine in December. And it poured about 13,000 ounces of gold last year and is on track to ramp up the full production here as we speak. So pleased to see that back in operating. As we said last year on our last conference call, we've been working on an updated social collaboration agreement with the local leadership of the Carrizalillo Community. And their key areas of sticking -- or sticking points basically were around employment and contracts for their future growth in the operation, particularly around Bermejal. So we've agreed those clauses around employment and sharing between the various communities and ultimately, contracts and awarding certain contracts or tendering into the local community. So we're pleased that we're able to come to a resolution on those. We're still working on the final dispute resolution mechanism in the contract. And hopefully, we'll have that resolved during the next few weeks, but we're getting very close. We've made progress since last time we spoke to you and Ross and I were on the call a few weeks ago here. So good progress being made, and we plan to see that finished here in the near-term and get back to normal business in Los Filos and get the mine expanded.

At Mesquite, it's a big heavy stripping period during the first half of this year, as Pete sort of alluded to. The Brownie pit is being stripped. There's very little new ore going to the pads during this period. So we are residual leaching and adding sort of some supplemental ore to the pads. We're also spending about $9 million this year on exploration at Mesquite. We've been -- it's been an outstanding performer over the last couple of years and has been a key area of focus to continue to extend the mine life. As I said earlier, it was a good job of increasing resources and reserves, and we want to just keep doing that this year as well. So opening up the new area of Brownie, looking to expand the resource and reserve and invest in its mine. And we've also leased a new fleet from Caterpillar because we have such confidence in the future of this mine continuing on for a while. So lots of investment there in those 2 mines this year.

When we look at Castle, we've been ramping that up. We hit commercial production later in the fourth quarter last year. We're still working on some niggly points around solution flow and leach pad management. One of the key investments this year really is in expanding the leach pad, actually spending the capital to build out the Phase 1 leach pad, to cover a whole period of Phase 1. So we're going to put all that investment into this year. That give us a lot more flexibility in the operating team a chance to work on increasing the flows and having more flexibility on the leach pad. So we'll see production sort of a little bit lower in the first half of the year, and it will ramp-up in the second half of the year.

Turning to Slide #9, looking at the Brazil operating mines. An extremely good year last year, very satisfying to see all those mines perform well. Obviously, the currency was a key impact and help on the cost, but performance-wise, in terms of production, all the mines performed well last year. And we expect a pretty steady performance this year quarter-over-quarter, so you'll see less variability than you'll see in the other mines in Mexico and California.

Aurizona, I do want to point out, has just had an outstanding end of 2020. As Pete said, about $100 million of free cash flow last year. That's only its second year of operation. So very good results there. And 2021 has a large stripping program and a TSF lift. So sustaining capital is a little bit elevated this year. Operating costs are basically in line with last year, but it'll be slightly elevated all-in sustaining costs.

We'll continue to allocate exploration dollars as well with that underground pre-feasibility study coming out in H2 and continue to work on satellite extensions as well as looking at some new potential deposits, which are within the 10 or 20-kilometer radius of the mine. We're really excited about the future here, and we're allocating the capital to extend that mine life.

Fazenda kind of continues business as usual. It's been going on and off for about 25 years. So business as usual. It's had a good start to this year.

RDM, again, another good start. The mill is performing very well. The mining contractors continue to perform. We got that large pit expansion permit late last year. We're spending almost $35 million on stripping this year. So that's a key portion of our capital for the growth capital this year. And interestingly, there's been a rainy -- quite a rainy period during this rainy season this year. And as you remember historically, it always was a challenge with having enough raw water in the raw water dam to get through a full year of production. But this year, the actual water dam is overflowing. We probably have 2 years' worth of water. So really, really pleasing pictures to see over the last week or so.

And Pilar just continues on smaller scale, delivering free cash flow, just sort of steady state.

Turning to Slide #10, just to refresh on the guidance that we put out a few weeks back. 600,000 to 665,000 ounces, that's a 30% increase on 2020. So continuing our move towards that 1 million-ounce target. Cash costs are up slightly, as mentioned earlier. Fuel, reagents, labor and FX is at a slightly more conservative assumptions this year going into the year, although, we're actually seeing almost the opposite on the FX front. I think, both the peso and the Brazilian real have actually been weaker than -- or much weaker than we expected early this year. So getting some benefit from that at the moment.

All-in sustaining costs increased a little more substantially due to the CapEx programs at Los Filos, Mesquite, Castle and RDM. We'll be improving those substantially in the second half of the year, as Pete alluded to, and quarter 4 looks to be a really good quarter as we open up new ore sources at both Mesquite and Los Filos.

Growth CapEx. Basically, the key components of that are the $100 million investment in Santa Luz restart. I'll comment on that in a second here. A $35 million on the pit expansion at RDM and also opening up the Guadalupe open pit in the Bermejal underground at Los Filos. So those are the key components that make up that $200 million. So we're spending about $400 million on CapEx this year in total, including the sustaining, but it really does set us up for a strong 2022 and beyond. So next year, in 2022, we should be producing up to 900,000 ounces of gold.

Turning to Slide #11. Looking at the development projects. So Los Filos expansion, the plan there is to move that towards 350,000 ounces of annual production on a fairly steady basis from 2023 onwards. We've selected an 8,000 tonne per day plant, and that new feasibility study, as I said, will be out in Q2. We won't start that investment until that social collaboration agreement is signed for Bermejal underground. But we hope to have that up and running fairly soon here. And we should be in a position to launch into construction on the CIL or the carbon-in-leach plant later this year as well.

In terms of Santa Luz, we did start construction, as we announced in the second half of last year. It's about 25% complete, just seeing pictures on the concrete cores for the mill foundations, also for the tank foundations. Resin has been ordered. Steel work is well underway, and mining is expected to start in May. So I think really good start to progress there. It will be constructed by year-end. The physical construction will be done. So we should be pouring gold in early 2022. At the moment, the mine is on time and on budget. So great to see. And some of the teams that help build Aurizona are down there, spearheading this one.

Looking at the Castle Mountain Phase 2 feasibility. That will be ready imminently. We expect that out in the public domain in a few weeks' time here. And should show a nice increase to the mine life, to the annual production, to the reserve base. On the back of all that, we'll also be looking at a slightly larger mill. And then what this feasibility will allow us to do is start the permitting process to amend that permit in the summer. This year we'll make a submission to the regulators. And we expect that will take us up to 3 years to permit, which works in really well with our current development pipeline. We get Santa Luz done by around this year-end. Hardrock potentially could be started in that second half of this year and completed around the end of 2023, early '24, then you could be starting construction on Castle Mountain. So a nice sequencing of our projects.

Looking at Page #12. The Premier acquisition, we announced that, I think it was December 16. The vote happened last week. We got 99.9% favor for the Premier shareholder vote. We're just waiting on the Mexican antitrust approvals. We expect that in the next few weeks here, similar to what we had last year with Leagold. Took us till mid-March. So we expect probably second half of March, we should have that.

And also the i-80 spin out that Ewan Downie will be running. It's had a nice sort of visibility in the Premier share price. It's probably moved up to about $250 million of implied value. Our 30% stake, then will be just under $100 million. So nice to see that value creation happening already and a focus on that pure Nevada based company.

Looking a little more closely on Slide #13 at the Hardrock asset. As we announced earlier this week, we'll hold a 60% stake in Hardrock. We bought 50% through the Premier acquisition, and we've negotiated deals to buy another 10%, which will close just after closing of the Premier deal. We'll acquire that 10% from Orion for just over $60 million. So really pleased to have that majority stake to really be able to say that we're behind this project, 100%. And we actually got a chance to visit it last week and put our feet on the ground and actually see the excitement in the local region for this project. They're really keen to see it up and running and all the stakeholders are behind it. So nice to start with that support.

As well, just a quick reminder. Now this is a permitted project at social agreements in place with the First Nations. It's truly construction-ready and has a project team that's been there, that's done the feasibility study, that's built a few mines for Agnico Eagle in fairly remote locations in Northern Canada. So really got all the pieces in place to get going later this year. So we're pretty excited to get this acquisition completed and do a bit of work before we can launch into construction, but really get this thing moving later this year.

And this asset will be a cornerstone asset for us for years to come. It's a 5.5 million ounce deposit. So great scale to it. It'll produce over 400,000 ounces in the early phases. Lots of exploration upside and potential. I was really pleased to see that last week. There's potential for an underground eventually. The 14-year mine life is only focused on the open pit. As well, there's some potential satellite deposits to the west of the property. Some really exciting drill results come out of there as well. So we see this as a multi-decade mine, eventually. It's got a great starting project. And we plan to get into construction there, hopefully later this year.

Look at the other assets on Slide #14 of the Premier acquisition. Mercedes, it's 50,000 ounce producer currently. It's producing good cash flow. It's about $1,000 all-in sustaining cost. So generating good cash on a quarterly basis. Hasaga is an exciting Red Lake property. It could be a mine one day. We plan to do some exploration there in due course, but we're really excited about that one.

Rahill-Bonanza, it's a bit of a smaller project. It's sitting between some evolution properties. And has logical part of that complex in the long-term for sure. And then i-80 Gold. As I mentioned earlier, Ewan Downie will be running out of Reno, Nevada. It's 3 focused assets in Nevada, one producing, one that can be put back into production fairly easily in a high-grade exploration project effectively. We think Ewan and the team will be able to create some real value there. And as we've done with Solaris, we think we can support them and help them surface that value as a focused U.S.-based gold mining company.

And turning to 15, just to kind of bring it together. When you look at this portfolio of assets with the Premier acquisition completed, it really does create a nice balanced portfolio. We're happy with the diversification. You've got almost a quarter in each of these jurisdictions, being Canada, U.S., Mexico and Brazil. Reserves and net asset values, the upside and expansion potential and all the exploration that sits in this portfolio is just fantastic.

We're really pleased that we're able to balance it now, almost 25% in each of these regions. And I think this year will be exciting because, you'll get number of studies out, you'll have some exploration results. And what we'll be able to do is expand a couple of the assets and really show that there's growth and potential in all of these regions. We're not reliant on any one. It's actually nicely balanced going forward.

And turning to 16 and just pulling that all together, what does that really translate to? Well, this is the leading growth company in the sector right now. I'm not sure there's anyone with that kind of growth rate, as you can see in the third column there. We plan to be hitting that sort of 1 million-ounce mark in a couple of years' time here. We also have a nice reserve base of almost 16 million ounces, and we see that growing in the near-term here. So at the leading end of all the peer comparable categories here, on this slide, except for at the valuation end. So our key job here is to move that multiple of price to net asset value up from 0.5 to 0.6, up into that sort of range like our peers of that 0.8 to 1x. And really over the next 12 to 24 months, as we execute, as we expand the portfolios, become a 900,000 to 1 million ounce producer, we really think that re-rating has got a really good chance of achieving that. And the balance sheet is in place to deliver on that growth.

And just in summary here on Slide #17. It's been a busy year in 2020. A long list of the catalyst for 2021. We're going to focus on delivering on the production and the cost base that we have. But that production will have a 30% growth factor built into it. And we've also got a $37 million exploration program, which will be mostly focused on extending the mine lives and around the mines that have shorter than 10-year mine life. So it's nice to see that we're actually reinvesting in our own portfolio. This year, it's more inward looking than it has been probably in the last couple of years. We'll be looking to close and integrate the Premier Gold acquisition. We'll be looking to support Solaris and i-80 Gold as they create some value.

And really, on the M&A front, it's a little bit more subdued. I think going forward right now, we're focused on basically expanding our assets, delivering on the value of all the great assets we have internally here and simplifying the portfolio. So what we think we've done here is, we've created a company with all those pieces to create value. It's well positioned in this gold cycle.

Diversity scale. We're in mining-friendly jurisdictions in the Americas. The growth is all owned internally at the moment. We don't need to go out and buy it. We've got a strong balance sheet, $600 million of liquidity, another couple of hundred million dollars of investments at a very low net debt-to-EBITDA ratio of well below 1x. So with that, in our long-term common vision with our core shareholder base, we're really excited about the future here. And we think that Equinox is really set up for a strong future, and 2021 will be a fun and exciting year so.

With that, I think I'll end the formal part of the presentation and maybe turn it over for a question and answer.

Thank you, Christian. Operator, can you please remind people how to ask a question?

(Operator Instructions)

We do have one question from an investor in the United Kingdom.

"You've just outlined, Christian, some very impressive growth plans for the coming years. What do you think the market is missing? What does the market need to do to believe in Equinox Gold and how that reflected in the share price?"

I think one of the key things that certainly, the feedback we get is, we do have a lot in our plate. So really focus on your core projects and the opportunity to create value in those core expansion projects in areas where you can expand the reserves and deliver on what you say you're going to do. And I think it's all about the execution here. We've gathered all the pieces to the puzzle. Now we just have to put them together and be on time, on budget and execute.

I hope that we've done a good job of building a mine per year over the last few years of doing some M&A and integrating cultures and companies and creating some value already. And I just think that it's a matter of -- executing is the key thing. And I think the balance sheet is in a strong place to allow us to do that. And again, the shareholder base has got a common vision with us of delivering something that has a long-term vision, not just a short-term vision.

We'll take a question from the phone now, please.

The next question comes from Kerry Smith with Haywood Securities.

Maybe Doug can answer this question. Just for these big pre-strips you have at Mesquite, Filos and Aurizona and, I guess, RDM. Would that pre-strip be happening sort of equally over the year? Or is it sort of front half weighted, runs for 3 quarters, just a bit more clarity on how it's going to be scaled out or scheduled out over the year?

RDMs through the year. Los Filos is more front-end weighted as we strip down Guadalupe and get into the ore. Mesquite is, again, front end weighted as we open up the Brownie pit to access the ore in the Southern part of that pit. And Aurizona stripping is a bit of a holdover from last year, it just continues into this year. And we'll go through most of the year as well.

Okay. So..

Yes. I think with the rainy season there, Kerry, we tend to do more tonnes, obviously after sort of April, May. So probably pretty evenly distributed.

Yes. Aurizona built up a very big stockpile coming into the rainy season. I think it was over 1 million tonnes. So we take advantage of that as we work through the rainy season and then get back into the stripping for the rest of the year.

Right. Okay. And Doug, while I got you, just on RDM for the production. That mine has been doing sort of 18,000, 19,000 ounces a quarter over the last few quarters at least? And your guidance this year is 55,000 to 60,000. Do you want to maybe just talk a bit about why that production is actually a bit lower than what you kind of expect on a quarterly annualized rate?

We were waiting for the permits to be able to do the pit stripping, which came through middle of last year, and that's why we're pushing it through this year is that -- and we're actually, I would say, delayed in getting going with that strip. And now that we're into it, we're focused on that. It means that we have a more modest grade through 2021. That said, it's actually -- it's been doing pretty good so far this year against our expected grade. So maybe we'll get a little bit of a bump, but it was kind of expected that when we got into the stripping, we would have a more modest grade coming into the plant, so that we could get access to better grade in the remaining life of the mine.

Okay. And then does that -- does all that stripping finish by the end of the year then or does some of the rollover into...

It rolls -- it rolls over.

Okay. Okay. And Christian, or Peter, could you maybe just let me know what the book value will be for your i-80 position once the deal closes, the financing closes and the company starts trading? Just what your dollars millions will be for your allocated book value there?

I think that one is for you, Peter. You know that?

Yes. We're going to have to fair -- so, A, we'll have to do fair value accounting for it. So the short answer is, it will be at whatever the shares trade at initially at inception. The fair value of that is going to be in and around, call it, $100 million, $80 million to $100 million.

Okay...

I mean that is a -- that's a -- let's wait for Q1 question really, Kerry.

Right, right. Okay. But if I just took the sort of this average price trades at first week and just multiplied by the shares, that's kind of going to be your book value?

Correct.

Take another question from the phone, please.

The next question comes from Lauren Stanley, a private investor.

Thank you for all your hard work. As the CPA, I'm a tad bit concern on the all-in sustaining cost numbers. With the acquisitions and streamlining, are you going to be able to cut costs? And are those numbers going to fall in the coming quarters?

So I think the bigger trend here is, obviously, as we expand and develop these the longer life, larger assets, those will naturally bring down our cost, but also we have the, call it the short-term impacts of these stripping programs and less ore going on the pads, et cetera, at Mesquite and Filos in the first half of this year. So we have an elevated period here in the first few quarters of this year, and then you start to see that downward trend.

And I think as we get into sort of like next year, you're running at almost 900,000 ounces. And we've got some expansions that have already come to fruition. You start to see those costs starting to come down. And gradually over time as we get Hardrock into production, as we expand Castle and as well as we expand Filos to its full capacity, those will all be lower cost. So it's a process here that we're going through of bringing costs down over time for sure.

Will that lend itself to the potential of dividends? Like after those things happen, will that be more lend itself to maybe the potential of dividends maybe in 2022 or 2023?

Yes. I'm not sure the exact timing yet, but absolutely, we're heading in that direction. And the goal here really is to get this portfolio humming, and spend some of this development in growth capital where we think we can get some great returns on it, and then we'll move to more of a dividend model. And probably be able to allocate some capital back to shareholders as well as invest in future growth. But I think you're right. It's 2022 maybe, but 2023 is much more likely for that.

Yes, that should help valuation, too.

Another question from the phone, please.

The next question comes from Mike Parkin with National Bank.

Can you speak to how Santa Luz's development budget is kind of tracking? Are you seeing kind of any wins on certain kind of cost items? And wherever you can kind of give some color?

And maybe I'll start there, but Pete and Doug, please jump in as well. So far, we've seen it pretty much tracking. I think it's 1% or 2% behind where we expected it to be in terms of -- at this stage, I think, around 25% and should be at 26% or 27%. And I think it's tracking basically on plan for the budget as well. And we're obviously getting the tailwinds from the FX rate. It's a slightly better environment than we had to work in up in Northern Brazil there with Aurizona. The rainy season, that doesn't have as much of an impact. And we're finding that contractors in the area are probably a little more qualified.

So far, we've got a really good start to it and really encouraged. And it is a fairly short build because a lot of that infrastructure is in place. So when we get asked what's the critical path and what are the key issues that could cause any issues or delays, it's not about waiting for a mill to come from China or from Europe or whatever. And those are there on site. So it's more about executing on concrete pores, getting that early mining going, getting the steel work erected, et cetera. And so there's less areas for things to go wrong. Of course, it's a construction project, and I can't be totally certain. But so far, it's tracking really nicely. Doug or Pete, I don't know, if I missed anything?

No. I think you explained, rightly well.

No, I...

Go ahead, Peter.

No. I was going to say the same.

All right. Excellent. And on Hardrock, could you just give us an idea of like, once the deal closes, it's already permitted for construction. Can you give us an idea of where what kind of activity we should expect on that project this year? And do you have a percent of engineering completion on the project that you could share with us?

I'll comment on that, maybe the first part there, Doug, I don't know maybe, you can comment on the second part. But the idea here is to close. We have been out to site. We've sort of started the process of getting up to speed with the team. We have a few questions just to answer and a few points we want to explore and look into. But overall, we were very happy with the work done to date and the project team in place. And -- Premier has given the go ahead, I guess, on just getting some early works done, like [tree] clearing and that, that has to be done during the, call it, the summer months. And it's a lighter end of early works. And I can't predict the exact timing, but hopefully in the second half of this year, we're in a position to be able to launch into construction.

So you're going to see, call it, the lighter end of works, where you're hiring a few project team members maybe doing a bit of tree clearing, ordering a few things with some deposits, but you're not going to see a big capital spend certainly for the next 3 to 6 months. And if you get into construction later this year, you could see us launch into a bit more detail. And at that stage, we can give a full budget and time line and be able to articulate capital, but a small proportion of the capital would be spent in the second half of this year, of course.

Okay. And on time line?

So Doug, about engineering -- what you see on the engineering, Doug, I don't know, if you know the exact percentage there where they're at?

Yes. Well, part of the work in the latter half of the year is updating all the costs. The -- majority of the costs for all the equipment was based on firm quotes. So there is an updating phase and completion of additional engineering. And the variable between about 50% complete on some of the detailed engineering, on the plant up to closer than 90% complete for TSF and highway rerouting.

I will add that part of the push for the second half of the year is establishing the camp and the supplement water treatment plant that are needed to be in place prior to being able to initiate the main construction for the project.

I'll take a couple of questions -- I'll take a couple of questions online now. So the first one I get asked all the time by e-mail. So I'm going to let you answer it, Christian.

"Are there any plans to employ synergies at Mesquite with core mining's Imperial Gold project?"

Not at this stage, that's for sure. We're pretty happy with what we got going on at Mesquite there. And we find the best investment dollars we have at the moment is actually going and exploring and add a [gallon] reasonably cheaply through the drill bit or the work with Scott and the team and Tom are doing down there. So that's what we're focused on.

And because of all the upside and the potential there at Castle and because we think of them not quite as one complex, but we certainly share some of the people, the skills, the systems, we tax consolidate, we're able to smelt all the gold at Mesquite. They have a somewhat symbiotic relationship, and we think of that as not just one complex, but a linked set of 2 mines. And we've got a long mine life and lots of opportunity there. So at the moment, we're really focused on that.

And in the last year, I would say, we haven't -- we're probably -- we've done a lot in terms of the acquiring side of things, and we've got a good portfolio now. We're really -- we will be focused on our own assets and not really in acquisition mode at the moment. We need to execute and deliver on what we've got on our plates.

Another question from a shareholder in Estonia.

"Do you see any political or union-related risks from any of your mining locations?"

I think -- I would say, the -- more generally is that you see political risks around the world anywhere you are. And anyhow with today's environment and COVID, I think there are certainly some moving shifts in terms of, obviously, government and public spending and maybe some tax risks. I think a lot of governments are looking at increasing taxes. I believe the U.K. government did so yesterday or the day before. So that's something when we certainly keep an eye on. But I do think that the jurisdictions we're in are very mining friendly. I mean Ontario is one of the top, I think, 3 in the world. The U.S. is fantastic. Where we are in California, I know people say, you can't mine in California. But Mesquite has been going for 30 years. Castle went for 12 years before. And we're having a good go at it right now. So we're very happy there.

And Mexico has got a long traditional mining. There's a little bit more left leaning government at the moment, but it's a key engine for the economy there. And Brazil, honestly, when we got back involved in 2016, Brazil has really, really improved. And we've seen the labor relations, the government policies around permitting, also contracting has actually improved. And maybe it's all marginally, but we've seen an incremental improvement across the board, and tax rates have stayed very, very amenable in Brazil as well. So I think we're prepared now. We've got a diversified portfolio. And if there are changes, we can withstand that. And that's one of the key things and part of our story is being diversified and evenly split amongst our 4 countries rather than being reliant on 1 or 2 assets that are much more at risk.

But -- in terms of unions, I think we've got unions at a lot of our sites. We have good relationships and that's something just like communities that you have to work on. It's a long-term partnership. And I do think we have pretty good relationships with all of them. And there's always risks in those kind of partnerships that need to be cultivated and managed well.

And certainly, Los Filos is an area that we've learned a few things from after acquiring it, and we'll do our best to improve that partnership, and it's the same with unions. But so far, I'm seeing no major issues jumping out at us.

We've got another question online from one of our institutional investors in the U.K.

"At current levels, the equity is extremely discounted. Is management open to considering a small buyback that doesn't materially impact cash levels?"

Yes. It's a question we get. I mean the dividend, share buyback question is always on the radar and it does get raised in this market. I think with our growth profile and the ability to invest and the need to make sure that we're our balance sheet remains solid. I'm not sure it would send the right signal necessarily to do a buyback at the moment and take some of that capital away from all the expansion projects we have on the go. There's some really low-hanging fruit in our portfolio, and I think we wanted to focus our capital on that.

But I think we're more likely to look towards them -- sustainable dividend when we get to that stage. And sometimes share buybacks can be fleeting and momentary, because they are, by definition, effectively, finite. You just can't keep continuing on with them. So we want to do something that's got a more sustaining, long-term view here. And of course, we worry about the share price. We're all owners of this company. Ross, myself and all the management team, we have an 8.5% stake. So we're very attuned to the low share price. And -- but clearly, it's the long-term vision that wins out here, and we do believe that we've got the right vision to deliver on value over time here, and we don't necessarily just want to do a short-term buyback. So we'll focus on getting to that point where you have a sustainable dividend first.

Operator, can you please take a question from the phone line?

The next question comes from Andrew Weekly with Smith Weekly Research.

Well, I wanted to extend an appreciation for the work you guys have done in this pipeline. This is really good, and I don't think the market is paying attention to anything other than [hingent] rates and a little bit of the gold price here at the moment. But Christian, can you add any color as to some of the highlights of the forthcoming community agreements at Los Filos? And if you could share maybe just vaguely, what phase do you think will keep this relationship aligned longer term?

Yes. Thanks, Andrew. And I want to be careful. I don't want to go into all the granularity of an agreement. But I think I was pretty forthcoming in the last few calls and even a little bit earlier, where the goal here is to set a collaboration -- social collaboration agreement with the community, that makes sure that we look after areas of concern and where we can help and include things like improving the water distribution system, which we committed to previously, and we will continue to commit to, and we'll make sure we upgrade that. Things that involve, call it, scholarships and medicines and other areas that we can contribute to the wider community and make a difference -- a positive difference.

And the key areas that obviously were -- the local community leaders were pushing towards, making sure that there's a reasonable and fair distribution of employment and contracts. And for us, it's absolutely vital that it's reasonably split between 3 core communities there, like it is for any other communities we affect in all the other lines as well. And those are the key areas that we're focusing on because you plan to be there, hopefully for a long period of time, and there's lots of investment to go in. So we want it as solid as possible. We want it as understandable as possible. And particularly, as we said, the dispute resolution mechanism or grievance mechanism is as clear as possible so that blockades don't happen in the future. And that they feel they can come to us and as an institution, we're able to work with them and deal with things. And it's not one individual or one person that builds that relationship, we're actually a company.

And with Ross' background and certainly ours, this kind of stuff is critical, vital. It's something that we've all had good experience in over the years. And we're disappointed with how this played out. We didn't get a good chance to go in and build those relationships on a personal level as well, amongst senior people in Vancouver and at the mine site level because of COVID and because the transaction happened just before that. So we're looking forward to, and I think I'm pretty optimistic that sometime later this year, in most of the countries, when COVID will be under control. And we'll be able to start building upon those partnerships and relationships.

And part of it, having the agreement in place, having it well understood, managing it well, having a regular dialogue grievance mechanism. But also, it's about building those personal relationships that stem all the way up to Ross and all the way down to the local team that's working with the community. And it's hard work. It's a regular thing that you have to keep up, just like exercise. You have to keep your body in shape, you got to keep your local relationships in shape, and it's an ongoing multiple touch point relationship. And I think it's just about that hard work on that front. And I think the agreement is the foundation of it, and the relationships are the key that keeps it going and keeps the machine oiled well.

Yes. I appreciate that, Christian. And I think it is important for the ESG part of it that's happening in this market, which has been largely unexpected. And of course, you guys have been servicing ESG for many, many decades here. But just wanted to bring that back up, and I'm sure you guys are listening to what the community wants as well and trying to find a common ground. So I appreciate that. You guys keep up the good work. Keep up the efforts. And take care.

Yes. Thanks, Andrew. And we get -- we have a lot of personal joy and pleasure from actually making a positive difference to communities into the regions we operate in. So we take it really seriously and we'll invest in that. And I think COVID -- and I'll just touch on that because you kind of alluded to that. COVID has been a big impact last year as much mentally and morally and just the impact it's had on testing and the way that we operate in protocols, but we do see that the case levels have been reducing across probably the portfolio of mines. With the mines we have done a wonderful job of managing COVID. And obviously, in the U.S., we're seeing a big rollout of vaccines. I think everyone now have a chance to be vaccinated in the second quarter this year. We've even been approached in Brazil about, do we want as a company to order vaccines, which is something that we would have to consider. I don't know if we want to do that. But we're seeing the vaccine starting to come out. And I do believe that this year, hopefully, we'll be turning a corner on that front.

One more question online from a brand-new shareholder as of this week. You've got your first project in Canada now. Are you thinking of expanding in that country?

Well, we are always keen to add in Canada. I think Ross was saying, we were on-site last week just first time back in Canada in a few years. I mean I was here, obviously with New Gold, and we're really excited to be back in Canada. I mean there's a lot of good reasons to be here, sort of great mining jurisdiction, lots of people who know what they're doing in mining. It's really prospective. Obviously, rule of law, the social relationships are very strong at this project as well.

And a number of shareholders said to us, one of the key pieces that would round out our portfolio, will be adding on a good scalable Canadian assets. So we hope that we ticked that box, and we're really excited about that project as a part of our portfolio and think that we can add some value to it.

And yes, I mean, why not? We'd love to be a little bit bigger in Canada. It wouldn't hurt. But we're not actively out there looking for more projects at the moment. Particularly, development stage because our pipeline is full. We've got Santa Luz, Hardrock and then Castle, and then there's a bit of work obviously to go on at Filos, it overlaps a bit. So we want to focus on what we've got in hand, and we're not in a rush to look for something.

And if we do ever do anything in the next year or 2, it will certainly have to be an accretive deal, and we got to get our multiple and our valuation up. So our focus is on delivering value and having people realize that this portfolio is well undervalued right now, and we get in that re-rating.

That is the end of our questions for the day. So thank you, everybody, for joining us. If you do have questions that you think after we're done, please don't hesitate to get in touch. And I will hand it back now to Christian for closing remarks.

Great. Thank you, and thanks for that group of questions from key shareholders and supporters, who've been around for a long time and patient here with. We're building a great pipeline and portfolio in this business. We've got the best growth, I think, maybe, globally for a good-sized mining company. And as you see us execute over the next couple of years here, it's going to be an exciting ride as we creep up in that re-rating in terms of our valuation. And glad to have you along for the right now. And thanks again for all the questions. And we'll speak to you again soon.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.