Equinox Gold Corp (EQX) 2023 Q4 法說會逐字稿

Thank you for standing by. This is the conference operator, and welcome to the Equinox Gold fourth quarter 2023 results and corporate update. As a reminder, all participants are in listen only mode 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, Alicia, and thank you, everybody, for joining us this morning. We will of course, be making a number of forward-looking statements today. So please do visit our continuous disclosure documents on our website on SEDAR plus and on Edgar.

I will now turn the call over to our CEO and President, Greg Smith.

Thanks, Rhylin, and good morning, everyone, and thanks for joining the call today. On the line with me is our COO, Doug Reddy; our CFO, Peter Hardie; our EVP of Exploration, Scott Heffernan; and of course, our VP of Investor Relations, Rhylin Bailie. Again today we are discussing Equinox Gold's 2023 fourth quarter and full year financial and operating results.

For those of you that are new to the company, Equinox Gold is a fast-growing Americas focused gold producer. We've got seven producing mines across Brazil, Mexico, and the United States. We also have several growth projects, including our large-scale Greenstone Gold Mine in Ontario that we're bringing into production this year with our 40% joint venture partner Orion Mine Finance. Our production is supported by a large gold endowment, including 17 million ounces in reserves and an additional 16 million ounces in measured and indicated resources.

I'll just start with a broad overview, and then I'll turn the call over to Pete and Doug for more details.

We had a strong finish to the year with fourth quarter production of approximately 155,000 ounces. That's the second highest quarterly production in the company's history. Cash cost per ounce sold in the fourth quarter was $1,330, our lowest quarterly cash costs this year, with all-in sustaining cost per ounce sold isat$1,657.

For the full year, we achieved our production guidance with just over 564,000 ounces produced. We sold 559,000 ounces in the year, beating our guidance with cash costs of $1,350 per ounce and achieving the low end of our all-in sustaining cost guidance at $1,612 per ounce.

Our safety performance this year was good. Four of our sites had no lost time incidents in 2023 and Greenstone completed over 5.9 million hours worked during construction with only one lost-time incident. Further, our total 2023 recordable injury frequency rate improved substantially from 2022. These are excellent results. However, I must also acknowledge that after more than five years with no fatalities, we did unfortunately have one fatality during the year at our Santa Luz mine.

On the environmental side, we also had a substantial improvement to our significant environmental incident frequency rate compared to 2022. We issued our first climate action report, our first water stewardship report, and an enhanced ESG report. All of these are available on our website. Further, we improved our S&P Global Corporate Sustainability Assessment score by over 28% compared to the prior year.

As most of you know, a major focus for the company during 2023 was advancing construction of our Greenstone mine in Ontario. Greenstone is one of the largest and highest grade open pit gold mines in Canada and will be a cornerstone asset for Equinox Gold.

With a strong push through the fourth quarter, construction at Greenstone was substantially completed by the end of the year. Commissioning is now the focus, and we're making excellent progress. Doug will have more details on the current status of Greenstone later in the call.

When operating Greenstone will significantly increase our production while reducing our consolidated costs, so achieving production is going to be a major catalyst for Equinox Gold this year. And this is going to be soon as we're on schedule for first gold pour in the first half of this year.

During 2023, we advanced our plans to develop an underground mine at the Piaba deposit at Aurizona and also commenced initial ground work at the new Tatajuba open pit. We plan to start development of the underground portal at Piaba and mining at Tatajuba later this year.

We also continued to advance permitting of the planned expansion at our Castle Mountain mine, which would increase production at Castle Mountain to over 200,000 ounces per year. We anticipate receiving the notice of completion from the Federal Bureau of Land Management in the very near term and the notice of intent shortly thereafter.

We expect permitting for the expansion will finish up in mid 2026. In the meantime, we're advancing engineering and design so that when the permit is received, we'll be well prepared to commence construction. And across our mines, exploration drilling in 2023 successfully replaced our reserves.

Looking forward toward 2024, we expect an increase in production to between 660,000 ounces and 750,000 ounces with cash costs of between $1,340 and $1,445 per ounce, and all-in sustaining costs of between $1,630 and $1,740 per ounce. The increase in production is driven by Greenstone, which we expect to ramp up through the course of the year following our first gold pour.

And with that, Pete, I'll turn it over to you to discuss our financial results.

Thanks, Greg. We're now on slide 8 in the presentation. We had a good Q4 that saw improvements in most key financial metrics compared to Q3 this year and Q4 last year, including gold ounces sold, realized price per ounce, income from mine operations, EBITDA, and operating cash flow before changes in noncash working capital. As Greg mentioned, Equinox had its strongest quarter on record for gold production and sales.

We sold 150,000 ounces of gold at a realized price of $1,983 per ounce for revenues of $298 million. Income from mine operations was $39 million, and that's an increase of $13 million from Q3's income from mine operations of $25 million and $16 million more than we did in Q4 2022. The increases in income from mine operations from prior quarters is primarily driven by the strong and higher gold prices we realized in Q4.

We had $198 million in operating expenses in Q4, which is a decrease compared to the $201 million of operating expenses from Q3 of this year and an increase from Q4 2022 $168 million. The quarter on quarter decrease from Q3 is primarily driven by lower reagent consumption at Los Filos. Included in our Q4 results are NRV write-downs of $3.7 million or just under $4 million at Castle Mountain and just under $2 million at Santa Luz.

On a unit basis, our Q4 cash cost per ounce of $1,330 is the lowest quarter for the year and lower than our annual 2023 cash cost per ounce of $1,350. Compared to Q4 2022, cash cost per ounce increased over $100 per ounce. The increase from Q4 last year is attributable to a few factors, including increases in mining costs related to contract mining rate increases, that's mostly at Aurizona and Santa Luz, of about $100 an ounce. And in addition, the appreciation of the Mexican peso and Brazilian real contributed to about $75 per ounce increase.

Those increases from Q4 2022 are offset by a decrease of about $50 per ounce in consumables and energy prices. Had our realized gains and foreign exchange hedging been applied against our operating costs, it would have further reduced the cash cost per ounce for Q4 by about $50 per ounce.

Our annual 2023, the cash cost per ounce at $1,350, increased nominally from 2022's $1,315 per ounce. Had our realized gains and foreign exchange hedging be applied against our operating costs, it would have further reduced the cash cost per ounce for 2023 by about $60.

Our all-in sustaining cost per ounce for Q4 this year of $1,657 is nominally up from Q3 and comparable to Q1 2023. When compared to Q4 2022, all-in sustaining cost per ounce is up just over [$30] an ounce. And due to the same reasons that I outlined for the increase in cash cost per ounce from Q4 last year, namely the mining and the foreign exchange.

Our annual 2023 all-in sustaining cost per ounce of $1,612 is lower than 2020 to $1,622 per ounce. In Q4, we saw Los Filos continue to decrease its overall gold ounces leach pad inventory balance. That trend continued into the new year. At Mesquite, we saw an increase of gold ounce inventory on the leach pad compared to the end of Q3. For Mesquite, the gold out inventory increase from the second half of 2023 is expected to be recovered through the first half of 2024, and Doug will discuss Mesquite operations further in his review of the operations.

Our EBITDA on Q4 2023 was $85 million or $95 million on an adjusted basis, which is an improvement over Q3 this year and Q4 last year. We had net income of $4 million, 2 million on an adjusted basis, both of which result in earnings per share of $0.01. Cash flow from operations before changes in noncash working capital was $168 million or $0.54 a share, which includes $76 million of proceeds from the long-term gold prepay arrangement that we closed in October.

With respect to our sustaining spend in 2023, we spent $120 million, which was $16 million less than our guidance of $136 million.

Moving to slide 9, in terms of liquidity and capital position, we ended the quarter with $192 million of unrestricted cash. Decrease from Q3 is primarily due to repaying $166 million of the revolving credit facility on October 3, with the proceeds from the convertible note we issued in September.

During December and into January, Equinox made use of its ATM and issued 9.9 million shares at an average realized price of just under $4.80 per share for about $48 million of proceeds. With regards to Greenstone, a total of $1.2 billion of the project been spent to date or through the end of December 31, with a total budget of $1.23 billion.

Throughout the project, Equinox saw some increases during the strong inflationary environment that were offset primarily by savings on foreign exchange and equipment financing. There is some exposure, but the commissioning period offset by expected gold revenue, but we ultimately expect Greenstone to commence commercial production largely on budget.

We expect to fund our remaining share and any pre-commercial expenditures through our cash at the end of the quarter and our operating cash flow. We have $165 million available to draw on our revolving credit facility, $140 million of which is set aside to repay, but bought less of the convertible debenture that matures in April, expire out of the money. As Equinox depends in part on operating cash flow to fund Greenstone, we added to the gold hedges in place to ensure and extended them to the end of Q2 to ensure a minimum gold price and secure the related cash flow on a portion of our gold sales.

As at Jan 1, the company had collars on about 143,000 ounces of gold with a floor of $1,964 and a ceiling of $2,170 per ounce. Additionally, we have $100 million accordion on the revolving credit facility feature that remains outstanding and undrawn. And finally, we have other levers with our $100 million investment portfolio in our ATM, should they be needed.

And with that completes the review of our financial performance for the quarter. I'll turn the call over to Doug for a review of the operations.

Thanks, Pete. We're now on Slide 10 of the presentation. At the Mesquite mine, gold production was within guidance at 88,000 ounces and below all-in sustaining guidance at $1,251 per ounce for the year. The mine stacked a large tenant of war in both Q3 and Q4, and it took a while to bring all of that ore under leach. The gold inventory was being drawn down in Q4 and will continue into 2024 with most of the gold production in the first half of the year coming from the ore that's already stacked.

Stripping on the Ginger pit is now the main focus for mining, for the majority of the ore from that pit will be coming online in 2025. Ginger was a new discovery in 2023, and it's quickly been incorporated into the overall mine plan. And it keeps the company continues working on developing additional resources and permitting to extend the life of the mine.

At Castle Mountain, gold production was below guidance at 21,000 ounces and was within all-in sustaining cost guidance at $1,899 per ounce for the year. Phase one is a small operation and that involves mining and processing of low-grade mineralized material. This material needs to be removed from the old open pits in anticipation of mining higher grade in-situ ore during the phase two expansion.

Crushing agglomeration modifications were completed in 2023. And the contractor also increased their throughput by about 46%. But we still didn't get to the level of crushed material being fed through the crushing and agglomeration system that we wanted. So we'll continue to work on this and also on cost reductions in 2024.

At Los Filos, gold production was below guidance at 159,000 ounces and over the all-in sustaining cost guidance at $1,890 per ounce for the year. In 2023, a productivity improvement program in both the open pit and underground mines was implemented has now yielded an increase in overall ore production.

However, in spite of the additional ounces that were above the mine plant being mined and stacked, leach pad issues resulted in slower and lower recoveries. And there was an increase in the inventory balances accumulated on the pad. The issues were resolved during the second half of the year and the drawdown of the ounces continued through Q4 and continues into into Q1 this year.

During 2024, we'll be mining from the Los Filos, Bermejal, and Guadalupe open pits and also from the Los Filos underground. All of the ore goes onto the existing heap leach pad. And we're continuing optimization efforts to improve efficiencies and reduce costs.

Longer term, we'd like to expand the mine and to build the carbon and leach plant so we can process higher grade ore and that would be a 10,000 tonne per day plant that would hit -- we'd like to build. We're not going to be able to make that investment unless we've been able to negotiate new agreements with our community partners so that we can ensure long-term economic viability and stability for the mine.

We started the dialogue in the fourth quarter of last year, and we're certainly hopeful that we'll be able to find a long-term solution so that we can invest in the mine. But as you'll see in the MD&A, we stated that if we were not able to find a long-term solution, we may need to suspend the mine at least until new agreements are in place. So that we can enter into a new phase of life for Los Filos.

Onto the next page. In Brazil, the Aurizona mine,gold production was within guidance at 121,000 ounces and with an all-in sustaining guidance at $1,440 per ounce for the year. In 2023, we had a record year for the total tonnes being moved by the mine -- in the mine.

We also completed the new tailings storage facility, which is now in use. That's in [Duvernay] 2. And we've begun decommissioning of the Duvernay 1 tailings storage facility. This year, we're going to be mining from the Piaba pit, the Piaba east pit and also from the new Tatajuba open pit, which is on the same trend and to the west to Piaba.

We will be finishing the installation of a public crusher. That's to maintain throughput at 8,000 tonnes a day. Fresh rock will be about 67% of plant feed in 2024.

We have the permits. We need to restart the development of the portal and ramped access to Piaba underground, and we'll start that work in the second half of the year. That's going to let us get underground to do some bulk sampling and underground drilling. And the portal will be sized ultimately to be usable as a production decline for underground operations.

At the Fazenda mine, we had another good year, achieving guidance was 66,000 ounces produced, but coming in slightly above the all-in sustaining cost guidance at $1,448 per ounce. Buying feed through 2024 will be 35% from open pit and 65% from underground. And I do note that the team is evaluating the opportunity for a larger open pit over the center portion of the main mineralized trend. So hopefully, we'll talk about that more later on this year.

Drilling programs continue to replace reserves in the underground to year on year, and that's been a consistent annual program that we've had the effort to annually replace what we mine underground. And a (inaudible) is in progress at Fazenda and will be completed in Q2.

At RDM, gold production was within guidance at 53,000 ounces and below the all-in sustaining guidance at $1,612 per ounce for the year. In 2023, we continued mining with a rental and owner fleet. That's being operated by an owner's team. We were doing -- this year, we were continuing on with the stripping campaign that will allow us to get into the section of higher-grade ore at the bottom of the pit when we expect full access to be at the start of 2025.

We're also doing some in-pit dumping. That should help us to reduce some costs. And we're planning to implement dry stack tailings in the second half of the year.

At Santa Luz, gold production was below guidance at 57,000 ounces and within the all-in sustaining cost guidance at $1,834 per ounce for the year. Mine had a good first half of the year, but began to have problems with pollution and electrowinning in the fourth quarter. That impacted our resin activity and the recoveries. Issues were being addressed as we came into the end of the year and into the year.

In 2024, we will be making some plant modifications, and those will be to increase mill throughput and improve recoveries. One of them is a declining circuit. That will be to reduce the total organic comp content and improve overall gold recovery by about 6%.

We'll be installing a new trend and that's to increase mill throughput. That should be about more than 10% increase on the throughput. And we're optimistic that these improvements overall will help stabilize the recoveries and throughput. We had the objective of achieving recoveries over 73% or higher for the second half of the year.

We are also doing TSF at Santa Luz. That should be completed by the start of Q2.

Can we move on to Greenstone? So obviously, cornerstone asset for Equinox. It's got a great group production profile, high average grade for an open pit, 1.27 grams, and we'll be averaging 400,000 ounces a year in the 100% basis. So that gives us about 240,000 ounces coming to Equinox Gold, given our 60% interest on the project.

Plant throughput at 27,000 tonnes per day. I mean, that's where we'll be ramping up to. And during that time, we'll be evaluating what will be needed to be able to take it up to 30,000 tonnes a day, which is the permitted for the mill. With a 14-year life, it's a good initial mine life. But we do also see opportunities to add from areas that are immediately adjacent to the current pit design, plus from an underground opportunity and also other deposits on the property. So we look forward to being able to augment the mine plan over the coming years.

I just move to the slide. I'm just in transit back to the corporate office. It's an exciting time. And I will commend the construction team. After 25 months of construction, they've kept to the overall schedule of H1 2024 being the gold pour. It's a really good sight to see.

And when you look at the crushing circuit or storage dome, they've been in hot commissioning. Essentially, they're ready to go. There is ore sitting in the ore storage dome, ready to be used. Ball mills, HPGR, leach tanks, and thickener, they're all in wet commissioning. And the tailings facility is permitted and ready for use. And mining fleet is 14 trucks, three shovels, current mining rates, about 90,000 tonnes a day, and it will be ramped up to 180,000 tonnes per day as we bring on additional trucks and bring them into service.

Stockpile for start-up, currently, it's just over 1.5 million tonnes. I know there's another 0.25 million tonnes broken in the pit. So they're doing a good job of putting everything in place ready for hot commissioning and ramp up. And we've received all from permits required for the commissioning activities and overall things are going well. We're really looking forward to being able to announce first gold pour in the next few months and then advancing through ramp up in commercial production and onwards.

So with that, I'll hand it back to Greg.

Thanks, Doug. And I'll just reiterate with the Greenstone coming online in 2024, it's going to be a very transformative year for Equinox Gold. As we progress through this year, we're going to be increasing our production in what we believe will be a macro environment of decreasing interest rates and increasing gold prices.

Our production from Greenstone will significantly reduce our operating costs and meaningfully increase our cash flow as we ramp up production through the year with our capital costs at Greenstone also substantially decreasing here, Equinox Gold will transition to generating significant cash flow later this year.

I'd just like to thank the entire Equinox team, the team at Greenstone as well for their efforts during 2023, and of course, the sincere thanks to all of our stakeholders. I think I'll conclude there and pass it back to Rhylin for Q&A.

Perfect. Alicia, can you please remind people how to ask a question?

(Operator Instructions)

Perfect. Thank you. While we wait for people to queue up, we'll take a question -- couple of questions from online.

Doug touched briefly on what's happening at Greenstone. What are the milestones that you need to achieve first gold pour?

Dough, you want me to start and you can jump in?

Sure.

So I mean, we're getting in the real final stages here. As Doug mentioned, the crushing circuit has been hot commissioned. There's -- that we've been running. It intermittently accumulating a crushed ore stockpile in the storage dome. HPGR, which is a high-pressure grinding roll, is ready to receive material. The mills are almost there. Ball mill 1 has been turned and load tested, and ball mill 2 is shortly behind it.

And the real push and the primary push at this stage to get into full hot commissioning is just programming and instrumentation in the circuit. And so we've got a whole team focused on that right now. And as we move through that, we can bring on each incremental part of the circuit online. And as soon as we can push material through the whole thing, we'll start the hot commissioning.

So getting close. And in terms of what we'll publicly announce between now and first gold pour, I'm not sure because it really is coming down to just getting the programming done and starting to push material through the circuit. Is that about about it, Doug or anything else to add?

No, you covered it. That's really what it boils down to. Most of the other things are minor. And once you're in the hot commission, you can work through any residual issues and tidy everything up.

We've got a few questions online from Kerry Smith, our analyst from Haywood Securities.

First one for Doug. What's the stockpile grade at Greenstone? And is it in line with your block model?

Well, first of all, deal with the second part. Is it in line with the block model? We did a grade control drilling program. It was done. And everything is pretty much matching against the grade of the block model. And then on the current stockpile average grade, I think we're about 1 gram overall, but that's not reflective of the bins.

I mean, we've been getting, I'll say, a positive reconciliation on tonnes and low-grade material that's outside of the block model. But it is the first few benches. So we are carefully monitoring ait s we go along. There is some variation on topography as we have the interface between [fuel] and and the initial rock. But so far, it looks like it's bang on.

Perfect. Thanks. Kerry is also wondering what our preferred strategy and options are for retiring the April 2020 convertible notes.

Well, the preferred strategy is that it settles in the money and they converge and move from being noteholders to shareholders. If that does not happen, either they don't convert or does not settle in the money, we have the funds set aside from the convert that we raised in September, which is currently parked against the revolving credit facility. And it's there to repay. We bought less should we need to.

One more from Kerry. How are the discussions going with the three communities that for the long term life of mine agreements?

I'll be general because this is really a discussion between us and the communities at the moment. We've had -- I met with them in November. We've had several meetings through December, January. We have a team that's engaged and addressing concerns both on the current CSR side, but a separate team that also is able to meet with them on an ongoing basis.

Full-on dialogue. We've kind of laid it all on the table. If the the opportunity is at mine and we see it as an opportunity to establish the next stage of life for Los Filos and it's clear that change is necessary. So it's a dialogue and so it's going to take a while.

Okay. Thank you. Alicia, can we please take some questions from the phone?

Wayne Lam, RBC.

Morning, guys. Just curious on the nonsustaining spend that is skewed this year. Quite high on that stripping for the Ginger. Just wondering what kind of additional mine life or ounces we should expect from that stripping program.

I'll start, Wayne, and Doug, feel free to jump in. But so Ginger is a new discovery, brand-new pit at Mesquite. So what you're seeing in our nonsustaining CapEx this year is basically the stripping program we're undertaking to advance that pit toward commercial production. And Ginger will provide a substantial amount of the ounces in 2025.

And what this does, this capital investment this year, it really sets up for a fairly meaningful increase in production in 2025 at Mesquite. And then beyond that, we're continuing to develop additional sources of ore and kind of what we say on every call here is we want to keep Mesquite going as long as we can. And happily, we've been able to continue to do that through the discovery of new resources at site.

So certainly, 2025 is looking good at Mesquite. That's the whole point of the investment we're making this year.

Okay. Is that pit in reserve though, or are there any parameters that -- how we might be able to think about it?

Dough, you want to have (multiple speakers)

Yeah, it came in quickly. So essentially, it was identified by exploration and put it into resource model and as we came through 2023, but it is at a reserve level and was able to be put into the mine plan at the tail end of the year. And it's definitely -- we're continuing to look at additional opportunities to try to expand beyond, but it provides good production in 2025.

Okay, great. Thanks. And then maybe just at Greenstone, it seems like the total CapEx budget was effectively spent by year end. I'm just wondering on the $95 million in nonsustaining, is the majority -- just on timing of that, is the majority of that spend going to be completed in the first half before the first gold pour? And then just looking at the mine plan, there is about $77 million in sustaining CapEx but it in year one. And just wondering what the delta is versus the $25 million guidance?

I'll handle the first part of your question, Wayne. The $95 million is spread fairly evenly throughout the year. We split that really, call it, $55 million, construction related; $40 million, other, call it, ancillary, infrastructure that we need to do, but timing of which we're still reviewing and not at all fundamental to the actual construction budget. Of the $55 million, about half of that is contingency. So that would -- related to construction, that would be the first half of the year, with the remainder effectively spread throughout the year.

And I guess the second part of your question there, Wayne, I mean, I don't have the feasibility study in front of me. Obviously, it's several years out of date in terms of where we're at in the project now. But within our sustaining CapE, it's primarily for work around additional drainage on the site.

We also are going to be maintaining our camp. We're done the construction camp. Now we're going to make a -- we'll call it a semipermanent cap. And so we're going to do some upgrades on that camp. We don't really need to do those yet. We can push that out to later in the year. And then there's some capital stripping in there as well.

Yeah, there may be a calendar year versus year one difference -- model difference versus the calendar year difference, but, Wayne, we can get back to you on -- run underground and get back to you on it.

Okay. No problem. Thanks for the detail.

And then maybe just curious on the ATM. You guys had done the convert in September, which was kind of in advance to trying to derisk the upcoming repayments. And just curious, it seems like the execution over the past few months has been pretty aggressive on that facility. And so just wondering if that you -- if guys expect to continue that program over the coming months or how we should think about the executionon the ATM?

Yeah. I guess just looking at the big picture here, we've been in two years -- more than two years in Canadian dollar terms, a $1 billion build for the company, pretty meaningful build. And we financed that largely through debts, some prepays, cash flow from operations, and to a very minor extent, some equity through our ATM at the sub-10% at this stage.

And so the ATM, it has been a good tool for us and our shareholders, I think, just to manage our cash balances and our financial strength across what has been a pretty significant build. As we go into the later part of this year, Greenstone hits commercial production. We start to generate substantially more cash flow from operations. And it becomes less -- probably less of a focus for the company.

In the near term, we've got access to it as we go through the commissioning at Greenstone. I think it's a good tool to have available to the company. But whether or not we'll use it will depend on how we're seeing things shake out with our overall liquidity position as we bring Greenstone into production.

Okay, great. Thanks. I'll hop back in queue.

Don DeMarco, National Bank Financial.

Thank you, operator, and good morning, team. First question, can you speak to the trajectory of the ramp up over the year? Maybe 240,000 ounces, obviously, back-end loaded, but maybe any additional color on how we should model this quarter over quarter? Appreciate it.

Yeah, so it's a staged ramp-up, probably the best way to put it. We think that we will start pouring gold in Q2. The first phase of the ramp-up will be to get to sort of 60% of capacity. Commercial production might call that sometime in Q3, starts to look like 80% of capacity. And then by the end of the year, we should be at that 90%, 95% capacity, as we move into sort of November, December.

Okay. And response to an earlier caller's question, you mentioned the stock upgrade maybe 1 gram per tonne. Should we expect that the grades in the first half during the ramp up to be lower than in the back half?

Yeah. So the original plan was to have around 800,000, 900,000 tonnes at around 0.9 gram per tonne. That was in our original model. We're seeing here now at 1 million north of a gram. We've got, as Doug mentioned, we've got several bins. And we've got certain bins that are very, very high grade. And then we've got some positive variance in terms of tonnes where we've got some lower-grade material as well.

So of course, as we start the ramp up, we're going to be running much lower grade material initially through the crusher mills. And as we dial in, the processing circuit increase our recoveries, we'll start to introduce that higher grade. And in the first five years of this mine, the grade is higher than the life-of-mine average. So we'll be able to ramp up the grade profile pretty quickly this year.

Okay, great. Well, certainly look forward to that. The costs are attractive for the guidance.

And just sticking with Greenstone on the Greenstone CapEx, you mentioned you expect to finish the year on budget versus the $1.23 billion total CapEx. Now CapEx guidance included a $68 million in post construction costs. Can you provide some more color on these items? Like, for example, the new hydro substation and so on. And are these items considered separate from that initial development CapEx budget?

Sure. So as we get to the very end here, you've got --we've got some things that fall into sort of sustaining capital or post-construction capital. There's a few items that we did not need to do during the build that we pushed out. The hydro station is one of those items. It's more of a timing of the open pit as to when we need to move it. So it was not something that had to be done during the construction period.

As we said, by the end of 2023, construction of the mine, of the tailings facility, of the crushing circuit milling, all the staff needed to run the operation and all the material infrastructure was complete, and we moved into commissioning.

And over the course of 2024 and into 2025, we do have to do the hydro substation. There are some historic soils on the properties that were contaminated from early mining and earlier industrial activity. We need to move those into the tailings facility.

We're buying an additional generator, which is really for redundancy for the power plants. We've got fleet payments which are related to leasing for the fleet, which are kind of even through the year. And I said earlier, some drainage, and then the camp, and then some capital stripping that comes in later this year as well.

So nothing sort of significant in and of itself, just things that will clean up the overall side and things that we need to do all of the timing of when we need to do. Some of these things is such that we can push them off or wait until commercial production in 2025.

Okay, understood. Thanks for that. Well, that's all for me. Good luck with the rest of the ramp-up.

Anita Soni, CIBC.

Hi, good morning, Greg and team. Apologies if this has been asked, I just hopped off the Newmont call, but I was just wondering when it comes to the guidance for the Hardrock -- sorry, the Greenstone asset. Could you give us a little bit of color on the grades and sort of cadence of throughput increases that you expect over the course of the year?

Yeah, we just answered that question, Anita, and I'll give you the two scoops again. So basically from from first gold pour, the first ramp up is to 60%. And we see that happening relatively quickly. The push to commercial production would take us to 80%, and we see that happening sometime in Q3. And then as we move into the end of the year, we would we would hit that 90%, 95% plus capacity and largely be at capacity by the end of 2024.

The initial grades that we'll put through, the material that will lead to first gold and into that 60% ramp-up will be lower. Just as we go through the commissioning, make sure we're getting the recoveries and everything's working the way it should. And then we can start to introduce higher grade material into the plant, I'm sure, the back end of this year as we're in commercial production.

The average grade for the first five years, just as a general comment, in the models, 1.47. But there's higher grade material available sort of within that broader average. Right now, we're sitting on a 1.5 million tonnes of stockpile. That's just over 1 gram. But within that 1.5 million tonnes, there's a fairly wide range of grades. Where we've got some low grade, we've also got a fair bit of much, much higher grade than that.

So like any mine startup, start with the low-grade, ramp-up the production, increase,the grades as we ensure we've got the recoveries, and then get to commercial production.

Yeah. I guess when I was last on the tour in September, you guys were talking about potentially moving that first five-year profile. I think, originally the tech report had very high grades at 1.7 gram per tonne material and then dropped to 1.3. So I was looking for sort of a little bit color on that, but then also the other aspect of it is the stockpiled material like your -- as you mentioned, the grade that you have in the stockpile is 1 gram per tonne material and you're going to be feeding something materially higher than that. So it's relying on you pulling higher-grade material out of that stockpile. So I was just wondering like what's the actual feed material is going to be in the next couple of years.

Yeah. I think again, I mean, we're looking forward to looking at the mine plan and working on -- some of that's moving in the future right now, Anita. We're totally focused on getting this plant up and running.

Doug earlier on the call, which -- also you weren't on it. At that poin, Doug did talk about the reconciliation. Everything's reconciling incredibly well to the block model. We are finding that we have some more tonnes tonnes that would have been waste, but actually do meet the criteria of ore. So we will end up with some lower grade stockpiles rather than go into the waste dumps.

But in terms of the mine plan and the reconciliation to what we had intended on mining, it's actually looking really good. So we're early on. We're early benches. But in terms of grade reconciliation, looking good, probably more tonnes than had been anticipated. And then going forward and optimizing the mine will come after we get it into production.

Arun Lamba, TD Securities

Thanks, operator. I think you might have just answered this, but just in terms of an updated life of mine plan, feasibility study, somewhat dated, could we maybe expect one in 2025 or it's kind of focused on the ramp up? And then we'll do 2025 guidance and maybe a updated life of mine plans maybe in 2026 or something. Just timing on that.

(multiple speakers) I was just going to say like again totally focused on getting the mine into production right now. And then we've got the luxury to do some of those technical report update. I'm thinking kind of the later end of 2025 before we see a fulsome update like that. So the next sort of guidance coming out for 2025 would be a year from now, focused on that year. And then in 2025, we could look to have a longer-term mine plan.

Perfect. And then just on capital, you mentioned permitting of the phase two going into 2026, and in the MD&A, you mentioned you're going to reevaluate whether there may be some slowdown phase one or whatnot. Should we get an update on that in the first half of this year? Or is that probably in the second half of the year kind of similar to Los Filos in terms of timing on a decision for the phase one plan.

That's second half.

Yeah, second half, Doug. Yes, it's in process right now, Arun. So the permitting, it looks like we're making some good progress now on the permitting side. The BOM has been very engaged with us recently. We do expect that notice of completion and then this notice of intent coming in the relatively near term. And our estimate is that the process beyond the notice of intent will take around two years. So that puts us into that mid 2026 timing for the permit for the expansion.

And phase one, as Doug kind of mentioned, it's a bit of a development project masquerading as an operating mine to some extent. The point of it is to maintain the permits and to excavate the existing open pits and that's what we've been doing and also doing testing on what this mine could look like at the increased production level.

And with -- it's fairly low grade material that we're processing. We're using a contractor for mining, a contractor for crushing. The cost profile is higher than we would prefer. So what we're looking at is what makes the most sense given we've probably got two more years of permitting.

Once we build phase two, obviously, we're going to have a much larger fleet. It will be a lot cheaper to move this material. But if it makes sense to continue doing it now, we can get it into a situation where we're doing it at a reasonable cost, that would be sort of first prize for us and we continue on with what we're doing. But at this point, there's no point in consuming capital over the next two years for that to any extent. That is a better deal to do it two years from now.

So that's what we're looking at. And it might just be a situation where we reduced the throughput at Castle Mountain over the next couple of years as we prepare for the expansion.

Jeremy Hoy, Canaccord Genuity.

Hi, Greg and team. I was taking my question. Most of mine have been answered. So one quick one for me and again, it's on timing. Appreciate that the dialogue at Los Filos is fluid. But is there any sort of timeline that we can -- we'll keep in mind or any dates that we can look to for progress updates on the negotiations?

I don't think we want to give -- Yeah, you're right, Doug.

I think we'll do our best to keep you informed. But given the dialogue, it's a back and forth. I can tell you that long term, the heap leach is not the way to go. So I mean, beyond -- I don't know, this year, next year, it just makes less sense. CIL is actually a cheaper option for us because of the cyanide consumption and the pumping that happens on a heap leach.

So it is the time to discuss and to work it through. We'd like to obviously have everything wrapped up ASAP, but we continue to to engage and try to be as open as we can, to be able to lay all our cards on the table, and come to an understanding of what makes through the next stage of life for the mine.

Okay. Yeah, I appreciate the color. And I know it's a fluid situation. Thank you.

Wayne Lam, RBC.

Okay, thanks, guys. I just had one follow-up. Just wondering on the impairment testing, the carrying value of CLOs looks nearly equal to Greenstone now. And just wondering if that year-end testing included update capital, operating costs versus the '22 feasibility study. And then just curious with the ongoing community negotiations, does it become binary in that there may be a significant write-down could be undertaking if you can't get a deal done.

Wayne, it's Pete. So the impairment test contemplates a CIL being put in. So of course, until the CIL is put in, it reflects current costs. But as Doug just mentioned, a CIL dramatically reduces operating costs there. And so that -- I think that probably answers your question on impairments.

And then with respect to would we incur a write-down at CLOs if CIL did not proceed, we likely would. But we would obviously have to review that, given the circumstances when we would have to redo that impairment test.

I guess I should clarify for accounting purposes-- I shouldn't imply we did an impairment test. For accounting purposes, you look first at indicators. And if you have an indicator, you do an impairment test. We concluded we did not have any indicators. So there was no impairment test. Had we run an impairment test, it would incorporate. Thus, the CIL, is a better way to answer your question.

Okay. Great. Hopefully you guys can get a deal done imminently. Thanks for taking my question.

Anita Soni, CIBC.

Hi.Just another one on Greenstone and this time on the cost. The AISC guide is $850 to $950 AISC, I assume, from the point -- is it correct that it's from the point that it's going to be declared commercial? Or is it from the first gold pour. That's the $850 to $950.

Yeah, that's right, Anita. It's from the point of commercial production.

Okay. And again, that was some time probably in Q3, right? You got to get to the 80%?

That's right.

Okay. And then just in terms of that number, I was wondering is there any additional costs that may be being capitalized or put into another bucket. Or would the $850 to $950 incorporates all of the costs at that asset in the quarter and in Q4, if we were to use that as a run rate?

So the $850 to $950, the only cost that would exclude and Greg already alluded -- I'm sorry, you may not have been on that. Greg alluded to it earlier. Is the leasing costs related to the initial fleet that we acquire during construction remains nonsustaining. But apart from that, it grabs all the cost.

Okay, grabs everything. So there's nothing else that's a -- okay. Thank you very much.

Thank you. We do have a few questions online, but I think they were pretty much all addressed with the questions that were asked from the analysts that I will get back to you all individually to make sure you've not got any follow up question. So I think we're going to wrap it up here.

Greg, do you have any closing statements?

No, just thanks again, everyone, for attending the call. And you know where to find us if you've got any additional questions. The contact information is on our website. Reel in myself or any of us are always happy to engage with shareholders.

Perfect. Thanks, everybody, for joining us this morning. Operator, you can now conclude the call.

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