SSR Mining Inc (SSRM) 2018 Q3 法說會逐字稿

Good morning, everyone, and welcome to SSR Mining's Third Quarter Financial Results Conference call. This call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to David Wiens, Director of Corporate Finance.

Thank you, operator. Good morning, ladies and gentlemen. Welcome to SSR Mining's Third Quarter 2018 Conference Call, during which we will provide an update on our business and a review of our financial performance.

Our financial statements and management's discussion and analysis have been filed on SEDAR and EDGAR and are also available on our website. To accompany our call, there's an online webcast, and you'll find the information to access that webcast in our news release relating to this call.

Please note that all figures discussed during the call are in U.S. dollars, unless otherwise indicated. All references to cash costs and all-in sustaining costs are per payable ounce of metal sold.

We will be making forward-looking statements today. So please read the disclosures in the relevant documents.

Joining us on the call this morning are Paul Benson, President and CEO; Greg Martin, our CFO; Kevin O'Kane, COO; and Carl Edmunds, Chief Geologist. Also present is John DeCooman, Vice President, Business Development and Strategy.

Now, I would like to turn the call over to Paul for opening remarks.

Thank you, David. Good morning, ladies and gentlemen, and welcome to our third quarter call. We achieved our strongest production and cost performance for the year, breaking records along the way, with consolidated gold equivalent production increasing to nearly 95,000 ounces at lower consolidated cash cost of $682 per ounce.

We are increasing production guidance at Seabee and lowering consolidated cash cost guidance for the full year, reflecting our strong operating performance and focus on operational excellence.

Even more impressively, we more than doubled operating cash flow and continued to grow earnings per share despite materially lower metal prices during the quarter. We also saw the Chinchillas project move closer to commercial production.

At Marigold, we produced over 58,000 ounces of gold, an 18% increase compared to the second quarter. We also set a new record for material movement, driven by the enhanced scale of our haul truck fleet and did it at a lower unit mining cost. So a very strong quarter at Marigold.

At Seabee, we set a new production record of over 27,000 ounces of gold, while reducing cash cost by 27% to $447 per ounce, the lowest level since we acquired the mine, an impressive result. We also had some strong drill results from our infill exploration program, which Carl will go through later.

At Puna, we continue to optimize the value from Pirquitas stockpiles and had a solid quarter, producing over 650,000 ounce of silver, while more than doubling zinc production. But the real highlight was the progress we made at Chinchillas. As Kevin will go through later, we have a number of new milestones and updates to report, including successful processing at Chinchillas all through the Pirquitas mill and completion of the stockpile dome. We remain on schedule for commercial production by the end of this year and that project remains on budget.

With that, I'll turn the call over to Kevin, who'll discuss the operational performance in more detail.

Thank you, Paul. As Paul mentioned, Q3 was our strongest quarter of the year, not only from the increased production we reported a few weeks ago, but also from a cost perspective, both of which drove higher operating cash flow and attributable earnings at the consolidated level. In total, we produced 94,808 gold equivalent ounces, an 11% increase over Q2 at lower consolidated cash costs of $682 per gold equivalent ounce.

Starting with Marigold. We produced 58,459 ounces of gold in the third quarter, an 18% increase over Q2, benefiting from the record ore tonnes stacked in the second quarter. Third quarter production also benefited from faster kinetics for leaching of gold that previously we had anticipated will be produced in the fourth quarter. We are therefore narrowing our full year production guidance to 195,000 to 205,000 gold ounces, considering our strong year-to-date production of approximately 151,000 gold ounces.

Cash costs increased marginally to $711 per ounce, as expected, impacted by the lower average grade of ore stacked during the quarter. With all 4 of our new haul trucks in service in July, we moved 21.3 million tonnes of material, a quarterly record. We also benefited from shorter haul distance and increased equipment availabilities during the quarter. As a result, mining costs reduced to $1.51 per tonne, an impressive achievement, particularly considering the ongoing higher fuel price environment.

As Greg will come to, we're proving Marigold's full year cash cost guidance as a result of our strong cost performance through Q3. Looking ahead, we expect a strong finish to the year with the commissioning of the new leach pad later in the fourth quarter and are well positioned to meet production guidance.

At Seabee, we had an exceptional quarter, breaking production and cost records as the operation continues to hit its stride. We produced 27,831 ounces of gold, a quarterly record, benefiting from a 20% increase in middle grade to 9.52 grams per tonne gold. The increase in feed grade, which we expect to moderate in the fourth quarter, was due to planned sequencing at the Santoy mine.

We achieved quarterly throughput of 959 tonnes per day, a 4% increase over Q2 and set a single day record of over 1,440 tons in August, as we continue to test and improve the limiting capacity of the mill through our Operational Excellence program. With our strong mill operating performance, throughput levels over the short term are reflective of the mining rates at the Santoy mine. As the team continues to optimize mining activities and look at delivery of new mining equipment on the ice road this winter. We remain confident in meeting our average 1,050 tonne per day target next year.

Cash cost for the third quarter were $447 per ounce, a quarterly record since we've acquired the mine and 27% below Q2 cash costs. Our strong unit cost performance was primarily due to the quarterly increase in production, but was also positively impacted by a record low mining cost of $48 per tonne.

As you will hear from Greg, we are increasing production guidance and lowering cash cost guidance at Seabee for the full year, reflecting the team's excellent performance for the first 9 months.

At Puna operations, we continued processing stockpiled material at the Pirquitas plant and also successfully ran test trials of Chinchillas ore. The lower average plant throughput rate of 3,348 tonnes per day in Q3 reflected the shutdown in July for major plant maintenance as well as test processing of Chinchillas ore. The plant shutdown involved over 200 personnel on site and was completed safely, under budget and 2 days earlier than scheduled.

Two test trials of Chinchillas ore achieved saleable lead, zinc and -- lead, silver and zinc concentrates and confirmed metallurgical performance of the ore, important milestones as we prepare for sustained ore delivery and commercial production later in the fourth quarter. We produced 660,000 ounces of silver in the third quarter and doubled zinc production to 3.2 million pounds, reflecting processing of stockpiles with higher zinc content.

We also produced 372,000 pounds of lead from the Chinchillas ore. Impressively, we achieved higher quarterly silver and zinc recoveries despite lower grades of stockpiles processed, as the team implemented initiatives to optimize grind size and increased resonance time in the zinc circuit, examples of how our culture of operational excellence continues to add to the bottom line.

Third quarter cash cost of $17.41 per ounce of silver sold reflects impacts associated with the mill shutdown in July, lower grades of stockpiles processed and limited by-product credits as zinc sales were lower than production. We expect zinc sales to increase in the fourth quarter.

Moving to the Chinchillas project. Significant progress was made with mine development and construction activities during the third quarter. At the Chinchillas site, pre-stripping activities continued to advance as expected. Approximately 2.1 million tonnes of waste and 300,000 tonnes of ore mined and 73,000 tonnes of this ore was transported to the Pirquitas site. With the road bypasses around 3 communities being completed during the quarter, ore haulage rates have continued to ramp up consistent with our expectation of declaring commercial production in the fourth quarter.

Construction activities continued as planned during the quarter, including work on the truck shop, fuel station and warehouses. We also completed the power line upgrade between the Chinchillas and Pirquitas sites, a key milestone.

At the Pirquitas site, work continued on the stockpile dome during the third quarter, including cladding of the structure and installation of the apex, and the dome reached 100% completion subsequent to the quarter-end.

We are particularly proud of this achievement, with the dome assembling over 4,000 structural components with high-altitude and variable wind conditions over a 7-month period. We did it safely, with no dropped objects, on time and on budget, which speaks to the project execution capabilities we have here at SSR Mining. We also made significant progress on the in-pit tailings disposal system during the quarter.

In summary, the Chinchillas project remains on track for commercial production by the end of the year. And just as importantly, the project remains on budget. With this successful project delivery and a very strong quarter across the portfolio, we are well positioned for another strong year in all of our operations.

I will now hand over to Carl, who will take you through our exploration activities.

Thank you, Kevin. Drilling activities have continued at an aggressive rate at both of our North American operations as we pushed to make significant additions to the reserves at Marigold and strive to convert inferred resources at Seabee. Our exploration update published on Tuesday this week provided a detailed account of activities since our last release in September of 2017. I'll now go through some of the recent highlights at Marigold and Seabee.

At Marigold, our ultimate goal is to convert the Red Dot resource to reserve. This requires completing the infill drilling of inferred, which, if successful, should increasing indicated, updating the resource and then completing ancillary geotechnical drilling to engineer and update the mine plan, all of which we expect to complete by the end of the second quarter in 2019. Towards this goal, we completed 26,960 (sic)[26,961] meters of drilling and 76 holes for the quarter at Red Dot and at adjacent phases of the Mackay pit.

Regarding our intent to replace depleted reserves, results announced earlier this week from drilling below final phases of the Mackay pit have been positive, as shown on this section, indicating high potential to expand reserves in these areas, which will be reported to year-end 2018 as normal practice.

On the aim to substantially increase reserves at the operations through the conversion drilling at Red Dot, we have received results through the quarter and throughout the year that confirm our model and are adding resources within the same optimized pit volume. We anticipate these additions to positively impact end of year 2018 resources.

At Seabee, we continued drilling in the near mine environment at Santoy from surface and underground as well as drilling on early-stage targets on the Fisher option. Over the period, drill totals of 14,580 meters from underground and 14,650 meters from surface with 1,870 meters being completed at Fisher. Underground drilling has returned some excellent gold results, as we continue to convert inferred resources at Santoy 8A. Notable high-grade examples include 18.5 meters at 11.2 grams per tonne, 7 meters at 14.1 grams per tonne and 7 meters at 12.2 grams per tonne. And at this point, we are comfortable predicting that the majority of the 8A inferred resource drilled to date will convert to measured or indicated, and we will add to that as we continue drilling in the fourth quarter.

Similarly, results from drilling Santoy Gap hanging wall identified by the ellipse behind the year-end 2017 resources in the diagram have provided further clarity on the nature of the controlling structure as well as returning high-grade gold assay results, such as 4.1 meters at 25.6 grams per tonne and 4.8 meters at 12.3 grams per tonne.

To date, gap hanging wall is defined by 35 underground holes forming a mineralized zone over a folded strike length of 300 meters with plunge length of 700 meters. Resource grades and widths tend to occur on the footwall side of an S-folded thinning granodiorite intrusion that dips and plunges as a package in a similar orientation as the gap deposits. On the 46 level, the zone is located 100 meters away from existing infrastructure, which allows easy access.

The slide shows the spatial relationship between gap hanging wall mineralized zone and infrastructure currently used for infill drilling of the 8A zone. We first announced the discovery of the new mineralization last year and are now confident that gap hanging wall will contribute to year-end 2018 resources.

On our early stage Fisher project, we focused on completing field work versus drilling, resulting in only 4 holes being completed. Fieldwork has identified new gold-bearing quartz vein shear zone targets and first pass drill results have been returned with anomalous gold assays. We continue to be encouraged by the geology and widespread mineralization on the property and look forward to receiving the fall's drilling results later this quarter as we planned for 2019.

With that, I'll turn the call over to Greg for a discussion of our financial results.

Thanks, Carl. The third quarter showed strong financial performance with sequential growth and attributable earnings and operating cash flow despite the lower metal prices and continued operational transition at Puna operations. Marigold and Seabee really delivered, particularly Marigold on revenue and Seabee on margin.

For the quarter, we generated revenues of $115 million and income from mine operations of $22 million. Revenue was up 11% over the second quarter despite the drop in metal prices. Our income statement was pretty straightforward, with expenses tracking as expected and consistent with our low G&A spend.

We continued to see an FX gain from the devaluation in the Argentine peso on our moratorium liability. However, the benefit to income was lower than in the second quarter. Our reported tax rate in the quarter was quite high, as it was distorted by the initial recognition of a deferred tax liability in Argentina. So this put net income in a similar position as the second quarter at $2.2 million or $0.05 per share.

Adjusted attributable net income for the quarter totaled $10.8 million or $0.09 per share, better reflecting the operating performance. As highlighted by our consolidated cash cost of $682 per gold equivalent ounce, we continue to generate strong margins from our operations with cash generated by operating activities more than doubling from the second quarter to over $35 million.

As expected, it was a quarter of heavier investment with the 4 haul trucks entering service at Marigold and the Chinchillas project remaining at full build pace. For the quarter, we invested a total of $56 million in our assets, the highest total quarterly investment in quite some time. From my perspective, it was great to see the trucks having an immediate impact on Marigold performance, and the test trials at Puna validated the metallurgical model.

We ended the quarter still maintaining an exceptional cash position of $475 million and total working capital of $649 million. So we remain well positioned as we complete the Chinchillas project to put us back in a position of free cash-generating assets.

As a result of the strong third quarter at Marigold and Seabee, we are able to improve guidance for the second time this year. Marigold cost guidance improves by approximately $15 per ounce and Seabee production guidance improves by about 5,000 ounces, while cost guidance also improves by $25 per ounce. Puna guidance saw adjustments up for zinc and down for lead, reflecting improved visibility to the type and timing of ore processing.

Looking ahead to the fourth quarter, we expect capital spend at the assets to return to a normal run rate with Chinchillas capital spend carrying through the quarter. We would also expect initial draws from Golden Arrow on the $10 million loan agreement we executed with them.

It has been positive to see metal prices stabilize and firm up through October and into November. So with Chinchillas commercial production on the horizon and Marigold and Seabee staying solid, I remain optimistic for a positive close to the year.

With those comments, I'll turn it back to Paul.

Thanks, Greg. To conclude, our operations continued to outperform in the third quarter and our positive guidance revisions are a testament to that. I'm particularly proud of our financial results. While our sector is broadly struggling with lower metal prices and a lack of profitable growth opportunities, we're increasing cash and earnings per share and delivering on our robust growth profiles for our shareholders.

As we approach the end of the year, we look forward to meeting or exceeding production and cost guidance for the seventh consecutive year, declaring commercial production at Chinchillas and completing our exploration programs and moving into the next phase of growth at each of our operations.

Finally, I'd like to thank David Wiens for the excellent job he has done covering the IR role, while Stacey Pavlova has been on maternity leave. David is returning to a role in the finance department, and Brian Martin will be taking over that role until Stacey returns from maternity leave in February next year.

This concludes the formal remarks for our call. I'll now pass the line to the operator to take any questions you may have.

(Operator Instructions) Your first question is from Mick Sroba with Macquarie.

Two questions on Seabee and 2 on Marigold for me. First, apart from the higher mining throughput, were there any other factors such as the development ore versus stope ore ratio or orebody thickness that drove the decrease in mining cost at Seabee?

Kevin?

The -- there were some minor increase in development -- or sorry, yes, development ore compared to production ore from the stopes. But other than that, it increased deficiencies.

Greg, any other, finance.

So yes, certainly the lower costs were primarily driven by the higher tonnes mined. Seabee, as we've said before, it's a -- largely, it's a fixed cash spend. So certainly, the unit cost vary a fair bit from just the total tonnes mined. So it was a productive quarter. I think as Kevin mentioned, it benefited from some wider sills that led to some higher productivity. And we expect to see mining cost vary quarter-to-quarter kind of within the range as we've seen over the last year, just depending on the mining cycles and sort of the productivity and the spots that we're in, which can lead to some variable tonnage over kind of a fixed cost spend base.

Second of your questions?

Yes. So the second one is, given that a plus 1,400 tonne per day mill throughput has been achieved, what's the key bottleneck for maintaining higher throughput levels at the moment? Is it the mining? Or is it some bottlenecks in the mill at the moment.

Kevin?

No, it's a good question. Predominantly, it's in the mine. We've been working to continue to release production from the mine, and that's what's going to see us move to the higher rates that we mentioned for next year.

I think it's worth pointing that we've done an exceptionally good job there, increasing throughput through the mill. And what we're trying to do is run it as hard as we can. And then when we can't keep it full, you see the throughput drop back off. If you look through the presentations we've given recently, I think most recently at the Denver Gold Show, you'll see the daily plot and there's a big variation there pushing it to the limit when we can keep it full with ore, but then it drops off again. Obviously, yes, what we said, next year, we've already ordered the new equipment to come into the mine that's limited by the ice road access. So we'll bring in 2 new trucks, 2 new loaders that will help lift productivity in the mine, and that's why we think we will comfortably get that number next year.

Okay. And on Marigold, what percentage of the ore was stacked close to plastic in 3Q? And what kind of percentage will be close to plastic in 4Q?

None in Q3 because we haven't finished the leach pad. And we've just said it will be, by the end of the year, we'll have it up and running. Kevin, any more insights?...

Yes, that was the right answer. And probably 28% to 25% close to plastic at the tail end of Q4.

Okay. And finally, at Marigold, what grade does the mine plan call for in 4Q to be stacked?

We don't give that sort of forecast. We give the yearly forecast. So just go back and have a look at the technical report. You'll probably get the best guess there.

Our next question is from Chris Thompson with the PI Financial.

Just a couple of quick questions. We'll start off with Marigold. Just looking at the processing costs a little lower than we were modeling, which is good, are they sustainable at these levels?

Kevin?

Where we're focused, Chris, is on doing what we can to increase recoveries. And so we -- they're sustainable, but we're going to trade off that with increased recovery, with increased use of reagents.

Okay, all right. Just I guess moving on to Seabee quick. Obviously, nice bump in grade there. Again, can we expect that to be sustainable on a forward-looking basis, mill-grade that is?

As we mentioned in the call, the grades in the fourth quarter will be modified somewhat. We'll maintain the [same concert]. The key that we're looking at, Chris, is having a more predictable mining sequence, which will allow us to be more productive and unlock the mine. And so the grades will modify slightly in the fourth quarter.

All right, good. And then just finally, going to Argentina here. You do mention, obviously, you're on budget as far as Chinchillas. What should we -- how should we be spreading out the remaining CapEx? Should most of it be falling in the fourth quarter? Or I'm looking at fourth quarter through the next year?

I'll ask Greg to comment on that because, obviously, with the capital project, it's also when you actually pay the bills.

Yes, yes, we'll -- as we said, I think, importantly, the project's on budget. So we're seeing pretty much full kind of full billed pay similar to what we've seen the last 2 quarters. We'd expect through the fourth quarter, and then we'll see some of that roll into Q1 as we clean up some of the infrastructure pieces. And at this point, we pretty much expect the project spend to be terminated towards the end of Q1.

I mean, the really nice thing about this unusually is because we already have a plant that's operating. It's not like a new mine where you can't get ore into the plant because you're waiting for the plant to finish. Most of the things that are still to be spent are ancillary to production. So I think like workshop and some of the buildings on site. So the actual mine part at the time has gone well.

Great. And just -- I guess, just looking for a little bit more color on that, obviously, related to what's happening in Argentina at the moment. On the back of some inflationary pressures and peso devaluation, would you say the 2 are offsetting each other, if you're on budget still?

I mean, we have certainly seen the peso devaluation outpace inflation through some short-term time periods. But over the longer term, we do expect those 2 items to offset. And yes, we've seen the peso kind of stabilize and strengthen here through the last couple of months. And I think that's reflective of that situation. So you get some short interval, either cost benefit or cost pressures. But longer term, we expect an offset. And for us, we don't -- we're not too fussed about inflation in aggregate. What we care about is the relationship between inflation and devaluation. And if those stay relatively in track, then we're in good shape from an operating perspective.

Your next question comes from Mike Parkin with National Bank.

Most of my questions were answered, but just a couple other ones. In Nevada, are you seeing much of a competition for labor? Can you just kind of comment with states having low unemployment plus some other competition. Are you challenged? Is it proving not too bad?

We haven't seen any increase in pressure there. And in fact, yes, particularly at the senior level, we've actually have some good hires recently with some other changes going on in the state. So no, we haven't seen any of that pressure flow through.

Sounds good. And then on Marigold mine, I think it was kind of asked on the processing cost, but the $1.51 per tonne mining, it was really impressive quarter-over-quarter. Would you expect that to kind of track similarly for Q4 and into 2019? I guess it's dependent on your strip ratio and distances to haul pads. But is the new equipment also kind of driving some of those cost efficiencies?

Obviously, you see some slight scale help there, but very much driven by how many tonnes you move per quarter, which is driven a lot by haul distance. So there will be noise, and there will be variability in it.

Okay. And then from a couple of days ago, you put out some really interesting drill results at Marigold. Is that in line with what you were expecting of that zone or improving better than expectation?

Carl?

Yes, those -- yes, those results are, as I mentioned, they're pretty much meeting our expectation. Going into the year, we wanted to see a moderate increase to the resource. And our past work previously has shown that as we do more drilling, we tend to get more ounces showing up. So these increases are more or less fitting our expectations and have continued to do so through the second half.

And that's particularly the case with the Red Dot, but any sort of thinking on the Mackay drilling?

Yes. The Mackay drilling, there's areas there that are towards the bottom end of our drilling depths and you can see that we're tacking on resources that should convert right on the bottom sector of the reserve and resource pit.

Yes. What we always say with Marigold, it's amazing, the ability the mine has had to continue to more than offset deflation. We remind people it opened in '89 with an 8-year mine life, has a 10-year mine life. Through the Red Dot study, we have the potential maybe of increasing the reserve by 30%, if that moves to fruition. And that would be impressive at any mine. But next year, it's 30th anniversary. So a testament to what an amazing orebody Marigold is.

So with these drill results, are you feeling like this equipment replacement studies looking same or robust?

Go back in at the end of the Q2 call, and we'll tell you.

The next question is from Cosmos Chiu with CIBC.

Congrats on a very good Q3. My first question is on Marigold here. And I think someone else had touched on it. $1.51 a tonne, that's really quite good in terms of unit mining cost, and I'm sure you've benchmarked it. That would be at the lower end, lowest quartile. I guess my question is, can it actually get any better with, say, the increase and increase in availability of the 4 new trucks? I'm not sure what the availability was in Q3. Can you actually get even lower than the $1.51 that you reported for this past quarter?

Yes. The way we've talked about it is if you look back over the -- yes, 4 years we've owned it, the year before we bought it, it was mining about $1.92 per tonne. We've got it down to that $1.50 level. Yes. We've had the easy wins, and that was really getting that new equipment that has been acquired before we bought it, running properly the big rope shovel and the expanded fleet. You get a marginal, yes, very marginal economy of scale by adding some trucks. You've obviously moved the bottleneck back to the big rope shovel. You will see variation. So I can't -- if you have short haul distance and you're not cutting a long way to leach pads, we'll get some quarters that are better. But I think generally, yes, that's where we are. Obviously, our operational excellence continuous improvement is always just trying to slowly improve and offset normal inflationary effects. What we've said is that to be a step change, you would need to bring in additional equipment, and that's what that part of that equipment replacement study is going to look at next year does it make sense to do anything on that front.

Of course. Maybe taking a look at the CapEx numbers here at Marigold, as you have mentioned earlier, it was high in Q3, just given the fact that you've got the 4 new trucks. What should we be expecting, say, next quarter? Or can you remind us of the sustaining CapEx level? And what we should be looking for in terms of CapEx on a quarterly basis once you get back to normal?

Yes. I mean, we don't give quarterly guidance, but I'd say just go back and have a look at the technical report for the annual guidance. But Greg, any color?

Yes, I mean, we provide you with annual capital guidance, Cosmo, and obviously, we have the year-to-date number. So it's pretty easy to imply what we expect for Q4. The main item in Q4 is finishing the pad build, so it's a bit higher than what we call normal because the pad builds in Q4 and then be back to kind of a normal run rate in Q1. So I think it should be pretty clearly laid out, if you look at our outlook.

Sure. And then maybe the same type of question but now for Seabee. As you kind of mentioned Q3 CapEx was quite low, again, could you remind me was that by design? And what should we be looking for in Q4?

Sure. As we've talked before, there's a seasonality aspect to the capital at Seabee that's important to just consider as you sort of look at it, particularly in the way it impacts on all-in sustaining costs and therefore the kind of how that cycles through the year. We will tend to see a big slug of capital come in through Q1 and the early part of Q2 as we bring all the capital items on site. So particularly, as Paul mentioned, next year with mining equipment come on, that will all get recognized in Q1. We tend to then get a bit of capital come through, through the summer construction season. If we're building a particular piece of infrastructure, it would tend to happen at that point. And typically, Q4 would be pretty light. So that's the kind of cycle you would expect to see and the quantum of that will really depend on activities that are going on at the site in any given year.

Yes, we put the technical report out for that and that envisaged new equipment coming in. So go back and have a look at that one as well.

You're just trying to make me do my work, Paul. But that reminds me, when should I start asking you about the ice road again? It should be coming up pretty soon, right?

Yes. If you put your little weather app on to La Ronge, you'll see that time is nice and cold there, but it gets -- they start to work on it in the coming months and then the equipment really moves across majority in February.

Okay, okay. And maybe one last question from me here. What's your criteria for declaring commercial production at Chinchillas? And how many months of, say, revenue should we be forecasting, targeting or modeling for Q4?

My pleasure to pass that one to Greg.

Yes. So I mean, our -- it's a bit of a unique project say because of the plants there. So really what we're looking at is sustained ore delivery from Chinchillas to the Pirquitas mill is being the main trigger for commercial production. As we said, we expect that before the end of the year. So there's not many months left in that period. So you can estimate from that time horizon. That will effectively stop the pre-strip and move the pit and the related infrastructure. We'd start to depreciate that. And as I mentioned earlier on the call, some additional infrastructure items would continue to be capitalized beyond that point of commercial production of the pit, and we would see those come through the remaining of Q4 and into Q1.

Your next question is from the line of Michael Gray with Macquarie.

Just one question for Carl on Santoy Gap hanging wall. You gave the dimensions: 700-meter plunge, 300 meters strike through zone and 35 holes drilled with 12 being significant. Do you have a bit of a nugget effect problem there in terms of a good hit ratio, but in terms of the numbers significant intercepts?

It's a good question, Mike. That's -- our experience with the mineralization is that it is similar to what are on in the main gap deposits on the #9 and 8 structures. The way this is dealt with is in our press releases, there's a standard capping thrown at it. I think it's at 75 grams. But then when it comes time to doing the resource, there is a full assessment of what the distribution looks like and so on. There is -- there are much higher grades in it and so it is susceptible to nugget issues.

And there's definitely a plunge to the...

Yes. It's conforming to all the other structural elements.

And it's only [dike], but it's nice to be able to find something in the shadow of the existing infrastructure.

Yes. And maybe just a follow-up, Carl. To the extent you've given us a bit of a structural picture, is that a pattern that you think can be repeated? Or is this a one-off? Or is it too early to tell?

I wouldn't preclude there being repetition of similar features. The -- it's been generally, I think, well known at the project, there's an association between this granodiorite intrusive dike-like features that have come in along the foliation that's in the mafic volcanics, and they're associated with the mineralization. What you do see when you go underground in the very productive areas is that these dikes have thinned out. So they're prevalent with a bit of asymmetry, sort of they're more prevalent on the right-hand side of that long section. But as you migrate across the left-hand side, you get away from the dikes. But there they are, and we got detailed rock models showing them.

The next question and final question will be coming from the line of John Tumazos from John Tumazos Very Independent Research.

Two, if I may. Was the Chinchillas CapEx winding down? Should we expect cash flow, cash balances to rise or cash flow to be more than uses? Last year, you generated more cash than you saw in marketable securities this year, the opposite because of the CapEx, it's deferred stripping, et cetera. And second question, we admire greatly the Marigold transaction, Seabee transaction, the attempted transaction on Kirkland Lake a couple of years ago. Gold prices have fallen, gold shares have fallen, some gold shares have fallen a lot with tax selling this time of year. Could you tell us -- I admire how you've kept your powder dry this year. Are you waiting for gold to fall to $1,100 or $1,000? Or is it just an opportunity out there as good as your last several transactions or attempted transactions?

In terms of the first question around cash, yes, we expect next year to return to putting cash back in the bank with the build of Chinchillas and lower production because we're processing stockpiles, that site is consuming cash this year. We're investing in the future. That's good, but you'll see all sites running at a fuller rate next year. And you see from now through to, what's it 2021 or 2022, a 40% growth in gold equivalent production across the portfolio. So the years after that, we should get better as well. In terms of that looking for external opportunities, yes, what we've said is that yes, we've actually done 4 transactions in 5 years. We did Marigold for cash, which then enabled us to buy the Valmy Property next door, which will ultimately fit into Marigold for cash. We've got Chinchillas through an earn-in option, putting money in the ground and finally the Claude acquisition. Since we did Claude, and I think we closed that May 2016, we've now looked at 9 opportunities under confidentiality agreement and not move forward with those. And that's just because we couldn't see value for our shareholders. Obviously, as gold price drops and share prices come off, that can change that metric. And occasionally, we go back and revisit. But to date, we haven't seen anything where we believe there was still value left in there for shareholders once you put some sort of transaction premium in. But you've got to continuously look, and we will continuously look.

So you think the sellers are still asking for too much in effect?

Yes, market premiums sort of -- unfortunately, yes, they can be significant. Interesting that last transaction, the big one, you saw a 0 premium merger between Barrick and Randgold. I think that's a nice precedent. But you've got to look at each. And some of the projects we've looked at or companies, whatever, have been very good, but you just couldn't clear the premium. Others, not quite as good. There are certainly things that once you dig down into the detail, I know it's pretty as I look in the -- just in the public information.

Okay. This concludes the question-and-answer session. I will turn the call back to Mr. Benson.

Okay. Thanks very much, everyone, for joining the call. Have a good day. We'll speak to you next quarter.

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