New Gold Inc (NGD) 2019 Q1 法說會逐字稿

Good morning. My name is Krista and I'll be your conference operator today. At this time, I would like to welcome everyone to the New Gold First Quarter 2019 Financial Results. (Operator Instructions) Thank you.

I will now turn the call over to Anne Day, Vice President, Investor Relations. Ms. Day, you may begin.

Thank you, operator and good morning, everyone. We appreciate you joining us today for New Gold's First Quarter 2019 Earnings Conference Call and Webcast. On the line today, we have Renaud Adams, President and CEO; and Rob Chausse, our CFO. Other members of the management team have also joined us and will be available during the Q&A period at the end of the call. Should you wish to follow along the webcast, please sign in from our homepage at newgold.com.

Before we begin the presentation, I would like to direct your attention to our cautionary language related to forward-looking statements found in the presentation. Today's commentary includes forward-looking statements relating to New Gold. In this respect, we refer you to our detailed cautionary note regarding forward-looking statements in the presentation. You are cautioned that actual results and future events could differ materially from those expressed or implied in forward-looking statements.

Slide 2 provides additional information and should be reviewed. We also refer you to the section entitled Risk Factors in New Gold's latest MD&A and other filings available on SEDAR, which set out certain material factors that could cause actual results to differ. In addition, at the conclusion of the presentation, there are a number of end notes to provide important information and should be reviewed in conjunction with material presented.

I will now turn the call over to Renaud Adams.

Thank you, Anne. Good morning, everyone, and thank you for joining us today. 2019 is sure, a pivotal year for the company and our commitment remains on driving profitable mining at all operations to create sustainable value for our shareholders and we're very pleased to report another step in the right direction with the strong first quarter that positioned the company to achieve our 2019 guidance. We are very encouraged about -- what the Rainy River mine has delivered in the second consecutive quarter of in-line result as the operations continued to improve quarter-over-quarter and we remain focused on repositioning the operation for efficient and sustainable mining that will drive our objective to become free cash flow in 2020.

The New Afton mine has delivered another quarter of positive operational and financial result, while the team further advanced the development of the B3/C-zone. Over the balance of the year, we will continue to execute on our aggressive capital plans in order to address all remaining construction and mill upgrades at Rainy River while advancing the development of the C-zone at New Afton and continue on up -- continue our optimization studies at both operations for targeted completion in the fourth quarter.

Finally, we have returned company's focus on organic growth and recently launched a strategic exploration drilling program at New Afton and expect to launch an exploration program at Rainy Rivers in the second quarter. I will now turn the call over to Rob Chausse, CFO to discuss our first quarter result, Rob?

Thanks, Renaud, and good morning. I'm going to start with Slide 5, which provides our operating highlights for Q1. So during Q1, the company produced 123,000 gold equivalent ounces. The amount consisted of 19.5 million pounds of copper, 61,500 gold ounces from Rainy River, and 17,800 gold ounces from New Afton, totaling 79,000 gold ounces. Higher gold production as compared to the prior year quarter is primarily due to higher productivity at Rainy River. Our operating expense for the equivalent ounce -- equivalent gold ounce was lower than the prior year quarter due to improved operational performance and increased metal production. Consolidated all-in sustaining costs for the quarter were $1,083 per equivalent ounce, 21% lower than the prior year quarter due to improved operating results and lower sustaining capital at Rainy River.

Turning to our financial results on Slide 6, the first quarter revenue from continuing operations was $168 million, driven by sales of approximately 89,000 gold ounces at an average realized gold price of $1,301 per ounce, and sales of 20.2 million pounds of copper at $2.79 per pound. Q1 revenue was 13.8% higher than the prior year quarter due to production increases related to the ramp up of Rain River, partially offset by lower copper production and lower realized gold prices. Operating cash flow before working capital adjustments was approximately $71 million or $0.12 per share for the quarter, higher than the prior year quarter again due to better operational performance at Rainy River.

The company recorded a net loss from continuing operations of approximately $13.4 million or $0.02 per share during Q1 compared to a net loss of $0.05 per share in the first quarter of 2018. After adjusting for certain charges, the net loss was $1.8 million or zero cents per share in the quarter, compared to a net loss of $17.9 million or $0.03 in the first quarter of '18. Our Q1 adjusted earnings includes adjustments related to our other gains and losses. Net loss and adjusted net loss were positively impacted by better performance at Rainy River. Our MD&A has additional details on all the non-GAAP measures that we've discussed here.

Slide 7 on our CapEx provides a breakdown for our Q1 2019 Capital expenditures. Total sustaining capital for the quarter was $44.7 million. Spend was primarily related to tailings work and capitalized mining costs. Our growth capital is focused on project development and Renaud will go into further detail on capital shortly, with his remarks.

Turning to Slide 8 on liquidity, as at March 31, 2019, we had approximately $132 million in cash and $420 million in liquidity. Lastly, we remain on track to meet our operating and capital guidance as released in February.

With that, I'll turn the call back to Renaud

Thank you, Rob. I will now discuss some key execution highlights before we open the lines for the Q&A session. I'm on Slide 10. At Rainy River, we're extremely pleased with the strong start of the year with the production over 62,000 ounces of gold equivalent, in line with our production target, but also a significant improvement over the 40,000 ounces of gold equivalent achieved in the same period last year, which was driven by continued improvement at the mill. Our cash cost of $801 per gold equivalent represents a great achievement, considering the high mining strip ratio over the quarter and we remain very confident to achieve our guidance.

In term of capital execution, effort was made in the first quarter to further advance the stripping on the Phase 2 in the pit at a time of the year where our capital execution was somewhat limited by weather. As a result, we've achieved a lower than guidance all-in sustaining costs of $1,330 an ounce, which include a $140 an ounce of capitalized stripping. Sustaining capital is expected to increase in the Q2 and Q3 as the favorable weather would allow for construction activity which will include tailings dam raises stage 2; the wick drains at the waste dump, the water management and the maintenance facility, to name only those project.

On Slide 11, in term of operational highlights at Rainy, the mill continues to improve quarter-over-quarter, a record mill availability of 89% despite significant plant repairs that we achieved in the Q1, the record gold recovery as well of 90%, an improvement over the prior quarter, despite the lower grade process. The only one spot to augmenting scorecard in the first quarter was the run rate throughput that was negatively impacted during a few weeks by the build-up of ice in the crushed ore stockpile, a situation that will be corrected to avoid possible repeat in the future.

On Slide 12, the work continued on the strategic review of the asset with the objective to delivered and optimized life of mine during the fourth quarter of this year. We are very pleased and encouraged with the result to date and we're surely looking forward to delivering an increased value through this revised life of mine. We're focused on the cash flow positive free cash flow generation, starting in 2020. More to come as we continue to work on that with the first milestone being the mine plan itself, that is due for early Q3.

On Slide 13, as previously mentioned, we have returned the company's focus on organic growth, and as such, Phase 1 exploration drilling will be launched at Rainy in the second quarter, with the first 7,500 meters of diamond drilling to test the potential repeats of the mineralized land, north of the Intrepid zone, which is somewhat key considering that we're reviewing and optimized plan for the underground. The plan will be following in the third quarter by some regional geophysical and geochemical reconnaissance with the Northeast and the Southwest of the mine site. Again, more to come as the company plan possible exploration update later in the second quarter.

On Slide 14, at New Afton, another solid quarter with in-line productions and operating expenses results. We have initiated the B3\C-zone development program advancing the exploration drifts towards the C-zone. The sustaining and gross capital expected to increase in the second quarter and, for the remaining of the year as we ramp up, are B3\C-zone capital activities. But again, congratulations to the team for another very strong quarter at New Afton.

On Slide 15, just as we discussed for the Rainy River, we are also very active and relooking at our life of mine with a possible update of the life of mine plan for the fourth quarter. The focus remain on updating the geotechnical and block-caving aspect, while on surface, we are focusing on the tailing disposal update with the C-zone potential -- C-zone in-pit disposal while we're going to be relooking at the watering and stabilization of the current and old tailings in place; permitting and timeline update; and capital and operational optimization update as well. Looking forward to deliver this updated plan in the fourth quarter of this year.

On Slide 16. We have launched our strategic exploration program with a first look on the near-mine opportunities. The SLC West target represents a potential near-term opportunity to expand 1 year of mining prior to B3 cave, allowing for better transition between the West/East caves to the B3 cave, a total of 8,750 meters planned with almost 7,900 meters completed to date. The company is currently analyzing the results to date with a focus on a midyear update resource estimate. The drilling was also initiated in a D-zone target with a total of 10 holes planned with completion scheduled in the third quarter. More to come as we unlock -- as we complete the plan, analyze and disclose.

In term of regional targets, geophysical and geochemical survey planned for early third quarter to test both near surface epithermal gold and deeper gold, copper-gold porphyry potential. This program, I've talked during the last couple of quarters of the importance of returning and the organic growth at New Afton. We believe that the site is poised with potential, and while the efforts has been really focused on the development of the C and the B3 zone, we believe that initiating a strategic plan there with the view that down the road -- further down the C-zone, this site may have more potential to unlock post the C-zone.

On Slide 16, on Blackwater -- oh, just before I go to the slide -- to the Slide 16, on the geophysical on the New Afton mine, we also plan an exploration update later in the second quarter. On slide 16, on Blackwater, the company received the federal EA approval on April 15 and provincial EA expected by year-end. The company has also entered into a participation agreement with 2 First Nations on April 18 and engagement and negotiation continue with the other First Nations. The company continues to evaluate optimized scenario, including project sizing and processing options. We surely understand the challenge of the Blackwater project considering the current economic situation, but we're extremely pleased with the progress to-date, the milestone achieved, and the potential of the Blackwater, down the road.

On slide 19, and as closing remark, on behalf of New Gold I would really like to thank our employees, Board of Directors, shareholders, our First Nation host community and all strategic partners for their continued support, as we continue to re-position the company for profitable and sustainable mining. We look forward to a successful 2019 of delivering and unlocking value. This will complete the presentation.

I will now turn the call over to the operator for the Q&A portion of the call, operator?

(Operator Instructions) Your first question comes from the line of Mike Parkin from National Bank.

Just wondering how we can expect the underground spending at Rainy to go for Q2 and Q3. Is it -- looks like it will probably be fairly modest, I would think?

In fact, nothing really planned. What you see in the Q1 as the gross were actually activities of closing, as disclosed in the Q4, which has -- was charged in the Q1 as we were closing -- temporary closing the activity. You should not expect any underground activities. The focus is on optimizing the plans and which will be part of our updated life of mine plan for Q4.

And then on Rainy, the strip there was 6.1 in Q1, I think kind of averaged around low 2s in 2018. How should that kind of trend for Q2, Q3 of this year?

Well technically, if you look at our technical guidance, if you will, we'd disclosed earlier in the year, we were calling for slightly above 3 as an average. I would always promote to advanced stripping exports or increased flexibility in the pit as long as we control our cost and we show improvement quarter-over-quarter. So I would say that the stripping ratio was somewhat maybe higher than planned. I think we saw an opportunity here of managing our capital over the years.

We know that Q2, Q3 will be somewhat important as capitalized item at the Rainy. So there was a good opportunity, especially in the winter to push, and as I've discussed, we're extremely pleased to see our operating expenses cash cost below -- remains below our guidance, even though we had an increase. So as you advance, definitely you will see a reduction. We will complete the mining of the Phase 1 at the bottom for the pit now that the winter is over and the de-watering has taken place. So we will return to the bottom of the Q1 and slightly you'll see the strip ratio returning. There is a chance that we end the year at a higher strip ratio. And again, as long as we continue to control and reduce our costs, advanced stripping is always a good thing.

And In terms of the unit cost per tonne, can you give a bit of color on how the higher strip ratio kind of factors in. Like, last time I checked, you've got a lot of material going to be material used in the tailings dam construction, so the haulage distance is higher, is that still playing a factor in your reported unit cost that with, like Q2, Q3 tailings dam work, will that play a factor into the unit mining costs just because of the haul distance being longer than the waste dumps?

A good question and, appreciate, and definitely as we advance and complete the second quarter, we're going to be some -- doing some sort of reconciliation and discuss our unit costs after 6 months of activity this year. But I can report that the unit costs are in line with the guidance. As you mentioned, by doing more pre-stripping, we were very pleased with the cost, and the mining cost, in particular, were trending slightly below the -- our expectation in the Q1. And that has an effect as well as you pre-strip some of it is pre-digging and involve lots of drilling and blasting activities and – so all in all, we were not -- where we improved significantly as well as how we monitor and manage the nonasset generations. I wouldn't say that the -- our operation was as impacted this first quarter on that. We already had, I believe, nearly 600,000 tonnes of stockpile material to start the construction of the tailing. We will continue as well to mining a quarry outside of the pit and the plan this year is somewhat optimized to supply rock at the same times of providing for a proper mining and we continue to see improvement in the cost structure and it's very encouraging.

Okay. And what's the stockpile? You had mentioned that you had issues with ice buildup there, is there any thoughts towards the requirement of a stockpile ore dome or you may have to address it?

Well, you know the best -- well we understand -- we understand the location of the asset and winter is part of the reality, the -- typically in the industry, you see a lot the use of a dome on top of the crushed stockpile. This aspect was, at the early stage, removed, that's our case. But there is also easier solutions and cheaper solutions on the use of solutions and salt and so far to avoid and we've also did some improvement and will continue this improvement with the control of humidity in the tunnel and the apron feeder. So in short, it's not something that we have seen last year.

I think this year was somewhat a bit of a weird situation in February and March, where we've seen quite a bit of fluctuation in the temperature. But I think for a very low capital, Mike, we'll be in a position to avoid this situation next year. We are looking at the best practices. We're looking at what others are doing. We're not going to reinvent the wheel. And while the dome is still a possibility, I think there is a way to avoid it without the need to put a dome, but we can report more in the second quarter. We'll definitely have identified the final solutions and start implementing them.

And then just one last final question. New Afton's mined tonnes per day dropped a fair bit quarter over quarter, should we kind of think of similar rates for the remainder of the year? Do you see this as a seasonal thing? Just any comment there.

No. Well, you know they reduced quarter over quarter but in line with our plans. I don't see any major, major issue there. I think we will continue to trend over a plan. I have John Ritter over the phone, happy you know to turn it quickly to John, if you have any further comment, but it is as planned. Maybe a little bit lower than previous quarter. But as you mentioned, as we transition there is more activities on the ground. And John, do you want to comment on that one.

You're correct, Renaud. It's a little slow start this quarter but we plan to meet our production targets.

Your next question comes from the line of Nick Jarmoszuk from Stifel.

On Slide 8, want to get a little better color regarding debt optimization scenarios you guys are thinking about, and then also can you address the bringing up the credit facility with the LCs.

Yes. So the debt optimization scenarios are essentially based around discussions we're having, whether they're strategic oriented or capital markets oriented. The bonds have 3 years but are churnless. And so we're looking at all opportunities and ways to lower our leverage ratio and deal with -- deal with the balance sheet. The Letters of Credit, essentially that's just talks to maybe move to another -- moving them out of the facility and freeing up that facility into a surety bond or some other alternatives that we've looked at. Essentially, by having them in the -- in the facility reduces the amount that we can draw from the $400 million.

And then with the -- in terms of the capital structure, do you have an estimate for the second lien capacity that you'd be able to issue?

Sorry, what capacities?

Second lien.

I don't have that.

Your next question comes from the line of Steven Butler from GMP Securities.

Renaud, you mentioned of course the ice buildup in the quarter are weather related. So the throughput in the Q1, I mean, would it -- would you've expected it to actually be potentially as good as Q4 or even better than Q4, if it was not for the ice buildup?

Well, you know you've pointed out, that's -- yes, I think we could have done, honestly, like somewhat better production by combining the Q4 -- basically the Q4 average run rate with and increased availability. So you're absolutely right, we're very pleased to see that the availability is running. There is no lack of capacity at the mill. We continue to unlock the value.

So without those issues, to be very frank, like early in January, we were seeing like pretty smooth operations, good capacity being processed and -- and an increase in availability and then somewhere you know like late February, March, we went through like a few difficult -- couple of difficult weeks, which have lowered the average, but it's not like the whole quarter was actually had a lower run rate on the average throughput. So absolutely active, and this is why I feel encouraged as we move forward. With the winter behind us with the capacity there, with the improved availability, we're looking forward to a strong -- a strong second half of the year.

Right. And you mentioned sustaining capital, will we see, I guess, a peak level of sustaining capital for Rainy in the Q2 and Q3 periods?

Well, those are definitely the biggest quarters. I would say even in the Q4 because when it comes to water management to the maintenance shop, last year, we definitely worked actively in the tailings as well, up to the in the fourth quarter. So that the remaining 3, maybe a push on the Q2, Q3 -- Q2 and Q3, but really for the remaining of the year. So this is a kind of a cautious comment here. We know we've achieved very good all-in sustaining costs in the first quarter, but just to remind everyone of our capital plans for the year.

And then, just to come back to the throughput renewal the guess -- excuse me, not the guesstimate, the estimate for 2019 tonnes per day -- tonnes milled per day 22,000 to 24,000 tonnes per day. That was predicated on of course getting the availability up and you're there in Q1 apart from the ice. Is there anything else in the mill that needs to be unlocked, If you will, apart from just pure availability and performance? No other refinements in the mill?

What we have found so far, we continue. Like there is 2 aspects; there is the optimization and there is the, what I would call the fixings. So we have done significant advance on that in the first quarter. In the second quarter, there were some remaining work to be done on the mills, mostly around that the brake system, just to bring everything up to speed. So I think now when it comes to belt, when it comes to the main mail, we're in pretty good shape now. As we advance, I have discussed previous quarter that we would be also are looking at, and enhance if you will, design of lining system for the site that would further enhance our productivities there. So this is planned for July but in line with the change of liner. So all in all, I would think that the main repairs or the main jobs are behind us, and everything is in place now to really maximize the throughput.

And lastly Renaud, on New Afton, I guess we'll see a study in optimization in the fourth quarter for both assets, but the -- and you talked in your remarks about maybe one year of mine life in SLC West target potentially and tailings in for disposal. And the other aspects that you're thinking of for the updated study on C-zone development plans for New Afton. I mean what else should we be watchful for?

Definitely, because we were -- the starting point is the 2015 studies and with the adjusted capital for the C-zone, there were somewhat as well an optimization around the sustaining. So one of the aspect is on the capital and operational and realigned everyone on our total capital there, which we believe there is quite a bit of optimizations from the overall view that back in 2015.

So capital, definitely, we continue to look for opportunities on the operating side. The SLC is an opportunity, I really like this possibilities of eventually extending, giving a little bit more breathing in the transition zone, which may as well reviews their need for reclaiming some stockpile at some point in time during the plan, but those are optimization, but there is absolutely nothing shares. We're going to complete the drilling, we're going to analyze the mine ability of it and that's an opportunity at this stage that is not currently contemplated in our optimized plans. So that would be a further potential optimization.

Your next question comes from the line of James Huntington from Scotiabank.

I was just wondering if you could give us a bit more color on the re-evaluation of the tip of the tailings dam slopes. I understand you're currently reviewing the geotechnical aspects at the possibility of reducing the amount of material required. So yes, I was just wondering if you could give us a couple of comments on that.

I think already said and disclosed previously. This is our long-term opportunities. When we joined, we were already well advanced in the permitting and execution of this Stage 2. We don't see this possible as we -- as we speak. The way we're looking at tailings down the road, the plan is to advance and complete the Stage 2, which is based on 11-to-1. Remember, back in 2016, the company disclosed their plan that that moving forward, it's -- it was an 11-to-1 with or without the use of buttressing. So this was already compromising, I would say, up to stage 2 entirely.

As we move forward and because we don't see the need to address so far Stage 3 in 2020 opens the opportunity to really work actively with the expert when the further stages approach starting in 2021, so too early stage. Rainy has definitely some challenging geotechnical aspects, so we know that the 11-to-1 and with our without buttressing works. The question now down the road is could we improve further. But again, this is all part of our optimization plan as well as we move forward, how do we look at the mining, how do we focus on optimizing and mining and disposing as well the tailings, the waste management as well out of the pits versus the underground potential. There would be definitely a different way to optimize, and currently, we are not considering in the updated approach any optimization. We will -- we don't believe we would be on time by the end of 2019 to understand the full possibility of reducing the -- or optimizing the -- from Stage 3. So the approach remain 11-to-1 and with or without buttressing in the updated plan, but we will definitely work on optimizing down the road.

Okay. Great. And then just one more questions from Rainy again just regarding the mining throughput rates. So obviously, in Q1, you're mining at about 111,000 tonnes per day from the pit, and you're planning to get up to about 127,000 tonnes per day from the pit. I was just wondering your sort of equipment addition schedule for the year. I understand you've got about 4 more trucks due this year and just when we can expect them and then also what sort of effective utilizations you're expecting to -- what's your target effective utilization for the year?

Probably, there's a few things. There is the availability of the equipment, but the real focus, the real optimization has to do with the use of availability. In term of equipment, you're absolutely right, there is new trucks plan we'd continue to commission. There is one more to come and another one to commission. So we're going to improve on the capacity while we were working as well on increasing the utilization, use of availability, drills as well. I would say the limiting factor so far is not so much around shovel and trucks. Drilling is where we have the most opportunities of improvement. There would be new drills coming as well. We're going to replace some drills that are -- we consider not efficient enough. So we'll definitely pick up the most on the drilling, and we believe that with the new equipment coming, we'll have the mining capacity. But again, the main focus is on optimizing drilling at this stage.

Okay. Yes, and sorry, just going back to the utilization. Have you got a ballpark figure of what you're doing for your trucks utilization-wise at the moment?

What I can tell you, I don't have the numbers in front of me. But by experience and then having done before, I will not hesitate to say that I see definitely an opportunity to improve by at least 20% overall in our utilization and optimization.

Your next question comes from the line of Matthew Fields from Bank of America Merrill Lynch.

I wanted to follow up on Nick's question about second-lien capacity maybe from a different way. The baskets in you 2025 maturity are a little looser than '22's. Is there -- in your mind, can you address the '22's with secured debt and lease the '25's outstanding? Or do you think you have to go through a more global refi if you go the secured debt route?

Yes. I haven't discussed -- obviously, our facility would be -- it'd have to play in that discussion, and I haven't sat down with any of the syndicate on it. Yes, there's a potential to utilize the second lien for the 500s, but I think that would be it. But again, I'd have to -- obviously, the syndicate plays in that discussion.

And then obviously, those discussions are dependent on a lot of things: your results, the high yield market in general, what not...

Yes.

To give us an idea of timing of when -- because you guys are doing a lot on the operational front with optimizing plans and furthering Rainy development and whatnot and New Afton. Do we have to see these operational milestones achieved before we can get a refi to the market? Or is it something maybe we could see in 2019?

Well, I don't think we have to in the current market, but I think we would like to give the operations the runway to improve and continue to improve and gain some confidence around them. Again there is the potential, but I would expect to see -- not expect to see refi in '19 and really look to '20. But again, as you mentioned, the market matters and how we perform and all that stuff may come into play, but my expectation is it would be an event in '20.

Your next question comes from the line of Don MacLean from Paradigm.

Just a quickie on the quarter at Rainy River. The sales were quite a bit more than the actual production. Just wanted a bit of color as to how that might or might not influence cash cost and all-in sustaining reported in the quarter. Just a bit of accounting clarification.

Yes. The sales that came into 2019, that was a timing and shipping issue, and they carry a bit higher cost but not a material impact in the '19 cost structure.

Okay. Great. So otherwise, cost would actually have been a little lower.

Right, but marginally.

Your next question comes from the line of Anita Soni from CIBC.

Just a quick question on your stockpile levels at Rainy River. Could you give me an idea of where that stands and what the head grade -- sorry, what was the mined grade out of the pit this quarter?

I really -- I'm sorry, I really don't have this right in front of me right now, but we definitely can provide that one. But I can tell you that by year-end, if you're looking at our overall reserve at the appendix of the presentation, there is 2 stockpiles. There is the low-grade stockpile really that is averaging between 0.3 and 0.5 that we were not really touching. This is stockpile for the midterm and long term, and we'll see, but there is also a medium-grade stockpile that is averaging between the 0.8 and 0.9. So when you mine the pits, like in the first quarter, our plans was already this year to utilize, if you will, some of the medium-grade stockpile to feed the mill considering that as we push and open the Phase 2, we go through a low-grade zone anyway at the top. So we did not -- that's the reason why you would see in the first quarter, for instance, where we did a lot of stripping, the average ore mined was only 15,000 and were supplemented the mill by the medium-grade stockpiles, which, at the end of the day, again is very similar to when you open up the phase in term of grades. So there was no real impact in the planned grade at the mill as a result of that and...

Well then, I'm just curious, given that you're using the medium grade stockpiles to certain extent of that, a certain amount of that, let's say, around like 1.8, I guess, is the total that went to the mill, so 1.6 of that was from the low-grade stockpiles, that would imply that the head grade coming out of the pit was somewhat marginally higher, probably and I guess my rough calculation would be probably in the 1.35 unless there were some selective high grading in the -- from the stockpiles. I'm just trying to get an understanding of what's coming out of the pit at this point.

No. No. So -- yes, so remember that as you go up and down like every phase, so at the same time you're opening the 2 on top, you're also completing the bottom of the Phase 1 as well, which brings pretty good grade as well and you would see the same phenomenon in the second phase as well. You start lowered the top and as you lower the base, you access better grades at the bottom of the phase and it's the same thing for the third. So you can see a mix here of mining of a lower grade on the top of the Phase 2 with better grade at the bottom of phase 1 and the supplement of a medium – medium-grade stockpile.

And then just in terms of the unit cost, could you give us an idea of what the mining cost per tonne are right now?

As I said, we would reconcile. If you refer back to the 2019 guidance because we have done a lot of pre-stripping in the pit, which somewhat has as a good benefit -- the cost/benefit of minimizing the drilling and blasting activity. So if you compare with the guidance, we were below around the 335 tonnes per miner or slightly below the $3 on the tonne move. So we continue to see improvement quarter-over-quarter. With a bit of an asterisk here and the conscious comment that as you return to the bottom and you returning to full rock, your drilling blasting activity would pick up again. So I would call in line, slightly better on the mining side for the quarter than the guidance.

Okay. And then the last question is with regards to the spring thaw that's coming. Do you -- I mean, I guess, I'm not sure if it's already in effect right now there. But are you -- do you have any issues with your mining activities as the ice melts and things get a little mucky?

Yes. As a matter of fact when -- during the melting time we, at some point basically, halted towards the Q1 the mining at the bottom of the pit. So increase the pumping capacity and about to return now at the bottom to complete the Phase 1. But again, that's -- on the overall year, it did not because everything that was mined was to be stripped in a way, so we just abandoned for a short period of time the bottom of the pit and focused on the top but -- and now we're returning back.

Your next question comes from the line of Jake Abelman from Imperial Capital.

Hi, this is actually Matt Farwell. Just curious, you've made some good progress with selling assets and raising liquidity in the past. I'm just wondering if you're comfortable with your current liquidity position, and do you feel like you have options in the future to raise additional cash in the form of, for example, streaming deals or non-core asset sales.

So the first question, the first part of your question is, are we comfortable with our liquidity? We're comfortable with that liquidity that we have that's in place to achieve our 2019 operational plans and it has been continuing to delivered on our plan or slightly better, of course would improve our -- this situation. As we move forward, as Rob has mentioned, there is a numerous possibilities of how we would address our financing. The short-term focus is definitely on improving the operational outlook, which will have a tremendous impact on how we deal with the debt. So too early stage, not there yet to be detailed about exactly how we would address this, but I can tell you that we're very comfortable with the liquidity to execute our 2019 plans.

And I will now turn the call back over to the presenters for closing remarks.

Yes. Thank you, operator. Thanks everyone for joining us today. If you have any further questions, feel free to reach out. Again, thanks for joining us and have a good day.

And this concludes today's conference call. Thank you for your participation and you may now disconnect. Have a great day.