Golden Star Resources Ltd.
Q1 2018 Earnings Call Transcript

Published: 3 May 2018

[Operator:]

Good morning, my name is Krista and I will be your conference operator today. At this time, I would like to welcome everyone to the Golden Star Resources Q1 2018 Results Conference Call. [Operator Instructions] Thank you. Mr. Sam Coetzer, President and CEO of Golden Star Resources, you may begin your conference, sir.

[Sam Coetzer:]

Thank you, Krista. Good morning, everyone, Sam here, President and CEO of Golden Star Resources. Firstly, let me thank you all for dialing into the call this morning following the release of our first quarter results 2018 after market close yesterday. Before we dive into the results of the first quarter, I’d like to talk a little about the performance in the market. Overall from a production standpoint we have started the year well. The first quarter of the year also had its challenges. As I’m sure many of you will know our share price experienced significant weakness during the first three months of the year, and this was deeply frustrating for us all. I believe the company is better positioned now than it’s ever been in its history with a high-grade underground production profile. But this was not reflected in our share price. We know that the gold mining sector had tough time during the first quarter with many of the small and mid-cap companies also experiencing weakness. But it was disappointing to see our company was hit harder than most. I’d like to thank all of our shareholders who’s stuck with us during this period. As a shareholder myself, I shared your concern, and I’ve been very pleased to see the recovery in the share price since we released the first quarter production result, and in particular towards our Inferred Resource update. As a company, we remain focused on the things we can control, which include continuing to hit operational milestones and to deliver growth through exploration. At this point I want to reiterate that I believe Golden Star has now differentiated itself from its past, but more importantly we are differentiating ourselves from the other companies mining on Ashanti Gold Belt. We are now predominantly an underground mining, targeting higher grades and with better margins. Our company’s risk profile has also changed, as we are now less impacted by seasonal change and fluctuations, and fuel costs as we utilize less power per ounce delivered. So as always I’d like to say thank you to all of the Golden Star team. I’m very proud to be leading this team and we are now well positioned for the future as we focus on generating robust returns for all of our stakeholders. Take a note of our disclaimer and I’ll turn past that slide. Joining me on the call today are André Niekerk, our Chief Financial Officer; Daniel Owiredu, our Chief Operating Officer; Katharine Sutton, our Vice President of Investor Relations; and then I invited Mitch Wasel, our VP of Exploration to talk about the great things that happened in the company through the drawdown. After the presentation, there will be an opportunity to ask questions of all team members. But first, let’s take a look at where we stand today. Just to briefly recap the slide, which I’m sure you are now familiar to many of you, Golden Star is a West African focused gold mining company with two producing mines in Ghana. Our assets are situated on one of the world’s most prolific gold belts, the Ashanti, a very favorable mining jurisdiction. This year we expect to produce between 230,000 ounces and 255,000 ounces of gold at all-in sustaining costs of $850 to $950 an ounce. Although we will still be focused on delivering our production and cost targets, this year our focus will turn more towards the future growth of our business. We allocated $6.6 million to exploration, and that will be spent on near-mine drilling at Wassa and Prestea, but also on generating new high-grade underground targets to supply additional ore to our molds. Our total CapEx budget for the year excluding exploration is just under $13 million, and at the end of the first quarter we had approximately $26 million in cash. Going to start off by looking at our gold production in the first quarter. Golden Star made a solid start to the year and we’ve produced just under 58,000 ounces of gold. We delivered stronger than the expected production from the Wassa Underground to a higher anticipated average daily mining rate and head grade. And I continue to be impressed by the huge leaps forwards this team has taken since the start of last year. We experienced some challenges at Prestea Underground during the first quarter, but I’m pleased that the mine now seems to be finding its stride. And Daniel will tell you more about this later in the presentation. The majority of the severance payments relating to the closure of the two open pits are now being paid, and we moved forward as a primarily underground producer. Moving on to cost, our cash operating cost per ounce was just over $900 an ounce in the first quarter and all-in sustaining cost per ounce was $1,171. Approximately higher than expected, however, it’s important to put these results into perspective. This was Wassa’s first quarter as a primarily underground mine, while Prestea Underground is still in ramp-up mode and we had anticipated this when we set our consolidated guidance for the year. We expect Wassa’s underground production to continue to grow through 2018, offsetting the cost associated with the stockpile blending. We will be replacing more and more stockpile ore with higher grade Wassa Underground ore and that will deliver lower costs. At Prestea we relied on low grade stockpiles more than we had expected during the first quarter, but we’ve already seen strong improvements at Prestea Underground since the start of the second quarter. Productivity here has improved since the drawdown of the second stope and the third stope will soon commence. We believe that the higher grade ore from Prestea Underground will have a positive impact on the cost at the Prestea complex as well. So it’s also important to remember that we’re still early in the year and we’re still on track to achieve our consolidated full year cost guidance. We expect our cost to decrease through the year as both underground mines continue to ramp up. And as you can see from the graphs, the bottom of the slide we expect to deliver the third consecutive year of material cost reductions. We will now look at each of our operations in more details. So I will be handing over to Daniel to speak to those. Daniel?

[Daniel Owiredu:]

Thanks, Sam. Turning first to Wassa. As many of you will know, Wassa is located in Southwestern Ghana and it became an underground early operation in January of this year. I’m very proud of our the underground team’s performance during the quarter. It was great to see Wassa have come out of the gate so well. The Wassa complex delivered 13% increase in gold production compared to the first quarter of 2017, and Wassa Underground saw 157% increase in production over the same period, which are excellent results. We know there was some concern about our decision to close the Wassa Main Pit, but hopefully these results will provide reassurance. They showed our Wassa Underground has the ability to produce the same amount of ounces as the combined Open Pits and underground operations did last year at a very much lower cost. As a result of the increasing gold sources, Wassa reported a 27% decrease in cash operating cost per ounce in the first quarter of 2018 compared to the first quarter of 2017. This is the lowest cash operating cost per ounce Wassa have seen in over two years. The majority of the severance payments relating to the Wassa Main Pit workforce are not complete and the operation is positioned to move forward with a lower cost base. Wassa’s cost per ounce started to decrease as the year progresses, and at end of the first quarter we were on track to achieve our full year guidance. Looking now at Wassa Undergound’s performance in a little more detail, we saw an 84% increase in grade to 4.5 grams per tonne in the first quarter, which is above Wassa’s Underground reserve grade. We are expected to see the head grade increase throughout the year, so it’s fantastic to see us achieving these higher grades so early in 2018. Following the turn of last year, the mining team continues to deliver higher than expected tonnages. The average mining rate for the first quarter of 2018 was expected to be around 2,300 tonnes per day, but the mining team delivered on average over 2,400 tonnes per day. So I am very confident that we are well on track to achieving our targeted average mining rate for the year of 2,700 tonnes to 3,000 tonnes per day in 2018. Turning now to Prestea, the Prestea Gold Mine is approximately 40 kilometers from Wassa and it’s also in Southwestern Ghana. This year we will see the mine transition from being an underground and open pit operation to solely an underground operation like Wassa. This was reflected in the results for the first quarter. As we saw lower production from Prestea Open Pits than we’ve been used to see during 2017, and production from Prestea Underground being – beginning to ramp up. As we are now reaching the end of the open pit mine life, we reported a 35% decrease in grade from the Prestea Open Pits. This was to be expected as we mine the higher grade material earlier in the mine life and it was taken into account when we set our guidance for the year. However, I am pleased to report that production from the Prestea Open Pits will continue into the third quarter of the year, rather than finishing at the end of the second quarter, well done to the exploration team for spending their life again. Our cash operating cost per ounce was approximately $1,300 in the first quarter and this increase was primarily due to the higher mine operating expenses associated with Prestea Underground, since decline in commercial production and the decrease in ounces sold. As the Prestea Open Pits finished production, we are expecting to pay $4.4 million in severance payment to the workforce. In the same way, at Wassa we will move forward with a leaner workforce and a lower cost base. Looking now at Prestea Underground, after we closed – disclosing the Q1 production results a few weeks ago, the challenges experienced with the blasting of our first stope in the fourth quarter of 2017 continued into the first quarter of 2018. The blasted ore contain higher levels of dilution than anticipated, and that resulted in a grade of 8.2 grams per tonne being processed, which is significantly lower than the reserve grade. Our mining team learnt important lessons during the quarter and adjustments have been made to blasting practices. These have already started to yield good results and during the last two weeks of April we recorded an average daily production rate of over 600 tonnes per day from the second stope. This means we are well on track to reaching a targeted production rate of 650 tonnes per day in 2018. And the grades from the second stope are in line with our block model. It was exciting to see that the daily mining rates reach as high as 880 tonnes per day during the period, which demonstrates the potential for production growth within this mine. We also strengthened the operational management team of Prestea Underground during the quarter, and as a result of all these changes, we expect the second quarter to reflect improvement. We experienced some challenges during the past few months, but I am confident in our ability of our team and I believe both operations are well on track. So now I will hand over to André to tell you about our financial results for the first quarter of 2018.

[André Niekerk:]

Thank you, Daniel. The first quarter was a mixed bag for Golden Star, but we expect to make solid progress throughout 2018. We expect to become cash flow positive in the third quarter of this year and we start to generate free cash flow. In 2019, we expect to generate further free cash flow, which will lend itself to strengthen the balance sheet going forward. Now looking at the numbers in more detail, we saw a 3% increase in revenue in the first quarter of 2018 compared to the first quarter of 2017, due primarily to a 22% increase in revenue received from Wassa Underground. In Q1 2018, mine operating margin of $3 million was approximately $6 million lower than the same period last year. This was mainly due to the addition of $5.7 million charge related to the drawdown of stockpiles at both operations, and $2.4 million of additional severance charges, which was partially offset by slightly lower mine operating expenses. The net income attributable to Golden Star shareholders totaled $1 million in Q1 2018 compared to $200,000 in the same period of last year. Higher mine operating margins at Wassa, higher gain on fair value of financial instruments, and lower G&A costs were the key reasons for this increase, offset partially by the mine operating loss at Prestea. The cash provided by operations before working capital changes decreased $800,000 due to a reduction in the consolidated mine operating margin, and the fact that in the first quarter of 2017 we received the final $10 million from the Streaming Agreement with RGLD Gold. Having largely completed the development of both Prestea Underground and Wassa Underground, capital expenditures decreased by 31% in the first quarter of 2018 to approximately $12 million. At the end of the first quarter, our debt position was $121 million and we believe this is manageable going forward. Our cash balance was just over $26 million at March 31, 2018 and we remain focused on cash flow generation. With the expected ramp up in production at Prestea Underground and the gold production from Wassa, Golden Star is well aligned to meet its future debt service requirements. And as cash flows continue to grow, and the company has the flexibility to reduce a number of its debt applications without any prepayment penalties, this will allow us to rapidly improve our balance sheet from internally generated cash flow. Back to you, Sam.

[Sam Coetzer:]

Thanks, André and Daniel. It’s clear that Wassa is now well on track to become the mine that we anticipated, even after it started with a few challenges in the second quarter last year. It’s really good to hear from Daniel, the strides we are making at Prestea Underground, you know as I have already said having two mines allows for the buffering of challenges when they come your way. We have taken a disciplined approach to our financial position over the past few years and it’s great to see that it’s beginning to pay off. And if you look at the aspects of our story that I’m most excited about which is exploration. With both of the underground operations are now in commercial production, we’re starting to turn our focus towards growth. This slide sets healthy exploration strategy for 2018. As a result of our recent success at Wassa, which Mitch will tell you about shortly, the Wassa deposit will form primarily – the primary focus of our 2018 exploration strategy. We plan to spend $2.4 million on drilling at Wassa, and the aim will be able to gain a clearer picture of the deposits potential at depth. The secondary focus of the exploration strategy is two-fold. Firstly, we will target the mineral resource expansion at Prestea Underground. We’ll be drilling into both the West Reef and Main Reef and looking to demonstrate the longer-term potential of the mine. Secondly, we will investigate the potential of five new underground targets. Both focuses represent the opportunity to increase our high-grade low cost production profile and increase the lives of our mines. Now I will be handing over to Mitch to tell us about the exciting things that’s happened in the company through the drawdown.

[Mitch Wasel:]

Thanks, Sam. To start with, I think, we’ll look at the Wassa, the slides here. So a couple of weeks ago we reported some exciting news from our Wasa Underground mine. As a result of drilling that we conducted in 2017 and 2018 we had more than doubled the mines Inferred Mineral Resources for 44.9 million tonnes at 3.6 grams per tonne for 5.25 million ounces. Wassa Underground has another 1.7 million ounces of indicated resources, including 650,000 ounces in the reserves, which gives us a five-year mine life resource. But, by increasing its Inferred Resources to 5 million ounces of gold, we are beginning to show the larger potential of this mine. We want to assess this opportunity at Wassa as soon as possible, so we decided to start work on our Preliminary Economic Assessment, which will look at the viability of sinking a shaft, access a deeper higher grade in Inferred Resources. PEA is expected to be completed during the third quarter and we’re all very excited and looking forward to what the outcome of the study will be. The next slide we’re looking at here shows the planned view of the Wassa Underground deposit on the left and an isometric view looking north on the right. We have been confident for some time that the Wassa extended to the south of the previous resource as an estimate, but it’s great that we now have a block model that shows this. The latest drilling results extended mineralization up and down depth as well as South down plunge. And as the deposit remains open to the South, we believe there’s still further upside. Wassa Underground has ramped up as well and this operational success forms a solid foundation for the next stage of the mine growth. We have underutilized capacity within the Wassa’s processing plant and the Southern portion of the deposit represents the potential to fill the mill and increase the production. We’ll be doing more step out drilling in 2018 to further test the extension of the deposit as we’re very excited about the additional potential of the Wassa Underground. Now looking at Prestea, this slide is a long section of the Wassa – the West Reef area and the Prestea Underground. The planned West Reef stoping areas are shown in the white box to the right of the image and the inferred resources are displayed in the red and magenta box. Until last year we had no significant drilling programs underground for the past 13 years. In 2017, we drilled 23 holes and an in-fill drilling program, and continued to confirm the high-grade nature and strong continuity of this ore body. We also conducted a small amount of extension drilling into the Inferred Mineral Resources, that too returned strong results which resulted in the conversion of some of this material in the indicated mineral resources in subsequently mineral reserves. However, the extension drilling we have done so far is limited. And once we establish further access to it, later this year we will accelerate these programs. The two priority drilling chambers are shown in the image where the green and red lines are located. This drilling will explore the larger longer-term exploration target which is a down plunge extension of the West Reef. If we can show that the West Reef mineralization extends down plunge, it has a potential to increase the Prestea’s annual production rate and increase the life of mine above the current five years. Okay, now let’s talk about other exploration projects that we have, and looking at the next slide there. Now we have five additional targets that we’ve generated in 2018, as both resource transitioned into an underground focused gold miner has led my exploration team to review our land package in a different way. We’ve looked at some of these targets in the past in terms of their potential for surface mining, but recently we reevaluated them from an underground mining perspective. As a result, we’ve generated five new potential underground targets and all of them are within trucking distance to the Wassa and Prestea processing plants. The objective of the work on these projects is to find additional higher margin ore to fill our two processing plants. Once again, stressing the fill the mill strategy that we’re using for exploration, and they’re listed on the slide in terms of their order of priority. We already have drilling data on some of the targets particularly Father Brown and we’re looking forward to updating the market on these results throughout 2018. Back to you, Sam.

[Sam Coetzer:]

You’ve got to feel the excitement in Mitch. And it always excites to – when I listen to Mitch’s plans going forward, it’s just such a great story as this starts to evolve in front of your eyes. Thanks, Mitch, well done, good job. It’s nice to have you on the call with us today. As you may know, Mitch is based in Ghana with two other Executive Team members, Daniel and Martin Raffield. And it’s not often that we get Mitch in here to talk to us on these calls, but today I thought that was important. But given that exploration has become now one of our key focuses, it was fantastic to hear the story direct from Mitch. Now let’s move on to the opportunity that we have, once we continue to see the exploration success we expect. Those of you that heard me talk about the slide before knows that this is the slide that I like the most, as it shows that we would be able to substantially increase the production rate of this company without having to incur significant additional CapEx. Maximum opportunity I firmly believe that not many companies have today. I will take you through it in a bit more detail. When we started developing the two underground mines, we decided to build-in more capacity than we originally needed in order to allow us to grow our production profile into the future. At Wassa, our targeted average mining rate for this year is 2,700 tonnes to 3,000 tonnes per day. However, we engineered the decline to handle up to 4,000 tonnes per day and our plants capacity is nearly 8,000 tonnes per day. So as you see, there is no bottleneck for this company for expansion. Our Prestea story is similar. The planned mining rate in 2018 is 630 tonnes per day which is a very low tonnage and the grade is so high. But the shaft has a capacity of 1,500 tonnes per day, and in our plant we proved it can process 4,000 tonnes per day. Once the Prestea Underground has reached this nameplate capacity, we will look more closely at our potential to ramp up further. So now the focus is on our exploration team to unlock the potential of other ore bodies and further demonstrate the largest scale, longer-term opportunity that exists within both underground mines and also on the outbound. Now looking at our 2018 guidance. As I have mentioned earlier, this year we expect to produce 230,000 ounces to 255,000 ounces of gold. We continue to expect production to be weighted towards the second half of the year due to the ramp up of our production of underground mines. Looking at our cost over the past two years, our cash operating costs and our all-in sustaining cost reduced by approximately $200 an ounce. That reflects very clearly our move towards being a high-grade underground producer. Our coverage for the year is expected to be $13 million excluding explorations, which is a significant decrease from 2017’s guidance of just under $17 million. The reason for that is both the underground mines are now in commercial production, so going forward less capital will be required. I believe this guidance offers a compelling investment case, which we expect to be enhanced by the exploration upside of both of our assets. Thank you for listening and we will now take questions, and I will hand it over Krista to take the questions.

[Operator:]

[Operator Instructions]. Your first question comes from the line of Nana Sangmuah with Clarus Securities. Your line is now open.

[Nana Sangmuah:]

Thanks, operator. Congratulations guys for a strong performance at Wassa. A couple of quick questions for me. Prestea showed some very good improvements as you start drawing stope. I just want to get a bit of better understanding of the lessons learned, S1 it was been applied to S2, and how sustainable that is through – going forward in terms of the other stopes as well. And any surprises on the ground conditions as well as you progress developments in additional stopes there?

[Sam Coetzer:]

I really don’t know, also I alluded to Daniel. Yes, you are 100% right. We learned a lot from the first stope similar that what we did at Wassa – when we just started Wassa. And it was mainly to do with the blasting and the layout of the blasting holes, where we have now adjusted in terms of the direction of drilling into the ore body, the way we charge it up, and the way that we break the ore. And since then we’ve seen the stope to react much more favorably to those additions. Daniel, is there any other lessons that you would think that this team has learned?

[Daniel Owiredu:]

No, I think you have commented all. Exclusively, the blasting – some adjustments and productivity enhancements, and we’ve seen it – sustained all through the period that we have seen. So, yes, Nana, we believe it’s sustainable and those lessons are being carried through the rest of the stopes.

[Sam Coetzer:]

And, Nana, there were some other lessons that we learned which was great places, or, let me say, an indicator that we now know that once these stopes are blasted the way that we intend that hardly which is in the bottleneck which was at one stage of concern. And Daniel and the team has proved that on certain days when we may have the mark really running well like we expect, we’ve seen some high tonnages along that. From the ground conditions, with the stope 2 – when we look at the SMS – CMS that we look into the stopes, we do not see any other breaking, we haven’t seen any big boulders in the drop point like we did in the first stope. We firmly believe we rectified the situation at this point and I think it’s sustainable.

[Nana Sangmuah:]

So, is it fair to say blasting efficiencies are maintained and there’s a chance that you could probably be an inched closer to the maximum throughput rates that you’ve experienced so far, which is about 40%?

[André Niekerk:]

Yes, all the indications are – it may now becomes a scheduling of the stopes. So we’ve got stope 3 starting, stope 4 is moving forward as well. So, yes, we are moving it to the direction of getting to that rate of 650 tonnes per day. And we look forward that, how Daniel has been looking out and ensuring stope 2, stope 3, stope 4 and stope 5 is in the right sequence.

[Nana Sangmuah:]

Great. And a quick one for Mitch, if I may. At Wassa, I know that you are doing some more step out. How many more meters are you planning to drill beyond the last hole that sort of double the Inferred Resource profile?

[Mitch Wasel:]

Yes, Nana, good morning. We’re looking at roughly around 8,000 meters for the next step out, so that is another step out 200 meters to the South of 18,900 on 18,700. We expect to have a drill rig out there, probably the first rig will move in there in June, and then followed by the second drill rig which will move over there probably in July, I would anticipate from there. So that program will kick off very quickly. The two rigs that are currently drilling there are busy doing in-fill on the existing resource that we’ve got there, drilling down depth extensions to see where we – if we can extend some of the mineralization in the known areas already. So that is planned and we will be going forward with it in the second half.

[Nana Sangmuah:]

Great. On the PEA, this is going to be commissioned in-house, is that right? Or is this going to be an external consultant that’s going to be working on that?

[Sam Coetzer:]

We tend to use the same group of people that we did – when we did the initial PEA which was the same group we used them at feasibility, which is the individuals that Martin handpicked, and because their ability to have given us the right advice and reading the resource into the reserve correctly, we’re going to stay with the same group of people. So some is in-house, but that’s also external consultant who have a good track record.

[Nana Sangmuah:]

Great. And the last one, if I could. At the West Reef zone, I know you are trying to pull the resource down plunge. Are there any indications of mining whether down below levels that to suggest that a system to be alive for some at least couple of meters below the level that you are right now?

[Mitch Wasel:]

Yes. Well, what we’re focusing on now is we’re still waiting on a crosscut to be put on 262,000 to check the down plunge extensions on West Reef, Nana. But the two drill rigs we’ve got underground currently are drilling on 281,000 and 287,000 crosscut on 24 level, but testing Inferred Resources between 24 and 27 to the South where we currently don’t have stopes, but we have inferred blocks. So we are working on converting that material over to indicated for a inclusion into the reserve next year. So, yes, we’ve got a two folds, resource conversion and resource expansion on the underground of West Reef.

[Nana Sangmuah:]

Great. Thanks, guys. I will pass it on to the next guy.

[Sam Coetzer:]

Thanks, Nana.

[Operator:]

Your next question comes from the line of Justin Chan with Numis Securities. Your line is now open.

[Justin Chan:]

Hi, guys, thanks for taking the call. My first question is just on Prestea. Firstly with the Open Pits being extended into Q3. What are your thoughts on grades and tonnages there? And based on that and the stockpiles, you’re expecting processing of the pit material through the end of the year?

[Sam Coetzer:]

Yes, it’s a good question. I have been answering this question for five quarters in a row. We think we’re not getting to the end. Daniel and Mitch seems to find us additional supply. I must say the bulk of the supply is sitting already on stockpile which we referred to. Our focus would be now blending of underground ores, number one; and then obviously the Open Pits supply to become secondary to the importance of our strategy but as a bonus. So at this stage we see supply of ore, whether it’s from stockpile or Open Pits total into the third quarter. The grades that you ask, I would – the supply were somewhere between 1.5 to 2 gram a tonne, but a lot of that is already sitting on a stockpile, already broken and delivered to the ramp pad.

[Justin Chan:]

Okay. Okay, thanks, that’s helpful. And then just on the Prestea Underground, in terms of your development rates, are you comfortable there? And are you now into the five stope sequence i.e., the six stope is being developed or? Now I know you’re comfortable, I guess with the development rates that you have there that you can maintain the sequence going? And then just on the severance expenses at Prestea and Wassa. I recalled Prestea at the beginning of the year is about $8.6 million and I’ve seen in today’s release it was $4.4 million. So I’m just wondering has that number moved or what’s the thinking there. And on Wassa how much is remaining of the $10 million that has originally guided?

[Sam Coetzer:]

All right. I will add the first question to Daniel, in terms of the confidence of development to keep your stopes open.

[Daniel Owiredu:]

Yes. The development, we are well ahead with our long-term development, and we’re on to that seventh stope now which is being blasted. So in terms of our long-term development, we are still well ahead of the stope development which allows us the flexibility to continue the stope development with well that truly it’s in seventh stope.

[Sam Coetzer:]

Yes. I think I want to add to what Daniel said. Development has never really been the challenge for us, we’ve done that well. As I said that was in the blasting of the first stope, and that impacted the productivity. We’re moving the stopes well in front of us, so that’s scheduling development has been really going to stand out, if I can say the least. I will handover to André to talk about the severance at both sides. André?

[André Niekerk:]

Yes. On severance, as you can remember, our guidance was $18.6 million for severance for 2018. And if you look at the spending, in Q4 we accrued for $9.2 million, and then in Q1 we paid $3.4 million, so a total of $12.6 million was paid out of the $18.6 million. So there’s another $6 million to go. The majority of that was spent was at Wassa, at Prestea. The big milestone for the additional severance should be when we complete the end mining of the Open Pits. So we expect the remaining $6 million to be spend over the course of year. And with a little bit still at Wassa as we clean up over there and the remaining piece will be at Prestea.

[Justin Chan:]

Okay, thanks, that’s quite helpful. And just my last one, just on G&A. I realized G&A definitely does move around quarter-to-quarter, but I think this quarter was especially low on that $1.1 million. I was just wondering if there are any factors behind that. And what you’re thinking there on how that compares to what you expect for the rest of the year?

[Sam Coetzer:]

And how we look at G&A corporately as we work in about $3 million of cash G&A expense for a quarter, maybe it’s between $12 million to $14 million per year. The fluctuation that you’re seeing in the G&A experience is related to the valuation of share-based comp and that depends on the movement in our share price. And since we have that large negative move in Q1, we saw some reduction and almost gains to share-based comp this quarter. So I think from a revolving purposes, we go with up to $14 million of G&A expense per annum, and that should be the cash expense at least.

[Justin Chan:]

Okay. Thanks, that’s very helpful. I’ll let the next person get their questions in.

[Sam Coetzer:]

Thanks, Justin.

[Operator:]

And your next question comes from the line Heiko Ihle with H.C. Wainwright. Your line is now open.

[Heiko Ihle:]

Hey, guys, good quarter. Thanks for taking my question.

[Sam Coetzer:]

Okay, Heiko, welcome to the call.

[Heiko Ihle:]

Are you putting any decrease in total CapEx in the quarter? I mean, we’re going slight focus on Wassa with a little more spent there, but you still got total guidance of $36 million for the year. Can you just sort of guide us towards your cost for Q2 and break it down a little bit between the sustaining and development CapEx for the quarter, please?

[Sam Coetzer:]

The bulk of the spending capital will be development. As you can imagine, most of our capital all – other is related to developing the decline down at Wassa. So, we are getting very good results and the idea is that to push that fast and ahead as we want to target to get to a higher production rate, so the return on that will be really well. So, in the first quarter we had typical rates that we are and we are expecting to continue those rates that will be expected for an ongoing?

[André Niekerk:]

Yes. As far as sustaining capital goes, which Sam mentioned them, bulk of it is Wassa Underground development, and we are running at $3 million to $3.5 million a quarter over there. I mean, there is some other small items that we had purchased and replacement of smaller equipments, but that’s the bulk of it. At Prestea you see the spending capital is going to be around $3 million for the year. I mean, you convert that basically spread out over the quarters.

[Heiko Ihle:]

Okay, clear. You guys total…

[Sam Coetzer:]

There is no big other introductions, so it’s development growth.

[Heiko Ihle:]

Fair. So your total expected severance experience is $18.6 million. I mean, you got the – you got $4.4 million for Prestea Open Pits. Is there been any changes, I mean, given the expansion in Open Pits mining? Has there been any changes in the number of people that you think you’re going to let go in the timing of the severance expense by the Board?

[Sam Coetzer:]

I don’t expect that to change, we’re very diligent when we come to people’s lives and looking at, giving them information whether they’re going to extend their life. And we do these negotiations very in-depth with the Union in terms of who will be staying and who will be let gone, for what business reasons. So, Daniel, I don’t think there’s going to be a change unless you see something. The only thing that can change is maybe moving out the cycle maybe by a quarter or longer, but the number I think it’s fairly fixed at this stage.

[Heiko Ihle:]

Okay, thank you so much.

[Sam Coetzer:]

Thanks, Daniel.

[Operator:]

[Operator Instructions] We have no further questions in the queue at this time. I will the turn call back over to Mr. Coetzer for closing remarks.

[Sam Coetzer:]

Yes. Again, I want to thank everybody for listening today. And just to remind you that we have our AGM later today and I’m looking forward to seeing those who will be attending at our AGM. Thanks, everyone. Bye.

[Operator:]

And this concludes today’s conference call. You may now disconnect.