Galiano Gold Inc (GAU) 2017 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the Asanko Gold's Q4 and Full Year 2017 Operating and Financial Results Conference Call and Webcast, which is being recorded. A copy of today's press release, the management discussion and analysis, and the presentation is available on the company's website at www.asanko.com.

I will now hand over to Peter Breese, President and CEO of Asanko. Please go ahead, sir.

Thank you, and good morning, ladies and gentlemen. Joining me today on the call is our CFO, Fausto Di Trapani. Before I begin, I'd like to draw your attention to the disclaimer on Slide 2 regarding customary forward-looking and cautionary statements regarding mineral resources and mineral reserves.

Turning to Slide 3. 2017 highlights. 2017 was a challenging year, and we learned some important lessons from the operational issues we faced. I believe we have now overcome these issues and with the enhanced operation team in place, we have the right foundations to consistently deliver quarter-on-quarter against our plan.

Running through the highlights for 2017. Starting with safety, I'm pleased to report that we continued our excellent industry-leading safety record. We reported only 1 lost time injury during the year, giving us a lost time injury frequency rate of 0.17 on a rolling 12-month basis. Our last lost time injury was recorded a year ago in mid-March, and up to the end of December, we had over 4.7 million injury-free man hours.

This is a great achievement, particularly as we're still a young business and we have 2 mining contractors on site as well as work being done on the plant as part of the P5M upgrades. I commend the team and our workforce for their diligence and commitment to working safely.

Gold production for the year was 205,047 ounces, at the low end of our 2017 amended guidance range. During the course of the year, we implemented the new CSA Global resource model at both Nkran and Akwasiso pits, which have been validated by positive results in reserve reconciliations for the second half of 2017.

We introduced and embedded a number of new systems during H2 2017, which include blast movement technology to improve management of ore losses and dilution; fragmentation management; broadened work index mapping; and mill slicer technology. All of these systems have significantly improved both mining and milling operation efficiencies and are producing exceptional results.

We increased our mining flexibility with the addition of key satellite deposits, Akwasiso and Dynamite Hill, to the production schedule. Whilst, we face some early issues opening up Akwasiso, this is now behind us, and I'm pleased to say, Dynamite Hill is progressing according to plan. We successfully completed another capital program, the P5M plant volumetric upgrades within budget and ahead of schedule. The plant is now operating at or above 5 million tonnes per annum on a consistent basis.

Our all-in sustaining cash cost increased this year and came in at USD 1,007 per ounce versus management's guidance of $920 to $960 an ounce. This was due to the higher prestripping costs associated with Nkran Cut 2, reflecting of the oxide slope angle at Nkran and the cost associated with mining through the extensive historical artisanal workings at Akwasiso.

Gold sales for the year were 206,079 ounces at an average realized gold price of $1,243 an ounce, generating gold revenues of $256.2 million. Cash provided by operating activities was $123.2 million, and we generated $30.7 million in income before taxes for the year. At year-end, we had $54.6 million in cash and immediately convertible working capital.

On the corporate side, we acquired the highly prospective Miradani concession area, which is adjacent to the Asanko Gold Mine concessions. We are still engaging with local and regional stakeholders to ensure unhindered access to the project area to fully test the 3 high-priority drill targets.

In June 2017, many of you will recall, we published an expansive DFS, which confirmed the economic viability of our two growth projects, P5M and P10M. And more recently, in February 2018, we signed an indicative term sheet with Red Kite to defer the first principal repayment of our debt by up to 3 years, extending the deferral period to July 1, 2021. As is usual, this indicative term sheet has certain fees, terms and conditions associated with this restructuring. Definitive documentation is underway and is expected to be completed in early Q2 2018, at which time we'll be in a position to announce the revised terms and conditions to the market.

The restructuring of our debt facility will enable us to proceed with the second component of the P5M growth project, which is the construction of the overland conveyor in 2019 and 2020 and the development of Esaase, whilst maintaining a solid cash buffer during the capital expenditure phase.

I'd like to turn to Q4 performance, starting with mining on Slide #4. During the quarter, we introduced the updated optimized mine plan, which forms part of the P5M optimization exercise. In preparation for our capital expansion phase over the next couple of years, we took the decision to change the design of Nkran Cut 2 pushback and increase the size of it so we can get ahead in the year where we have low capital spend requirement.

The design change means we'll spend more money on the pushback now so that we generate maximum cash from a low-strip mine plan when we build the conveyor and open up Esaase. I'll talk about this in some more detail later on in the presentation.

Part of the optimized mine plan also includes geotechnical design changes in the oxide zones at Nkran to further flatten the slope angles from 34 degrees to 26 degrees. This requires an additional 4 million tonnes of waste to be mined, of which we mined 2 million tonnes in the fourth quarter 2017 and we'll mine the rest during 2018. The 2 million tonnes that we mined in Q4 had an impact on AISC of approximately $113 per ounce of gold produced in the quarter. Those of you who were on site for this back in November will recall seeing this taking place.

If you take a look at the top right-hand corner of the slide in front of you, you will see a picture of the Nkran pit that was taken last week. It clearly shows how the oxides in the East have been flattened, and now we are well into mining the hard rock on the pushback. The larger pushback started in Q4 2017, and I'm pleased to say it's progressing well.

We're already ahead of schedule as at the end of February 2018, which is a great outcome with the onset of the rainy season in Ghana. This along with the establishment of Dynamite Hill pit resulted in the overall strip ratio increasing significantly for the quarter. All mining rates for the Asanko Gold mine averaged 267,333 tonnes per month for the quarter, and we mined a total of 802,000 tonnes and averaged mining grade of 1.5 grams a tonne with a strip ratio of 13.3:1.

Ore was sourced from Nkran, Akwasiso, Dynamite Hill, Nkran extension and at surface stockpiles. Ore end tonnes and the average grade mined were lower compared to the previous quarter due to the ongoing Cut 2 pushback at Nkran, which focused on waste removal in line with the updated life of mine plan. Higher waste from Nkran reduced the ore yield, thereby reducing grade mined.

At Akwasiso, despite the early setbacks that we -- have been discussed extensively in previous quarters, steady-state production of 60,000 tonnes a month of fresh ore has been achieved, and we expect these levels to be maintained over the coming quarters. The local mining contractor at the strip (inaudible) has really stepped us to the plate and continues to show improved performance level.

At Dynamite Hill, we completed the early works program and infrastructure development and commenced ore mining operations during the quarter. I'm pleased to say that the mine is progressing according to plan. We have been very impressed with our local mining contractor Rocksure and we're on track to ramp up to 70,000 tonnes per month of ore during the current quarter.

In Q4, we will also mine a portion of the -- sorry, in Q4, we also mined a portion of the Nkran extension, which is located right next to the (inaudible). It is a very small deposit of at surface oxides, and we'll continue to use it to supplement oxide feed from Dynamite Hill during 2018.

I would now like to turn to the processing on Slide 5. We had a very good quarter with the plant achieving record milling rates, processing around 1.1 million tonnes of ore, in spite of a lower proportion of oxide tonnes being fed to the mill than designed. The volumetric upgrades to the plants are complete. Since the month of December, we have been running at or above the designed 5 million tonnes per annum annualized rate on a consistent basis with a new monthly record set in January of 430,000 tonnes processed through the mill. That is close to well over 5 million tonnes processed in the year.

The process recovery upgrades will be completed in Q1 2018. Encouragingly, we have maintained a 94% gold recovery rate in the process facility despite the recovery upgrades not yet being operational. The high volume throughput's been achieved by the process facility and continued high-recovery levels all point to improved operational flexibility for Asanko into the future.

The plant feed grade was 1.5 grams per tonne in the quarter. As I mentioned in the Q3 conference call, from Q4 onwards, we expect the mill feed grades to reflect the average reserve grades from the respective pit as they are mined, including the blended grade average from the various stockpiles.

During the quarter, we optimized the crushing circuit with the addition of temporary diesel-powered jaw and cone crushers. We are now crushing to 60% parts in 80 millimeters to feed the SAG, and this has significantly increased the flexibility we have with blending the harder rock to the mill as well as improving the milling performance. However, there's a cost associated with that, so we will be installing a permanently -- permanent secondary crusher in the second quarter of 2018, and that will be fully commissioned in the third quarter of 2018.

The installation of the permanent and larger cone crusher will deliver a mill feed size of approximately 80 millimeters -- 80% minus 80 millimeters, which again will give us more milling flexibility. The installation of this permanent crusher will bring down the operating cost associated with crushing from around $2 a tonne to $0.60 a tonne processed.

In addition, we also installed mill slicer technology to enhance milling performance and efficiency. This is a great piece of technology and has helped us to optimize the mill power consumption and throughput as it ensures the mill is always working at its most optimal full level, thereby, reducing energy used per tonne processed.

These 2 interventions, combined with the fragmentation management and Bond Work Index mapping have enabled the processing facility to achieve the 5 million tonne a year processing capability.

That concludes the operational review for the quarter. I would now like to hand you over to Fausto, our CFO, who will discuss our financial performance.

Thank you, Peter. Turning to Slide #6. I'd like to start with our cost performance. This quarter, all-in sustaining costs were higher primarily due to the increase in stripping costs associated with the investment in the Nkran Cut 2 pushback as well as a higher reliance on diesel-fired crushing capacity to maintain elevated throughput levels at the Asanko Gold Mine processing facility.

As Peter mentioned earlier, the drop in grades reflects the average grade of the various ore sources we processed this quarter. Level ore yields from Nkran, higher reliance on satellite deposit mill feed as well as an increase in processing low-grade ore from the stockpile impacted feed grade for the quarter. Mining unit costs decreased quarter-on-quarter to $2.82 a tonne as most of the mining at Nkran and Dynamite Hill was in the soft oxide ore zones, which do not attract drilling and blasting costs.

Processing unit costs for the quarter increased marginally compared to the previous quarter, impacted by high utilization of mobile crushing capacity and higher maintenance fees. These impacts were offset somewhat by record milling tonnes processed. Total cash costs increased by approximately $100 an ounces quarter-on-quarter due to lower head grade to the mill, impacting ounce production and associated sales volumes, which also had the impact of increasing fixed production costs on a per-unit basis.

Planned stripping activities associated with the investment in the Cut 2 pushback at Nkran continued to dominate the all-in sustaining cost base. The costs associated with deferred stripping in the quarter amounted to $418 an ounce of the all-in sustaining costs for Q4. This is considerably higher than previous quarters but in line with our updated life-of-mine plan. Alongside the pushback itself, the cost associated with flattening the slope angles based on the recommendations received from our geotech specialists earlier in the year was approximately $113 an ounce or $5 million for the quarter.

All-in sustaining costs were $1,171 per ounce for the quarter, delivering an all-in sustaining margin of $93 per ounce with realized prices in line with Q3. The reduction in the all-in sustaining margin was due to margin compression associated with higher stripping activities. As you will note from our 2018 guidance, we expect all-in sustaining costs to remain high for most of this year as we invest heavily in the Nkran Cut 2 pushback.

Moving on to the income statement on Slide #7. Looking at our income statement, we generated a pretax net income of $7.1 million for the quarter from the sale of 49,561 ounces of gold at an average realized price of $1,264 an ounce. Earnings before interest, tax, depreciation and amortization was $26.6 million for the quarter, yielding a quarterly average of $27.9 million for the year. The decrease compared to prior quarter was due to fewer ounces sold, higher production costs and generative exploration spend of $1.5 million at Midras South and Miradani.

We did not pay any cash taxes for the year with the exception of withholding taxes. The tax charge in the income statement relates predominantly to timing differences between accounting, depreciation and tax capital allowances without the recognition of debit deferred taxes associated with carryforward tax losses. Net loss for the quarter was $7 million. However, if we calculate earnings and earnings per share before noncash taxes, we generated earnings of approximately $7 million and earnings per share of $0.03 for the quarter.

Let's now turn to the cash flow on Slide #8. We continued to generate strong cash flow from operating activities of around $34.4 million for the quarter. Before working capital changes, we generated $26.2 million from operations. This gives us a quarterly average cash flow from operations of $28.4 million.

We continue to work with the Ghana Revenue Authority to manage the VAT receivable cycle. At the end of 2017, we held a current receivable in respect of VAT amounting to $5.1 million. VAT refunds continue to be collected in the normal course of business.

Turning the focus to investing activities for the quarter, we spent approximately $17.8 million on growth capital related primarily to cash payments pursuant to the P5M volumetric upgrades and the development of Akwasiso and Dynamite Hill pits as well as $2 million on sustaining capital expenditures related to the tailings raise and secondary crushing infrastructure.

During Q4, substantial stripping costs amounted -- amounting to $22 million were capitalized to the balance sheet as the company continued to invest in the next phase of production through the development of Cut 2. Although these stripping costs are capitalized, I'd just like to point out that they are included in our all-in sustaining cost calculation for the period. The quarterly interest payments to RK -- or sorry, Red Kite dominated the financing activities for the quarter.

Moving on to Slide #9. In anticipation of our next growth phase, we are looking to restructure our existing debt facility and extend the repayment of the first principal by up to 3 years from July 2018 to July 2021. This will enable us to fund the construction of the overland conveyor and develop the Esaase pit from cash on hand and cash flows from operations. We're expecting to commence these capital growth projects in 2019, and they'll take approximately 18 to 21 months to complete at a capital cost of approximately $141 million.

With the updated mine plan plus this debt restructuring, we'll be able to fund these projects from cash plus internally generated cash flows in addition to maintaining a healthy cash buffer during the construction phase. Following the completion of confirmatory due diligence by Red Kite's independent technical experts in February this year, we signed a nonbinding indicative term sheet with Red Kite. Whilst these terms are confidential until we have executed final documentation, we have agreed to an initial 1-year deferral and a further conditional 2-year deferral, which are subject to certain fees, terms and conditions, which will be captured in the definitive documentation. We anticipate execution of these agreements in early Q2 2018.

I'll now hand back to Peter.

Thanks, Fausto. Moving on to Slide 10. Now I'd like to discuss our guidance for 2018. As part of our planning for growth, 2018 will be a year of investment as we take advantage of a low capital expenditure year to expand the Nkran Cut 2 pushback to ensure higher ore yields and solid cash generation over a longer period from 2019 onward.

For 2018, we are guiding gold production of 200,000 to 220,000 ounces and an AISC of $1,050 to $1,150 per ounce with ore sourced from Nkran, Akwasiso, Dynamite Hill and surface stockpiles. Due to a high level of stripping and low Nkran ore yields, 2018 will have relatively high all-in sustaining costs, especially in the first half of the year.

In H1, mining operations at Nkran will continue to focus on the larger schedule of waste stripping as we get through the Cut 2 pushback, which we commenced in the second quarter of 2017. Whilst we continue to yield ore from Nkran, it will be at lower rates, and this will result in lower blended ore grades being delivered to the processing facility.

The company's production guidance for the first half of the year is 90,000 to 100,000 ounces at an all-in sustaining cash cost of $1,200 to $1,300 an ounce, of which approximately $370 an ounce of AISC is attributed to the higher levels of stripping. We expect to start reaping the benefits of the Cut 2 pushback in the second half of 2018 through into 2019 and beyond when all-in sustaining cost will fall and become much more competitive.

Steady-state levels of ore production at Nkran will resume in the second half of 2018, and the waste-stripping portion of the Cut 2 pushback will continue but have a reduced impact on AISC with stripping costs decreasing to approximately $280 an ounce of ASIC for the second half of 2018.

The overall feed grade improvement and increase in gold production will also contribute to the lowering of AISC in the second half of 2018. The company's production guidance for H2 2018 is 110,000 to 120,000 ounces at ASIC of $950 to $1,050 per ounce.

Capital growth expenditure for 2018 is expected to be approximately $8.5 million, made up of $3 million for the final recovery upgrades to be completed in the first quarter of this year, $1.5 million for the upgraded mill motors to be installed in the second quarter of this year and $4 million for a secondary crusher, which is expected to be fully commissioned in the third quarter of 2018. Sustaining capital expenditure for 2018 is expected to be approximately $4 million.

Turning to Slide 11. I'd now like to give some context by discussing our updated 5-year outlook. As Fausto has discussed earlier, we are preparing for our next phase of growth, which we expect to start in 2019. This is the development of the Esaase deposits and the construction of the overland conveyor linking the Esaase deposit to the Obotan central processing facility.

As part of the planning process, we have completed the optimization of P5M. You will recall that the previous P5M was based on the P10M mine design scenario. As part of the optimization exercise, we're focused on reducing the overall strip ratios of all the pits, which in turn, improves our all-in sustaining cash costs in order to deliver the optimal cash generation profile over the life of the mine. Just as a reminder, the Asanko Gold Mine is a long-life asset with a life of mine of 19 years from current mineral inventory.

The optimized pit designs have used our actual operating data from both the mining operation and process facility, so they closely reflect the current performance of all work cycles within the mine. A clear focus of the plan was to give us both a life-of-mine plan with improved economics as well as optimal cash generation capability over the coming 5 years during the period of capital growth and debt servicing.

The new mining sequence, which includes a new multi-pit schedule delivers exactly this. Just to quantify, that's a little bit more. The optimized pushback facilitates Nkran ore yields of approximately 7.6 million tonnes of ore after 2018 at a very low strip ratio of less than 3 over the coming year. Our updated outlook for 2019 to 2023 [delivers] an average over the 5-year period production of 253,000 ounces per year at a very competitive all-in sustaining cash cost including corporate overhead of $860 an ounce, bench-rate marking this AISC firmly places Asanko Gold at the midpoint of the second quartile industry cost curve.

This optimized plan represents an increase in ounces and significant improvement in our AISC margin of $147 an ounce over the previous 5 -- P5M plant, which produced on average 243,000 ounces per year at an AISC of $1,007 an ounce over the same period.

And at current gold prices, the optimized plan provides a robust all-in sustaining cash margin of about $450 an ounce over the outlook period, which generates just over $110 million a year in AISC margin. This will be more than sufficient to enable the company to meet its growth capital and debt obligations over the period.

So in conclusion, ladies and gentlemen, turning to Slide #12. Our deliverables for 2018 are [clear.] On the operational side, we continue to deliver consistently according to plan and progress the Cut 2 pushback so that we can benefit from the increased ore yields and grades from H2 2018 onward. The pushback is currently a full bench ahead of schedule, which we deliberately managed to take advantage of the seasonal dry period. In addition, the process facility is running at above design levels, and in the coming 2 quarters, we'll implement 3 well-advanced projects that will further enhance our ability to deliver to plan on a continuous basis.

We expect 2018 production to be at similar levels to 2017 before ramping up next year and over the subsequent 4 years, averaging around 250,000 ounces a year at a highly competitive all-in sustaining cash cost. We have spent a lot of time with our financing partners Red Kite to restructure our debt, and to that end, we have signed an indicative term sheet. We are working on final documentation. And we expect to announce it in early Q2 2018.

And on the exploration front, we'll continue to advance our negotiations with local and regional communities with respect to allowing unhindered access to the highly prospective Miradani exploration target. Drilling will commence once this access is granted and we see our cash flow allowing us to spend the necessary funds on this exciting target.

Thank you, ladies and gentlemen. Operator, we'll now take questions.

(Operator Instructions) Our first question comes from the line of Rahul Paul with Canaccord Genuity.

Peter, you -- when you spoke about the 5-year outlook, I mean, it sounds like it does include Esaase as well, but just wondering, if I understand this correctly, am I right in assuming that it includes both Nkran and Esaase under the 5 million pound scenario but looking at optimized and perhaps smaller pits than what you had in the reserve pit in the past with the aim of avoiding the final more expensive pushbacks and reducing the overall life-of-mine strip?

Yes, so Rahul, you're 100% correct. We start -- we plan to start building the conveyor in Q1 2019. As we've always said, it's an 18- to 21-month project from start to finish. What we will do in that period is we will start to track Esaase at limited quantities to keep the mill full with oxides. As we've shown already, the mill is running between 16 -- 15,000 and 16,000 tonnes a day, but we can enhance those levels dramatically if we put more oxides in. So the aim is to get limited quantities of oxides while we build the belt. When the belt is up and running, then we'll start running Esaase at enhanced throughput levels. In the interim, it'll be just over 1 million tonnes a year.

Fair enough. So then if that's the case, Nkran will be part of the mine feed sort of at that 1 million tonne a year level for, say, another 7 years-or-so. I think you mentioned 7.2 million beyond -- next year and beyond.

Yes, It's 7.5 million tonnes in this cutback at Nkran, when we go and do the next cutback, which is Cut 4, if you look at the original design and the feasibility, we had 3 cuts in the future. We've now changed that to 2 cuts, and essentially Cut 3 used to be called Cut 4, and Cut 2 now is a combination of Cut 2 and Cut 3 in the original plan. So we will continue to mine Nkran over the next coming years and then we start a pushback later in the mine cycle with Nkran. We will publish all of those -- that detailed information as soon as we can.

Fair enough, and then just broadly speaking, with the optimized pit for Esaase, safe to assume that it captures most of the oxide material, but then it takes a lot less at the fresh rock or is it...?

Yes. Sorry, you broke up a bit at the beginning of your question, Rahul. So can you just ask that question again?

So with the optimized Esaase pit, is it safe to assume that you'd take most of the oxide mineralization that was in your last mine plan, but you would take less of the deeper fresh rock?

Yes. The whole plan on all of this is essentially the pits are being optimized using software called NPV Scheduler and essentially, what that does is it optimizes the maximum NPV of the pits, which is what [Whittle] does, but it also -- you can add to that the component of AISC, so we've optimized it for NPV as a (inaudible), and essentially the pits will be slightly smaller, not much smaller but slightly smaller. And the sequence is quite different here. So it just adds a lot of NPV.

Okay, that's helpful, and then last question from me. I mean, you spoke about the changes to the -- I mean, the revised or the debt restructuring. Are you able to comment on the -- any changes to the terms as compared to your current facility and on some of the costs associated with the 1-year deferral and the 2-year deferral?

Unfortunately, I can't, Rahul. Confidentially, until we've signed the detailed documentation, it is a matter of weeks away, and we'll probably set as soon as we can, but right now, we're -- all we're allowed to say is we've signed an indicative nonbinding term sheet and are subject to legal documentation. I'm sorry, but I can't give any more information on that.

(Operator Instructions) Our next question comes from the line of Geordie Mark with Haywood Securities.

Peter and Fausto, just a question in terms of production this year. Obviously, January throughput was off to a good start. Are you looking at -- what sort of average throughput were you looking for the year for that guidance? And in that sense, what's the sort of balance of oxide to hypogene ore that you expect in that projection versus what you achieved in January?

Yes, so Geordie, we're planning to mill around 4.8 million to 4.9 million tonnes this year because we will shut down through -- to do all these tie-ins, and the plan for that is from the end of this quarter, 70,000 tonnes a month of oxides from Dynamite Hill. All the rest of the ore will be in the form of hard rock.

Great. And in -- so we expect -- sort of, what's -- what recovery rate should we project for the year? I'm sorry if I missed that one.

Yes -- no. We're currently getting between 93.5% and 94% recoveries, which is kind of where we've been ever since we started the mine. It has surprised us somewhat. You remember I said, we're running at 5 million now, and we haven't put in the recovery upgrades and the recovery upgrades is essentially another Knelson, another screen and another Intensive Leach Reactor. They're all-in, we just haven't connected them all up yet, and we still maintain the same recoveries. So the mines are having to convince me to switch them on and spend money on them. So we'll run them to test, but at this point, we don't see any benefit in the recovery coming through.

So what is amazing -- and not only on top of that is we've got increased throughput but because the grades are so much lower because we're running from stockpiles, normally one would see a distinct grade-recovery curve and a fixed tail on these things, and what we're finding is that's not the case. So we are very encouraged, I mean, every time we throw something at this processing facility, it just says bring it to me and let's process it. So recoveries are very good, and we get movements in the tail less than 0.2%.

Okay. That's excellent, And was I -- am I right to think that you -- for the life of mine -- or the 5-year plan, the strip ratio is 3:1? Is that what you're looking at the average?

So the strip ratio for the big push that we're doing right now is on Nkran, right. If you actually look at the pictures, if you look at the guidance slide on Slide 10, you'll see a picture of the Cut 2 pushback there. And you can see the size of the bench going down where there's a person standing up on the top looking down there. This picture was taken last week. So this pushback is -- originally, we designed the pushback at about 30 to 40 meters and now 50 to 60 meters wide. And because that pushback is so much bigger than the original designs, what it's going to do is it'll be extensively for all intents and purposes completed by the end of this year.

We'll still do some waste stripping from 2019 onward, but the bulk of that pushback -- so that total pushback's capacity was 42 million tonnes, and we're going to move about 28 million tonnes this year. So what that means is, in the next 3 years out of Nkran, the strip ratio from Nkran is less than 3, considerably less than 3. So what that means is Nkran will come just on an all-in sustaining cost basis, a fraction of the price that it is in a normal environment where the strip ratio would be like 4.5 or 5:1. So that's what we've done is we've taken the opportunity to -- we've got very little capital spend this year. We've got decent production, and we've got a decent gold price. So we've taken the opportunity to make the pushback bigger to give us a high ore yield at high grade with very low mining cost when we're going to build the belt and repay the debt. So that's the purpose of that exercise. And you can see how far we're down in that picture. We put 4 or 5 benches down in Hard Rock, and you could see the oxides at the top there, that have been fully flattened to 26 degrees.

Okay, maybe last question. For Dynamite Hill, obviously looking to ramp up, I guess, by the end of this quarter to 70,000 tonnes a month, in terms of any information on terms of grade reconciliation, dilution factors, et cetera?

So what we find in a Dynamite Hill is, it is ahead of schedule, as we're speaking right now because of the oxide and the oxide right through until about October/November this year, we have -- we can mine at any speed we want because there's very little -- [they're going through and] blast right now, and it will get a bit harder as we get deeper. We are running right now at about 2,000 tonnes a day out of Dynamite Hill, and we're getting grades slightly above our expectations. And the reason for that is because there's no drill and blast, so there's no heave and swell and there's no disturbance. You can mark the polygon. You can see the polygon. You can pick it cleanly. So we're getting very, very low levels of dilution compared to our original interpretation there, which is expected. It's what you should get.

(Operator Instructions) Gentlemen, we're showing no further questions at this time. I will turn the conference back over to you.

So thank you very much, everybody, for joining the call today. If you have any more questions, we're always available. Please don't hesitate to contact us. Thanks for your time and thanks for listening. Goodbye.

Ladies and gentlemen, this does conclude the conference call for today. We thank you for your participation and ask that you kindly disconnect your lines. Have a good day, everyone.