Barrick Gold Corporation
Q1 2014 Earnings Call Transcript

Published: 9 May 2014

[Operator:]

Ladies and gentlemen, welcome to the Randgold Q1 Results International Investor Call. My name is Jacob and I will be your coordinator for today's conference. For the duration of the call, you will be listen only. However, at the end of the presentation, you will have the ability to ask questions. (Operator Instructions) I will now hand you over to your host, Mr. Mark Bristow to begin. Thank you.

[D. Mark Bristow:]

Thank you very much and good evening and good morning to our shareholders both in here in Europe and South Africa and of course back in North America. As you know, we today in UK time, 12 O’clock we delivered our update for quarter one 2014. And for those who are interested in the full transcript. It is available in a webcast format on the website. The intention is that thus you can all follow the presentation; we will skip through it, summarizing our presentation from earlier today and with the objective of getting you to question time so that you can clear any issues that you might have with the numbers. Just a quick summary, good set of results, very much inline with our plan certainly from our side, run rate reinforces that we're well positioned to meet our guidance just on a basic arithmetic basis or if you calculate four times what we achieved this quarter, we'll get to within our guidance. We've got some upside opportunities both at Loulo and Gounkoto, which performed very well and Kibali, which is amazing good progress and then we've also got some challenges as you would have picked up Tongon. Before we move onto the operations, to start just a quick review with our – on our sustainability initiatives. You would have seen and those who have had a chance to browse through the annual report we have updated our sustainability report for 2013 and as part of that report we’ve also updated our reporting under the GRI initiative and following latest G4 guidelines and that’s a big achievement for us, we have again through the year have maintained all our certifications both environmentally under the ISO14001 program as well as OpEx in the $0.30. A very good quarter on safety, talking about safety with lost time injury frequency rate down at 0.26 per million hours which is certainly the best performance we've been able to deliver since incorporating the Company back to 1995. And I think what makes it even more relevant is that it’s been a very challenging couple of quarters with multiple large projects and in Kibali's situation also operating the completion of these big capital programs alongside actually operating the processing plant. Moving on to the operations and the group as a whole. These are the highlights, which underscores the very comforting performance I referred to earlier. Kibali's grain contribution boosted production to a new record high and Loulo's underground mines continue their strong performance and I'll come back to those under the specific mine reports. As I alluded to Tongon, while profitable, is still giving us some technical challenges. Group wise, cash costs were slightly up quarter-on-quarter but significantly down year-on-year. Net earnings were again in line slightly down on last quarter because of a change in depreciation really to adjust the – and reconcile the depreciation numbers at the end of the year. So the depreciation in quarter four last year was lower than normal. And that's what makes on a quarter-by-quarter comparison, but if you compare Q1 2013 of Q1 2014, there's significant improvement. Exploration as I guided in January has been refocused on reserve conversion around operations as well as looking for that next big discovery. And finally, I'd just point that the annual general meeting earlier this week proved – the shareholders approved the Board's recommendation of an unchanged dividend for 2013. These are the numbers really support what I've just taken you through. I think there's nothing really untowards in these numbers. And whichever way you look at it, you know compare the annuals to quarters, the trends, everything pointing in the right direction. As usual, we published our annual resource and reserve declaration in March and attributable resources grew by 5% but reserves are down 8%, reflecting the mines good performance and their ramp up and – both in production and in grade. Having said that, we've, if you listen and read the messaging we're putting out to the market, very focused on moving our recent three-year rolling plan that we started three years – I mean five year rolling plan that we started three year ago to a 10-year plan and the underlying strategy to do that this is to highlight to the market that for us to deliver a solid 10-year production and operational plan for our three key operating [incentives] (ph) without – with continued decline in capital requirements is really underscores the profitability of Randgold Resources. And I'll touch on that as we get to the various individual operations. Turning into the Loulo-Gounkoto complex – another commendable performance, production was in line with the previous quarter. Nothing untowards, as you know we don't run this business on quarter-by-quarter basis. And specifically the big driver behind Loulo-Gounkoto continued success has been the significant delivery from the underground operations. On the numbers, which you see next, again operating results show positive trends in profit and production. Certainly when you look at the run rate we are well positioned to deliver on our 640,000 ounces for 2014 and we certainly run the risk of potentially exceeding this guidance. As you can see from the standalone updates, the underground mines continue to deliver and a new production record achieved this quarter was the underground combined ore production exceeding an average 220, 000 tons a month run rate, which is something that, as you know many people felt we could never get to and it's a very significant milestone in the development of the underground business at Loulo. On the results, Loulo improved – delivered an improved take of results on the back of more tons being processed from Loulo than Gounkoto as we moved the operation to a 60/40 ratio. The costs are slightly up on a total cash flow basis, driven principally by a lower recovery, which again are short-term and impacting where – with what everything and net recoveries of combination of some operational issues, which we're dealing with including the oxygen capacity to add to the process and also just the mix more Yalea ore in terms of slightly lower recovery. On the underground, a significant increase 12% quarter-on-quarter at Yalea, 13% on Gara. A lot of the remaining capital projects are now complete that being the whole underground conveyor system was commissioned at Gara. We've completed the stockpile management system for the feed into the processing plant. We upgraded the ventilation system and also increased install the backfill capacity at Gara. At both Yalea and Gara, drill programs to convert resources to reserves are underway. And they're bringing back to the 10-year plan. We have a more than a 10-year business plan for Loulo-Gounkoto. But one aspect of it is that in 2020 the production profile drops from 700,000 ounces to about 480,000 on the back of lower grade. And, so it's important that we focus in on ways to lift the feed grade back up and to bring the production up to the 600,000 ounce mark. We have two ways of doing it. One is grade, and this slide shows the opportunities of being able to extend the Yalea hard grade zones, both in the south into the very hard grade open pit ore and also deeper in the – at depth which is marked by the white stars. We have about 600,000 ounces at plus 5 grams that have the potential to be converted into reserves at Yalea. And then if we move to Gara, the same applies there, we've got a certainly some very interesting intersections recently and if class dipping plunged to the ore body, you can see the grades. And it's inferred and so we're busy drilling that out to reserves. There's sort of 130,000 ounces to 300,000 ounces at plus 5 grams. And it's open in the direction of that real red arrow. Then on the exploration side, again, you'll see a general theme across the quarter is that we rarely looked at our exploration strategy as I indicated early on in this presentation. And the focus is that anything that that's been in the portfolio for more than two years, we're really throwing it out and said to the geologist and say I want to bring it back. They want to motivate it back into our resource plan and our encouragement is if you can't get it in the values delivered after two years, we should go and keep looking for new projects. So we have a relatively new set of ideas recently introduced in our [indiscernible] triangle and the plan is to keep that focus. I think that, just on an aside, differentiates ourselves from many of our peers in that we are constantly turning over permits because I'm stringent enough to bring anything to account but to bring those that pass our filters to account. As we know, they're not any deposits that meet 3 million ounce, 20% return, and a long-term gold cost of $1,000. Moving on then, looking at just Gounkoto standalone. As I pointed out, Gounkoto is slightly down over last quarter, as Loulo was up as we shifted the balance towards the Loulo ore bodies, because they're much bigger than the Gounkoto ore bodies. And the numbers again reinforcing that, still a very profitable business. Gounkoto is still paying substantial dividends to its shareholders, which is important and almost unique in industry. The other aspect of delivering on this gap for the ten-year plan is the conversion of this higher grade material in both Yalea and Gara and also the completion of the bankable feasibility study on the Gounkoto underground project, a project that's well on track as you see from this slide to complete at, by year end. And on the next slide you’ll see some real potential to continue to add to the resources and subsequently additional reserves in the current and more than plunging extension of the MZ3. As you see now so the red and white stars are in that new area where we've got some resources and we're busy drilling off with the intention of trying to convert as much as possible to reserves before we finalize the underground study. Again on exploration, very active. We're not – we are certainly not tracking back on exploration as we did in the late 1990s when things went a little passive in the industry. Our natural reaction in these environments is to up the ante on the hunt for that next big discovery. Those I'll show you in the Ivory Coast slide. We got some very exciting opportunities in the coast as well as around our current operations like Gounkoto. Morila, a solid performer, really well on its way to deliver or fund its own closure and that's the objective. A small setback in that we had one LTI in later this last quarter something that Morila hasn’t experienced for quite a few quarters and like all accidents they are always unnecessary. Under numbers, we're again supports – and still profitable albeit a small operation now, as you can see from these numbers. Moving on to the Ivory Coast, as I pointed out Loulo-Gounkoto looking certainly running a risk of beating [gardens] (ph) Morila although its in very good shape doesn't really move the dial in the good place. Tongon, on the other hand, is a challenge for us. We've had the -- eventually had to concede that the new Vibrocone crushers supplied by Sandvik did not work. And Sandvik agrees with us and so we're busy retrofitting VH more traditional crushers back into the process. It’s being done at Sandvik cost and they have undertaken to ensure that we work with our engineers to get a flow sheet and supply the necessary crushing capacity to deliver on our original nameplate for the month. We see that as temporary hurdle to get through over the next quarters then of course we are still on schedule for the extra capacity in the floatation circuit to address the recoveries by year end. Still a profitable operation, Tongon is. It's still made a contribution towards paying back its capital. We are, at these current gold prices, it's going to payback its capital by the backend of next year. So it's still a significant important business in our portfolio. And again when we look at the 10-year plan Tongon has got a seven year life, so encouragement to management is once we pay the capital back, the economic formula changes. It's all about maximizing net return on employed – capital employed and so we've already demonstrated to ourselves we can make the real positive cash flow, lower grade than what is normally acceptable at Randgold because of the low-cost power. And so we’ve challenged the mine to look at ways to find viable satellite deposits within the six kilometer radius of the mine and the objective is to get -- to add another three years out. We also have some very exciting extensions to the – particularly if we can deliver on our improvement and recovery and get to the soup of that we'll drop the unit costs which will allow us to have – to mine deeper pits or profitably. Staying with Cote d'lvoire, with – in the exploration as you would have noticed, we've now signed off on the new mining legislation with the government, between the governance in the industry and general civil society. We're excited about what that does for future investments in the country. We think this country is very prospective and we already have 12 permits in the Cote d'lvoire and we are – two of them are particularly attractive at the moment, Mankono and Fapoha, Fapoha being just south of Nielle, as two poses fringing on the way pronouns that. And Mankono, which is has got some soil anomalies very long extended anomalies up to a gram in the soil. Both projects we're planning to start the first drilling project on these targets this quarter. Moving onto Kibali and the DRC. You will have noticed that we officially opened the Kibali mine last Friday, great event, fantastic milestone, fifth one in our history of Randgold. Kibali has been one of those – the biggest project we've ever done and certainly so far we've managed to keep it more or less on track. Everything points to being able to really deliver on current guidance of 550,000 ounces for this year. These are the numbers, very profitable, we did manage this quarter one, we've brought a bit of more gold in – forward into quarter one. We've managed the interruptions of the commissioning. We've started commissioning a second circuit on sulphide at the backend of quarter one. It will delve into most of April. We are through that now. The commissioning is up and we're behind that. We're now ramping up and ironing out all the wrinkles. And things they're looking pretty stable at this stage. Few challenges on management and the normal stresses of bringing in new man and certainly management down and changing that mindset from capital focus to consistency and reactive and patient operational discipline. Just a quick update on where we are with the project. This highlights those completed parts of Phase I, what's left to do in Phase I. And then we've still got all the key deliverables in Phase II. On the underground, really doing well on the underground ahead of plan both on the vertical shaft development as well as the declines. We have started the ore drive developments in preparation of stoping which we've brought forward in our schedule to start in quarter four. And RAP is all but one project complete. There are the remaining issue is the Roman Catholic Complex, which is scheduled for completion this quarter. Otherwise, all the houses are now electrified and we put it to stuff as you can see are quite an impressive township development in this photograph. And then moving to exploration, I'm not – now some of the other operations, Kibali's led some capacity that we haven't sold within – that was planned. So rather than just adding last, we're really focused on satellite project that can contribute to the feed. And, this is one particular project, Gorumbwa, where we see a potential to convert about 300,000 ounces into reserves at a reasonable grade, which we'll be able to augment our low feed and full the – some of the unutilized capacity in the next couple of years. Our focus is on our new satellite project within tracking distance of the mine. Next. And likewise we continue across the greater permit here as you look for and this is a very big permit area, very prospective. We made an enormous amount of progress in our understanding of the controls and the realization and it did another big discovery out there within this permit. We definitely believe we'll be able to find it. Stepping back a bit and going back to Senegal and Massawa project, which is at project level? Again, in line with our decision to clean up our portfolio. As you know, Massawa has been sitting in our portfolio for some time. In January, we took it out of our five-year plan. Having taken it out of our five year, we sat down as a team and said, how do we bring this to account? We've spent a lot of time this last quarter really getting our head around some detail of the structure. We followed up with some long strike trenching and we believe that believe that we've really made progress in understanding this project. What was important to us is when we started benchmarking it in the industry, it was clear that this is one of the best undeveloped gold projects in the industry. It has potential ultimately to meet our criteria and if it doesn't, we are comfortable that there will be real interest in it by other developers in our industry. So that's our focus, we would like to bring it to account. We're not going to bring it to account at any costs. We're very mindful of the value of it. And also, we're committed to working alongside the Senegalese government to insure that we do facilitate investment in the mining industry and not just sit on ethics. Just a quick update on our joint venture strategy, again we added another joint venture in the form of Legend Gold to the parcel of mineral rights North of Loulo. And again, we've already mobilized on the ground and we'll start reporting against that project next quarter. And then the Taurus Gold Bakolobi joint venture is at a state now where we're starting to do some trenching and Paul's planning to do the first phase of drilling this quarter. And just a quick summary just to reinforce what I've already said and that is exploration focus is bimodal. We really want to replace the reserves that we depleted last year. We've given you the guidance of how we intend to do that. Kibali we're comfortable, we'll continue to do that for some time. And then, it's all about that next big discovery and that's the rationale. If you look at our five year plan, we believe it's completely banked. It's deliverable with the early with the early risk being operational. Our ten year plan, the backend of the ten year plan has got some strategic risk in it but again we've got a clear focus on having introduced that concept, and it really highlights where we need drill down and get that conversion to reserves to insure that we continue to be able to deliver those ounces. And then on the ten year plan, once that's done, it really gives us time to continue to focus on that real new discovery which is you know that as we've demonstrated five times before, is the only real way of creating value in the mining business is to discovery and development itself. I thought I'd finish off by letting everyone know that we're planning to do our third and final box around and to circumnavigate the continent of Africa. We're going to start in Abidjan, where we left off in 2012 and complete the trip down the west coast of Africa via Ghana, Togo, Benin, Nigeria, Cameroon, Gabon, Conga/Brazzaville, DRC, Angola, Namibia, and then South Africa. We, at the same time, you would have noted that Philippe Lietard, retired as our long-standing chairman on Tuesday at the AGM and we – I would take this opportunity to recognize the enormous contribution that he's made in the 10-years as chairman for our company. His passion for the business and understanding of Africa has been invaluable to help us charter through the many challenges and difficulties we’ve faced as we've bought this company. At the same time, we welcome Christopher Coleman to his new position, taking over from Philippe. Chris has had a long association, for those who don't know, with the company, initially as an advisor from Rothschild and since 2008 as an independent non-executive director. And I certainly look forward with the team to working with Chris in his new role. Back to Nos Vies en Partage, it's worth pointing out that we're not losing Philippe; he is going to be taking on the mantle of chairman of our foundation. We've incorporated this little initiative; this is a charitable initiative that I started some years ago into the formal and sponsored foundation of Randgold by Randgold Resources. I've just put everyone on notice. Anyone that's participated in our business and benefited from your relationship in money and returns, we’re going to be coming after you to share that back in our foundation, our foundation being focused on – for those that part of society that gets left behind, particularly disadvantaged children and women and another one is really also education. Link for the pledges are on the 3boyz on box website and you can access this through www.3boyzonbox.com and full in your places there and knowingly you will understand that if you don't complete your pledges we'll come and approach you directly and you remind you accordingly. Then finally with that bit of PR behind as is customary, we'll finish with a comparative slide and how we are performing in the industry and again whilst it becomes more and more challenging to outperform an ever re-basing industry, we are continued to stay up there in the front part of our peer group. And what I’ll kind of show you is that we are under no allusion about the fact that we have to create value and continue to create value for all our stakeholders, shareholders, post-government workers and the communities around the mines which we operate and we are as committed as ever to delivering on – continuing to deliver on our promises and we’ve certainly made a good start this quarter for this year and we are definitely focused on keeping management flexible and absolutely focused on profitability. And with that thank you for making the time to call in and we would be delighted to take questions at that point. I do have Paul Harbidge from, the head of exploration, around the table, our CFO, Graham Shuttleworth, our CEO from Eastern/Central Africa and responsible for Kibali, Willem Jacobs and Lois Wark on communications sitting with me here in London. So I think we are well equipped to answer any question you can fire at us. So with that I’ll toss back to the operator and open for question.

[Operator:]

Thank you (Operator Instructions) The first question comes from the line of Josh Wolfson from Dundee Capital. Please go ahead.

[Josh Wolfson:]

Hi, good morning guys. I have a couple of I guess cash flow related questions to sort of start off things. First up I guess on the working capital front there was a big consumption of capital there, but inventories were sort of steady from last quarter. What was the factor in that working capital adjustment?

[Graham Shuttleworth:]

Josh this is Graham here. But basically you had a sort of a double whammy. On the trade credits is up, we had sort of stretched our creditors a bit going into year end. And so, we caught up on some of the trade creditors. And then on the debt side, it mostly relates to gold shipments, the timing of gold shipments, normally quarter end we will shift pretty close to quarter end and then normally have one gold shipment with we’ve recognize the revenue from a sales point of view, but we haven’t received the cash. So we've got a gold debtor. This time around just because of the timing of the gold shipments with they were two gold shipments we were still waiting for cash. So, but you had a sort of a double swing both from the trade credited side and on the debt side which is really the biggest movement.

[Josh Wolfson:]

Okay, so seeing from the fourth quarter, there was a pretty substantial positive change in working capital and then first quarter was negative, should we expect aside from the gold sales timing more or less that inventories and so forth will stay relatively steady going forward or is there going to be a big difference going forward.

[D. Mark Bristow:]

Yes, I don’t expect on the inventory side and on the credited side say, relatively same and as you say, we should get an improvement on the gold debtor.

[Graham P. Shuttleworth:]

But I would add if I can shift, Josh, we don’t run our business on the quarter-by-quarter, we do make an effort to tidy it all up at year end where we do our short of ship all the gold get the money and roll that, but we don’t goes through gymnastic to get a perfect rounding at the end of the quarter. So there is going to be a better swap.

[Josh Wolfson:]

I guess the reason I'm sort of asking, I have a couple of cash flow questions is just because our anticipation was and sort of guidance was that there would be cash building up successfully throughout 2014 and I guess because of the working capital adjustment that impacted I guess your cash flow and you would more than likely be required to draw down on your line of credit in 2Q.

[D. Mark Bristow:]

Let me cut the quick. The cash is what Mali and DRC in the form of that which we working to get back. And that’s where the cash that about $200 million, $120 million odd in Mali and it was $95 million we just got a $15 million payment out of the DRC. So our share of that $80 million left is $45 million. Sorry this is great is about a $160 odd million $2 million count.

[Josh Wolfson:]

Okay, so knowing that some of that money is in dispute with the government…

[D. Mark Bristow:]

Is gotting in dispute, that’s a step everything, this is purely that is no dispute going to approaches the – we are we can redeem by offset in Mail but this some of this VAT is from 2014 during the cross where there just the government just didn’t have the money to settle it. We have been engaged with the treasury, the treasury has been by the IMF we certainly got a plan to clear the ongoing 2014 that reimbursement the challenges they historical stuff. Again, that we’ve inform by the government that they have a plan there is a loan structure the important place and they believe that there will be in a position to start dealing with this backlog but June this middle of the year. On the DRC is the VAT realizing to the capital project again on the – from the time we started production we have been clearing that on forward going basis, but this is historically from the time when you were constructing the mine and we didn't have any revenue to offset. And so again, we have signed off on the IOU for want of a better word, the government is clear about the fact that it's got to reimburse us. It's just a matter of doing it. As I've pointed out we’ve already got the first or second tranche back. We've had two payments on the historical number. And so, no, but that's not – don't confuse that with the arbitration process we're doing in Mali with the mine and government cause it's completely separate.

[Josh Wolfson:]

Okay, so the two tranches of that were received in the second quarter?

[D. Mark Bristow:]

Yes.

[Josh Wolfson:]

And how – what was the total for that so far?

[D. Mark Bristow:]

$15 million.

[Josh Wolfson:]

Okay, that's…

[Graham P. Shuttleworth:]

That was in the DRC.

[Josh Wolfson:]

Okay, also on the cash flow front, in terms of cash flow from I guess your equity in Kibali, when should we start to see dividends being paid there to the shareholders?

[D. Mark Bristow:]

First is we're very close for Kibali to wash its face out of capital requirements. It still has, as you saw on that slide, some significant capital to spend. And we had originally indicated that it would start washing its face in, around quarter three of this year. We're close to its washing its face on a sustainable basis. We’ve got a few payments that, you know, we're coming to the end of the major capital projects. We're busy demobilizing the engineering firms. And so that sort of messy time on the project where we're arguing about completion, what time is it, et cetera. So but we're very close to breaking even. That's the first objective. With the $1,300 gold price, we've managed our business at $1,000. We should be starting to break even around, that's where we are. And then it's a case of redeeming the capital before we pay dividends. So we have no intention of paying dividends until we've paid back all the capital.

[Josh Wolfson:]

Okay and in terms of, in terms of I guess your cash flow statement, there was nothing received from Kibali in terms of your income but there was – there was obviously a lot lower in capital outflow you'd have to pay there. So, looking at the next couple of, or the next year more or less, how should we be understanding how cash goes in and out of that business?

[Graham P. Shuttleworth:]

So, Josh, if you look at the cash flow statement, you would have seen that under the investing activities, the fund invested in equity kind of joint ventures was $36 million for the quarter. So, that’s the net number of what we did because the actual capital expenditure was just over $100 million. So, net of the funds we got from selling gold, it was $36 million. And what you’ll expect to see going forward is that instead of seeing funds invested into joint ventures, you'll start to see loans repaid by equity account joint venture. So you'll start to see a negative number, I mean a – rather a positive number in that category of the cash flow statement as we start to repay our loans.

[Josh Wolfson:]

Okay. And then sort of one last question on Kibali for the management fees, is that a cash item you guys are receiving on a quarterly basis or is that factored into something similar with this – with the equity joint venture accounting?

[Graham P. Shuttleworth:]

No, so if you look at the face of the income statement, and under other income, in that category, that's why we receive the management fees from Kibali and Morila.

[Josh Wolfson:]

That's an actual cash flow item you'll be receiving?

[Graham P. Shuttleworth:]

Yes.

[Josh Wolfson:]

Okay.

[D. Mark Bristow:]

Do you think we do this for free?

[Josh Wolfson:]

Never know if it's accrued and it comes in several years or it's today you'll ever see the – that's it for me though. Thanks so much, guys.

[D. Mark Bristow:]

Thank you, Josh.

[Operator:]

Thank you. The next question comes from the line of Patrick Chidley from HSBC. Please go ahead.

[Patrick T. J. Chidley:]

Yes, good evening. Good morning, everyone. Just a few questions here on some of the operating stuff. Really I want to get a view on looking forward at Kibali, what do you see in terms of the grade profile and the tonnage buildup, especially as right now we're in commissioning or finishing up at sulphide commissioning?

[D. Mark Bristow:]

We’ve shown that quarter-over-quarter Patrick a significant lift up in production modes and that was including the commissioning part of Q1 and we left the throughput up from 800 odd thousand tons to 1.24 million tons. Looking forward, our forecast for this quarter is that again we’ll show another improvement. We had a pretty tough April because it was right in the commissioning, we are now through that and we’ve got everything stabilized now to better of managing that ramp up and the intention is to get to quarter four and quarter five will be around 1.7 million tons, between 1.6 million and 1.7 million tons processed at around 3.1 grams to 3.3 gram a ton. Quarter two is going to be somewhere between quarter one and quarter three, so around 1.5 million tons at the same sort of rate and recoveries for quarter one should end up around 83%, because of the lower recoveries in April as we commissioned the mine that we are in that sort of nameplate 86% and that’s you know so if you balance it all out and we related full cost, a lot of recovery buzz in Q1, because of the back end of Q1 being the start of the commissioning and early part of Q2 also commissioning. We are guiding, at this rate we should – we did 112 the back end or – the back half of 2014 we should do around 300,000 ounces for the – on production and with a still – quarter two still even if we do half way we are looking to comfortably get to our 550,000 ounces.

[Patrick T. J. Chidley:]

Okay, so in quarter two, this current quarter is in 83% recovery and then you moved to 86% for the rest of the year basically is that what you are saying?

[D. Mark Bristow:]

Yeah that’s correct. Absolutely.

[Patrick T. J. Chidley:]

Now recoveries in the first quarter here were down, was that more operational challenges or was that the mix of the all or I mean how much oxide did you put into it.

[D. Mark Bristow:]

I can’t tell you, I mean just we had like 92%, 93% during January and 89.5% in February and I think it was about 74% in March. So that was really gearing up for it, we commissioned the first phase of commissioning on transition ore and we had a few bumps on the way as you do, but again that was well within our guidance.

[Patrick T. J. Chidley:]

All right. So it's still pretty much you're confident that recoveries will pick up with the more sulphide rich feed as you go through the year?

[D. Mark Bristow:]

Based on this last week’s production, yes.

[Patrick T. J. Chidley:]

Okay, very good. Thanks and then Tongon quickly, the drop in grades in Q1 was that planned or was that just, you know because I know you had the operating issues with the crusher, but some of the reasons for the grades coming down?

[D. Mark Bristow:]

Now the great fun we surprisingly have got the throughput up and that way we got caught. So its family, team has done a good job, restarted mining the Northern pit, we’ve got them access to additional oxide which helps immoderate the pressure on throughout and we are managing it, you know and so far the team has done really well, its not that if we are gaining with the challenging situation. But I can also say that Sandvik is around there, we’ve got [indiscernible] started and worked with us, we’ve redesigned the flow sheet and flow sheet have got tough on order the first two hydro stone crushers are on site already on start already and the we’re waiting for the next two, I think a couple of month’s time. And then there also have another two and we’ll start exactly how many we need to make that we get the mine back to name plate. So anything happened but it is at least straightforward supplier comes to party to work with you to ameliorate the problem.

[Patrick T. J. Chidley:]

All right, all right. And just in terms, just on that grade issue for Q1 or what I perceive to being lower grades, was that potentially because you were actually feeding oxide ore and that…

[D. Mark Bristow:]

We will feeding, yes, that’s those because were feeding just about anything that would run through the crushers without taking up too much costs.

[Patrick T. J. Chidley:]

Okay, that sounds good, okay.

[D. Mark Bristow:]

But it wasn’t out of line with our dredge, it's 2.3 is the sort of number and we only get the higher grades in the back end last years of loss because that’s we are the great sit into the bottom of the pits.

[Patrick T. J. Chidley:]

Right, okay. And then just on exploration the Mankono, you had some sort of early stage kind of interesting comments that I guess and you're going to be drilling it in the Q2. Question is what kind of drilling are you going to do and what do you expect to sort of target here? Is it a Tongon style deposit or is it something completely different?

[Graham P. Shuttleworth:]

Patrick, in Q1 we did inflow so sampling on that 21 kilometer regional soil anomalies. So we got better definition in that regard multiple plus 3 kilometer we got one to the 15 kilometer long continues anomalies where we got 17 samples – gram per ton so that very interesting and its now because you don’t normally get so anomalies with that. Two anomalies on the contact, major contact, the sedimentary basin and the volcanic belt, so that's going to be a caustic sheer style hosted mineralization that were expecting we got under and sediments we’ve seen, so good [indiscernible], chlorite and silica alteration and some sub crop at soil in – there is a high degree of core trainings, why about the deflation we anomalies and we good enough see with mobilize we think some wide space drill holes and that starting in the next couple of weeks. So will be add a report back to you and at the end of the quarter on that’s going.

[Patrick T. J. Chidley:]

All right, okay, well that sounds very exciting the results. Okay, thanks very much, guys.

[D. Mark Bristow:]

Thanks Patrick.

[Operator:]

Thank you. The next question comes from the Bart Jaworski from Davy. Please go ahead.

[Bart Jaworski:]

Good afternoon, guys.

[D. Mark Bristow:]

Hi, Bart.

[Bart Jaworski:]

Just a quick question on the sulphide circuit at Kibali. Just want to confirm that the commissioning is now finished? And if so, is it as scheduled, cause I believe during the site visit it was supposed to be completed at the end of Q1 and if I'm remembering wrong. And then thirdly, I guess on that is what are the exact – I guess what are the recoveries, the isolated recoveries just from the sulphide circuit that you're getting?

[D. Mark Bristow:]

We’ve always said that with start excuse me the commissioning in Q1. The commissioning is not finance side, but…

[Bart Jaworski:]

Yes.

[D. Mark Bristow:]

But we definitely stated at beginning of March, as we announced and as we had a few issues we add a couple issues not relates to the commissioning but just bringing the whole the commissioning of that circuit that bringing the whole plans up to capacity. We are still leading with the couple of incomplete that will work through I think with that the most in our well tackled all lubrication there is a still a couple of figure issues what some of the controls. But unbalance where they are budget is 86% when we riding both streams one with oxide and one with sulpide and that – at that point is about it certainly in the last 10-days or so we’ve been achieving that sort of recoveries. So I think we’ve got some – we are the commitment to get the major contractors off site. We're busy demobilizing rapidly now and we want to finish – you know commissioning and completion are not the same. And our big challenge is now to make sure that we don't send these contractors off with a completion payment and then still got outstanding deliverables. So there’s a lot of work, if you talk to anyone that went to the opening, massive improvement in the general finish of the operation, you know concrete aprons and proper band walls and the drainage across the whole mine. A lot of that is receiving attention at the moment. On the operational side, you know we're now still mining transition. We're getting into the main sulphide zone in the pit, so we're managing the transition and soft sulphide through the oxide circuit and the main sulphide, through the sulphide circuits.

[Bart Jaworski:]

So in Q1 there was – I can assume that it was mostly oxide going through the plant. There was very little sulphide going through in Q1?

[D. Mark Bristow:]

I explained to you the recoveries are up in the 90’s for the first two months. When we started commissioning, we introduced transitional through the sulphide circuit and we even had to – a lot of as you put that in. You know, Bart, very nitrous below recovery ore. If we wanted to clean up there and get the float and start before we started putting hard grade sulphide in. So the recovery dipped into the 70's. And then, into April we had upper 70’s and now we're back up in the upper 80’s. That was the plan – that's how we planned it.

[Bart Jaworski:]

Great. So it sounds to be working out?

[D. Mark Bristow:]

So far it looks pretty good. You know we wouldn't be so bullish about meeting our guidance if things weren't working out.

[Bart Jaworski:]

Great. That's really good to hear. Okay and I had a question on the exploration, just given that you guys have churned through a lot of these targets. Is the Bakolobi JV and Mankono still sort of the top of your list? Are you most excited about those or is there something else that has cropped up or are those – have those two maybe receded a bit behind any other targets? Sort of where do they sit right now?

[Graham P. Shuttleworth:]

Bart, I mean we're drilling on Bakolobi and for me I feel it's very prospective. You know you're between Gounkoto and Papillon [indiscernible] the first drill hole is look encouraging. We've got very deep weathering and we're seeing alteration. Mankono, while it's an early stage target as I mentioned to Patrick, you know we're very encouraged with the results and the geology. It ticks sort of boxes. It's got a favorable structural setting as well and the first site we're drilling that we're going to be doing this quarter will give us an indication of how prospective that flecking I mean similarly in Ivory Coast there for power permit as well as got significant anomalies and major fletches in the regional structure. So we're very positive about that as well as a number of targets in and around Loulo. As Mark mentioned before, we've got a lot of targets in that triangle. We want to try and increase the chance of that discovery and decided that we would kick our targets that have been there longer than two years and as we get more information, that can always come back in. But, certainly Bakolobi, Mankono are at the moment at the top of the list.

[D. Mark Bristow:]

But, I think, Bart, the point I'd make in support of Paul's comments is we believe that exploration is an integral part of our business and as you know, not – the bigger problem in the industry is we get these one project companies that just have to force their project to make – to become amount. We don’t do that, if it doesn't fit our hurdle rates, we can target. And so every quarter, we're turning over target. We know that if we keep that discipline, we will find the one that fits. So, that's – and that's the way it is. And we're very comfortable with that strategy.

[Graham P. Shuttleworth:]

Bart, as well, I mean you've seen we've signed that joint venture where that almost which gives us nearly 1,000 square kilometers again, straddling the Senegal, Mali which we believe is the address to be in, in western Mali. We've got another 10 applications in on Ivory Coast, so then as we turn over targets, we've got to make sure that we've got a constant supply of new permits to generate new targets as well.

[Bart Jaworski:]

Right, right. Okay and then at Mankono, I believe initially or in January we were thinking you wouldn't drill there till the end of the year and now I think I heard you say that you might be drilling in Q2. Is that correct?

[D. Mark Bristow:]

Yes, when the rigs are mobilized there's – you know sort of like the works program in Mankono so that we've got the or the saw – the detailed saws down picking and trenching so that we're able to get the drilling done before the rains.

[Bart Jaworski:]

Okay, so it's currently operational or can I infer from that things are getting perhaps a little bit more exciting?

[D. Mark Bristow:]

I think based on the continuity of the saws out, the geology that we've map and the tenor of results we've got then it supports drilling.

[Bart Jaworski:]

Interesting.

[D. Mark Bristow:]

This is not a process box. Prospectively attracts – we redirect the budget to what is more prospective ground so…

[Bart Jaworski:]

Yeah, naturally. Yeah. Great, thanks very much for that.

[D. Mark Bristow:]

Okay.

[Operator:]

Thank you. And we calling of final question from the line of James Bender from Scotiabank. Please go ahead.

[James Bender:]

Hi, good afternoon, Mark and Graham. I just have a follow-up question on Josh's question, so it's more a question for Graham. The loans that you mentioned that were received from the joint venture and then in the cash flow there would be separated disclosed. Can you let us know what the amount of those loans are or how long you expect it to be repaid there, until they're untreated as dividends?

[D. Mark Bristow:]

It change our model as well if you are luck. How long this piece is straight? What gold price do you want to use?

[James Bender:]

On a gold price like what do you expect?

[Graham P. Shuttleworth:]

So the outstanding Loulo loan is about $500 – just over $500 million.

[D. Mark Bristow:]

[Indiscernible]

[Graham P. Shuttleworth:]

Yes but we have given the whole lot, just over $100 million at Tongon and Kibali is 50% of $1.3 billion off the top of my head or box.

[D. Mark Bristow:]

Well it’s another model there I think then we’ve 1.3 is what we’ve invested in the project to-date. Plus we had already spent about $200 million at the feasibility stage and in an addition to that we acquired a loan on around $200 million with -- so that’s …

[Graham P. Shuttleworth:]

That’s 1.6 million.

[James Bender:]

1.6 And once that's repaid your share then…

[D. Mark Bristow:]

It’s half of that.

[James Bender:]

Pardon me?

[D. Mark Bristow:]

Half of that is our share.

[James Bender:]

Yeah, exactly. Once that's repaid then it's expected that the dividends will flow from free cash flow and then will be within operating cash flow?

[Graham P. Shuttleworth:]

Yes, so in the cash flow statement, you know you'll see how it's part of the – you’re going to see that is dividends being paid. So, in the same way that you can see, last year we saw dividends being paid from Morila, you would see the same dividends coming through the cash flow statement in respect of -- dividend payments made by Kibali.

[James Bender:]

Okay. That's it for me, thanks.

[Operator:]

Thank you. We have now another question from the line of Howard Flinker from Flinker & Company. Please go ahead.

[Howard Flinker:]

Hi, Mark. Hi, Graham.

[D. Mark Bristow:]

Hi Howard howdy?

[Howard Flinker:]

I didn't hear clearly. Did you collect $15 million from the government of Mali or 50?

[Graham P. Shuttleworth:]

$15 million from the government of the DRC. 15.

[Howard Flinker:]

$15 and how much do they still owe you?

[Graham P. Shuttleworth:]

80

[D. Mark Bristow:]

80

[Howard Flinker:]

18, 1-8?

[Graham P. Shuttleworth:]

8-0

[D. Mark Bristow:]

8-0

[Howard Flinker:]

8-0, okay. Thanks.

[Operator:]

Thank you. We currently have no more questions coming through. (Operator Instructions) Okay. We have nor further questions coming through. So, I’ll hand back to your host for any final remarks.

[D. Mark Bristow:]

Well, thank you very much operator and thanks everyone for participating the call. As usual, we're always available for any follow up calls if you think of something between next couple of days. I'm going to be down in New York with Lois and Martin next week for the hard assets conference and we're going to hosting the opening bell on NASDAQ. Then we are on to Merrill Lynch and we’ll probably catch up with most of you down in sunny Florida at the backend of the week. So if you're going to be down there, you can ask us questions or please feel free to contact any of us. And once again, thank you very much.

[Operator:]

Ladies and gentlemen, thank you for joining this conference. You may now disconnect your lines.