Centerra Gold Inc. (CGAU) Q4 2016 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by and welcome to the Centerra Gold 2016 Fourth Quarter and Year End Results Conference Call and Webcast. [Operator Instructions] As a reminder, this call is being recorded Friday, February, 24, 2017. I would now like to turn the conference over to John Pearson, Vice President, Investor Relations. Please go ahead, sir.

Thank you, Carlos. I would like to welcome everyone to Centerra Gold’s fourth quarter and 2016 year end conference call. Today’s conference call is open to all members of the investment community and the media. First, in listen-only mode and then we’ll move to a Q&A session afterwards. There are slides available on Centerra’s website, which the speakers will refer to while they are giving their remarks. After the formal remarks, the operator will give the instructions for asking a question and we will open the phone to those questions. Please note that all figures are in U.S. dollars unless otherwise noted. Today, joining me on the call is Scott Perry, Chief Executive Officer; Frank Herbert, President; Gordon Reid, Chief Operating Officer; and Darren Millman, our Chief Financial Officer. Also, I would like to caution everyone that certain statements made today on this call maybe forward-looking statements and are subject to known and unknown risks and uncertainties, which may cause actual results to differ from those expressed or implied. Also certain of these measures that we will discuss today are non-GAAP measures and I refer you to our description of those non-GAAP measures in both the news release and the MD&A. For a more detailed discussion of the material assumptions, risks and uncertainties please refer to our news release that was issued last night along with the MD&A and the audited financial statements and notes and to our other filings, which can all be found on SEDAR and the company’s website. And now, I will turn the call over to Scott.

Okay. Thank you, John and good morning, ladies and gentlemen and thanks for joining our call. As John mentioned, we have a webcast presentation on our website, I am just going to be referencing that in terms of making some of my opening remarks, and I would like to just starting off on Slide #5. So just, Slide 5 here really just recaps some of the key highlights from the fourth quarter as well as the full year 2016. I think I really would like to start off the call referencing safety as we mentioned in previous calls, it’s been a real a sort of doubling down on our safety leadership programs throughout the company, one of the Centerra branded safety leadership programs that we are rolling out everywhere at all of our assets and business units is our Work Safe, Home Safe program. This is well underway. We have started this program at Kumtor and we are getting – it’s resonating very well with the workforce and just positioning us that much better for zero harm in terms of our operations moving forward. In terms of some of the key operating results, in terms of gold output, on a company-wide basis, we produced just under 599,000 ounces of gold for the full year. The key contributor here was obviously, Kumtor, which produced just under 551,000 ounces. Kumtor had a very strong quarter as well as full year performing very well relative to guidance. The consolidated number does include the stub period, if you will, in terms of gold output from Mount Milligan from when we closed the transaction in October, up till the end of the calendar year. In terms of our operating cost profile, I think this is where Kumtor in the company really excelled. Our final results of the calendar year was $682 per ounce on a company-wide basis and Kumtor itself finished the year at $640 per ounce is really good execution by operations team. This result most notably favorably outperformed even our revised guidance. In terms of how all of this flows into the financial statements, we had a strong year in terms of profitability, a full year net earnings result of $151.5 million or a corresponding $0.60 per share. In terms of the fourth quarter results, the net earnings result was $63.6 million or corresponding $0.23 per share. In terms of cash flow, very strong result, cash flow from operations on a companywide basis was approximately $371 million or $1.48 per share. Kumtor itself, at the actual operating asset level on a free cash flow basis, this year Kumtor generated $237 million of free cash flow, so another strong year of profitable production, recalling that in 2015, generating a $158 million. So, it’s voluntarily exceeded that again this year, obviously, driven by a slightly higher gold price environment as well as stronger gold output. Mount Milligan, during the stub period in terms of Centerra ownership, generated free cash flow of $8 million. In terms of the balance sheet, we finished the year with $409 million worth of cash and I will touch on this in my next slide. And then obviously, one of the key milestones during the year was the closing of the Thompson Creek Metals acquisition. With the acquisition of Thompson Creek, this is well underway in terms of our integration and what have you. And we put forward to the very transformative transaction for the company, especially in terms of more favorably re-domiciled geopolitical risk profile. On a consensus basis now, roughly half of Centerra’s value is now domiciled in North America, so again, a very transformative acquisition. This also very favorably increased our gold reserve inventory count and Gord will touch on this. We also last night released our reserves and resources for the full year, and you will note that our company-wide reserves have increased by some 90%, which is primarily due to the addition of Mount Milligan as well as the resources at our Greenstone joint venture project being upgraded into reserve category following the release of our feasibility study in November. Just moving on to the next slide, on Slide 6, just a few charts here, just sort of graphically illustrating some of the key financial aspects from our year end results. You can see the chart here in the top left of Slide 6 is just a waterfall chart, where we have looked to, I guess, pictorially breakdown our cash flow statement. So, just looking at the key increments and decrements starting from the left, you can see we commenced the year with $542 million in cash. Kumtor again, very strong year, in terms of cash flow generation, providing $237 million in cash. Mount Milligan, during the stub period of our ownership provided $8 million of free cash flow. And then the other – the remaining cash flow increment there is the drawdown on our EBRD credit facility, which provided $74 million in cash flow. In terms of how that cash flow is appropriated, if you will, obviously, the key investment during the year was the Thompson Creek acquisition. This is being illustrated here as $318 million investment, because if you reference the footnote, we are netting this off with the credit facility and the equity financings that we put in place to facilitate this acquisition. I mean, you can see the other key sources of cash utilization be at other projects, G&A and dividends resulting in us finishing the year with $409 million in cash. The pie chart there on the top right further just reinforces that same just in terms of the net debt position for the company. So again, balance sheet finishing the year with $409 million in cash and corresponding debt balance of around $475 million, so net debt of approximately $66 million. The share count in the bottom left, it’s always been relatively stable throughout the year. It’s again just reinforcing the same that Centerra when you look at our assets, our balance sheet everything has been funded from profitable production, obviously with the acquisition of Thompson Creek. We did issue shares to facilitate this transaction, which has resulted in our share count growing to 291.3 million shares outstanding. What I would note is it was a $1.1 billion transaction. And approximately 25% of that of those proceeds was funded with Centerra equity shares. Approximately, the remaining 75% being funded with cash be it from our balance sheet or the credit facilities. Retained earnings in the bottom right, again is the strong track record of profitability, continued with the 2016 results. We grew our retained earnings balance to approximately US$856 million. Just moving to the next slide, on Slide 7, just want to touch on some of the operational results relative to guidance, and again, just reinforcing our internal branded theme of operational excellence and Gord will touch on this in more detail. You can see the chart here on the left it was a very strong year. In terms of execution, the first column on the left adds in terms of our gold output guidance. And this is the midpoint of our gold production guidance. It was 515,000 ounces as we made our way through the year. We quickly revise that guidance given the favorable production performances that we were seeing at Kumtor. So we revised that favorably to 540,000 on the midpoint. And then you can see the column illustrated is actual, is where we have actually finished the year. So again, very strong execution from our operations team. But I think the more stronger theme is the next chart to the right, which is our corresponding operating cost profile in terms of the all-in sustaining costs per ounce metric. So again, the original guidance in the gold column was $860 per ounce. On the midpoint again, we favorably revise that for approximately during the mid-year to a new midpoint target of $692 per ounce. And then here of our actual results, we have favorably outperformed that guidance coming in at $640 per ounce. Really what this speaks to is, Kumtor is firing on all cylinders, if you will, be it in terms of productivity, its unit cost efficiencies, we have got a number of business process improvement initiatives have been rolling out. We have also had some favorable macro tailwinds, if you will, in terms of diesel fuel price environment, exchange rate environment and this really resonating in terms of Kumtor’s profit generation and cash flow generation. Anyway credit to the operating team and perhaps that’s a good segue to pass it over to Gordon Reid, our Chief Operating Officer.

Thanks Scott. Good morning everyone. I will turn your attention to Slide #9. I will talk about safety performance. There were four reportable injuries in the quarter; two at Kumtor, one at Thompson Creek Mine and one at the Greenstone Mine for a total of 13 reportable injuries year-to-date. The total reportable injury frequency rate was 0.38 for the quarter and 0.37 for the year-to-date. That compares very well with our peers. These totals include the incidence in man hours from Thompson Creek Metals as at the time of the closing of acquisition on October 20. As Scott stated, Work Safe, Home Safe, which is our company’s safety leadership program continues to be rolled out across the organization, starting at the Kumtor mine. Moving to operating results, for the quarter on a consolidated basis, we produced over 248,000 ounces of gold at an all-in sustaining cost of $586 per ounce. Copper is treated as a byproduct and the revenue from the 10.4 million pounds produced at Mount Milligan in the quarter is included as an offset the all-in sustaining cost. Kumtor produced 200,762 ounces at an all-in sustaining cost of $538 per ounce and as from the time of acquisition, Mount Milligan produced 47,717 ounces at an all-in sustaining cost of $509 per ounce. For the year on a consolidated basis, we produced over 598,000 ounces of gold at an all-in sustaining cost of $682 per ounce. Kumtor produced 550,960 ounces at an all-in sustaining cost of 640 per ounce and as from the time of acquisition, Mount Milligan produced the 47,717 ounces at an all-in sustaining cost of $509 million per ounce. In the quarter, Kumtor received all the necessary permits and approvals to continue to operate in 2017. In terms of production guidance, guidance for 2017 is 715,000 to 795,000 ounces of gold produced at an all-in sustaining cost of $743 to $824 per ounce on a byproduct basis. Kumtor will produce 455,000 to 505,000 ounces of gold, and Mount Milligan will produce 260,000 to 280,000 ounces of gold. Copper production will be 55 million to 65 million pounds of copper all from Mount Milligan. Unit mining cost at Kumtor in 2016 was $1.27 per ton mined. Mining costs were favorably impacted primarily by the price of diesel fuel, which averaged $0.38 per liter in the year, offset by the long average holdage cost of nearly 9 kilometers. Fuel cost comprises 18% of the total cost at Kumtor. Milling costs at Kumtor were $9.87 per ton for the year. At Mount Milligan, average unit mining cost for the fourth quarter was $2.59 per ton and unit milling cost was $5.93 per ton. Moving now to Slide 10, in 2017, our primary focus of Mount Milligan, improving mill throughputs and metal recoveries by continuing to optimize the combination circuit including integrating the secondary crusher. To complete development of the geo-metallurgical model to further develop and enhance maintenance capabilities and to complete an evaluation on the benefits of increasing flotation capacity and implement if warranted, we will also complete an evaluation to improve gold recovery with the use of cyanide or an alternative methodology. At Kumtor, in 2017, the majority of the gold production will come from existing surface ore stockpiles supplemented by from the satellite Sarytor deposit, which will be available in the second half of the year. Surface stockpiles at year end included $8.2 million tons of ore grade material greater than 1.1 gram per ton of gold and $3.2 million tons of sub-grade material, grading between 0.9 and 1.1 gram per ton. Mining at Kumtor in 2017, will focus on advancing cut-back ‘18, which will release SB zone ore in the second half of 2018. Moving to Slide 11, improvement in probable gold reserves increased to 16 million ounces at year end net of depletion at Kumtor with the addition of $2.3 million ounces resulting from the completion of the Greenstone feasibility study and the addition of 5.8 million ounces with the acquisition of Mount Milligan. We will also add a 2 billion pounds of proven and probable copper reserves as a result of the Mount Milligan acquisition. Our development projects at Öksüt. There was no progress on receipt of the pastureland land use permit in 2016. Once this final permit is received, mobilization of the site can begin. At Gatsuurt there was no progress on negotiating an investment or other agreement with the Mongolian government. At our 50% owned Greenstone project, the feasibility study was completed adding 2.3 million ounces to our proven and probable reserve. The partners have agreed that the best path forward for the project was to first proceed with obtaining the EA/EIS approvals obtaining the required permits and negotiating the IPA agreements before committing the construction decision. I will now turn the meeting over to Darren.

Thanks Gord. Good morning everyone. I will be first discussing Slide 13 for those following in the presentation. Revenue for the 2016 year was $760 million with $305 million recognized in the fourth quarter. This is an overall 22% increase in revenue compared to the prior year. The underlying increase resulted the additional 43,000 ounces sold during the year with an average realized price up 6% to $1,233 per ounce. Due to timing only one copper shipment sale from the Mount Milligan mine was recorded from the [indiscernible] acquisition, this shipment containing 10.4 million copper pounds. $63 million or $0.23 per share was earned during the final quarter with total earnings for the year of $0.60 per share or $151 million net earnings. We generated a $170 million of operating cash flow in the fourth quarter and $371 million for the full year. The final quarter results and an on an annual basis continues to demonstrate the Kumtor’s mine’s ability to generate significant cash flow. The Mount Milligan mine on a go-forward basis now provides Centerra with two sources of additional cash flow. I won’t be providing additional comments on our 2016 cost performance given Gord’s comments. However, I would note the favorable market conditions experienced in 2016 to-date are continuing in 2016 – in 2017. Diesel cost of $0.38 per share, we experienced in 2016 and we have continued to see these favorable terms into 2017. The local Kyrgyz currency the som also currently trading at US$1 to 69 Kyrgyz som, a level more favorable in guidance levels for 2017, if you refer to Slide 20 of this presentation for further sensitivity analysis. I will now turn to Slide 14. Other financial highlights to note during the quarter was our long-term strategic partner EBRD who had significant presence in Kyrgyzstan, Mongolia and Turkey have now joined $150 million Öksüt project finance facility. During the quarter we also came through agreement with lenders to extend the offer terms of this facility to June 30, 2017. We closed the Thompson Creek acquisition on October 20, 2016 with a smooth transition and integration task successfully been completed as we set our targets. Our focus now moved to realization synergies to maximize both value from operational and G&A standpoint. We closed the new $325 million revolver and term facility with a strong diversified lending group with both North American and Europe banks that the facility previously, which is underwritten by one North American bank. And finally, we implemented a balanced corporate hedging program with the objectives to set levels of minimum cash flow generation from the copper production, while still providing exposure to copper price moments. I now turn back to Scott to wrap up.

Okay, thank you. Thank you, Darren. I just have one final slide just to wrap up and then we will move into Q&A. Speaking on Slide 16 of the same presentation deck, again, really just summarizing some of the real key highlights and milestones from the year, I think there is really three that I referenced obviously, the big milestone for the year was closing the transaction with Thompson Creek, which is really the first and second bullet points is definitely transform the company in terms of our geopolitical risk profile and you really see this in the pie chart illustrated here in the top right. This pie chart is just showing the distribution of the company’s net asset value just based on consensus, sell-side research, and as you can see when you look at the North American piece being Canada, just under half of our value is now domiciled here in North America, whereas Kyrgyzaltyn, in terms of Kumtor is being reduced to 33%. So, we think that’s going to be very advantageous just in terms of our valuation multiples moving forward just given the more favorable geopolitical risk setting in terms of where our value is domiciled. The other key theme, I would reference the third bullet point here just in terms of our production guidance for this year 2017. As you can see here, we are guiding for up to 795,000 ounces of gold at very competitive all-in sustaining cost profile. Obviously, we also enjoy the significant stream of copper from Mount Milligan and just given where we stand in the current metal price environment, we think it’s going to position us very well for strong profitability and strong free cash flow generation from these two low-cost high-quality operations. Just lastly, the other theme, I would highlight really is the chart in the bottom right hand corner, which by and large is our strategic plan moving forward. And really what you see here is our current asset base illustrated by the blue increments. Obviously, this is our current producing operations, Kumtor and Mount Milligan, as I mentioned, both assets very low cost production, very high-quality production – very low cost production, but also high-quality just given the asset life of the cost profile, the scale of production. And as we move forward and execute on our business plan this year, we will be increasingly looking to bring forward the development of Öksüt, Gatsuurt and Greenstone, with Öksüt most likely to be our next source of additional products which will be very important and advantageous in terms of improving the diversity within our portfolio. With that, that really concludes my remarks and Carlos, if I can pass the call over to you, just to open it up to Q&A please. Carlos, operator, are you there?

Yes, sir. [Operator Instructions] And our first question comes from the line of David Haughton with CIBC. Please go ahead.

Good morning, Scott and team. Thank you for the update. Just following on from the restriction you have got of access to Kumtor cash. Of the $160 million you have got as cash on the balance sheet, excluding the $248 million restricted. Of that $160 million, how much can be accessed for activities outside of Kumtor?

Yes. So, basically the $160 million less the $50 million for Mongolia, of which $25 million we repaid in Q1 in February and less the $56 million that’s currently in Canada, in the TCM or the Centerra B.C. Holdings facility. I would highlight though that the cash flow generation from the Mount Milligan mine can be moved up to the corporate level, with dividend distributions, but that same amount will need to be also paid down in the debt. So, hopefully it answers your question, David.

Okay. So, if I got the additions right, this is just at year end recognizing some adjustments have happened since, it looks like about $54 million is accessible?

At a point in time, yes.

As of December 31. So, given your comments that you would be either looking to raise additional finance or perhaps defer some expenditures. Do you have the capacity to take on more debt or is that restriction of cash flow out of Kumtor restricting the servicability of any additional date?

David, sorry, it’s Darren Millman, again just answering that question. We have got options available to us at this point in time. So, we are comfortable where we liquidity situation, so we do have other options available to us. At this stage, we are not pursuing those from a debt perspective.

Okay. And I would expect that Scott is undertaking and others in the team have lot of negotiations with the Kyrgyz, what is it that they are after from you? Is there any particular sticking point that is difficult to negotiate, you don’t quite seeing eye-to-eye on or can you just give us a little bit of an idea what the problem is?

Yes. Hi, David. This is Scott. I will try and answer that question in less than 1 minute, but there is a lot of disclosure in the press release just result kind of articulating what the various disputes I would regard to. But I think from – obviously from the Kyrgyz perspective, you can just read through the disputes that they have bought to the table. From our perspective, obviously, in terms of negotiations, we are looking for an all-encompassing – I want to use the word settlement or resolving all of this in an all-encompassing matter. So that moving forward, we have a clean page or a clean runway moving forward. We are very actively engaged in negotiations as we speak. And I think both parties are engaging in a matter where we want this resolved sooner rather than later.

And all of this is ahead of the international arbitration, so you are looking for a negotiated settlement between yourself and the Kyrgyz. But as last resort, I guess you have got the international arbitration, which is not necessarily binding upon the Kyrgyz?

I think speaking on behalf of management, the Board of Directors, we also have a fiduciary obligation to make sure we are protecting the best interest of our shareholders. And what I mean by that is in terms of these active negotiations that are underway, we cannot commit that it will result in a successful negotiation at the end of the day. So, we need to make sure that rest assuring other measures again just making sure we are protecting the best interest of our shareholders given our 2009 investment agreement.

Alright. I understand. That is quite sensitive. So, thanks for that, Scott.

Our next question comes from the line of Trevor Turnbull with Scotiabank. Please go ahead.

Yes, I had a question on the secondary crushing that you guys have been getting commissioned and installed during last – the end of last year. I just wondered it sounds like you are still getting that optimized and if you could give us a bit of color on how long it will take before it’s delivering the full capacity that you are looking for on the secondary crushing?

Trevor, it’s Gordon Reid. All I call tell you is yes, the secondary crushers are mechanically available. We are looking at the whole comminution stream. So we are all the way from fragmentation at the mine through the secondary crusher to the SAG mill to the [indiscernible] rate to the concentrate production to try to optimize that full stream to maximize the throughput. It’s an iterative process and that’s ongoing. And I fully expect to see productivity gains over the next period, but really that’s all I can say at this time.

And will see a bit more color on that when the technical report comes out kind of in terms of how you expect that to fully ramp up into this year and future years?

Yes. You will see, based on the technical report, how we expect to see a ramp-up in production through the live of mine.

Okay. And then I had a quick question, speaking of studies, the Gatsuurt study, it looks like you are updating some numbers towards the end of Q2, is that a study you expect to put out as a press release and disclose that?

Yes. We anticipate a new technical report will be delivered as a result of these studies in the third quarter.

Okay, great. And then just going back with respect to capital allocation, you did make a comment in the MD&A that some projects will have to be looked out in terms of what capital is available, I assume considering Öksüt is largely financeable through the debt package that that wouldn’t be included, if everything goes forward, in terms of permitting with Öksüt that the capital is available for that and that’s not a decision that would be revisited kind of regardless of where the cash from Kumtor is at?

Yes. Hi Trevor, it’s Scott. It’s really going to depend on obviously the prevailing economic environment in terms of making that assessment. So you don’t have to evaluate what’s the current sort of gold price environment, exchange rate environment as well as business environment in Turkey before we can make the decision. So I would say that that’s really the answer to your question.

But just as...

Sorry, Trevor. I really should add, if you look at our guidance as well for the full year, in terms of the production level and the cost per ounce we are expecting significant cash flow generation from Mount Milligan. So all of these things will factor into making that evaluation decision on Öksüt as and when we should be in a position when we got that final permit so that we can make a potential proceed decision.

Okay. And can you just remind us what the CapEx is relative to the kind of the project that you have available, it seems like project debt covers of largely on the entire initial capital, doesn’t it?

The feasibility study had construction capital of $221 million and inclusive in that number was approximately $30 million of contingency. And that feasibility study is more than 12 months old. So it was based on the previous local currency exchange rate environment. And as you would have seen of the other companies operating in Turkey and some of the recent feasibility studies that have come out, the local Turkish lira exchange rate has devalued significantly. So there could be some favorable deflationary aspects or pressures in terms of that integrated capital budget.

And is it safe to assume that the amount of exposure to the Turkish currency on CapEx is similar to what others are reporting and that’s on the order of say 60%?

It shouldn’t be, yes, it should not be dissimilar. Unfortunately, Trevor I don’t have the exact number in front of me right now, in terms of what our split is, in terms of how the expenditures are denominated in different currencies.

Okay. Then just one last kind of housekeeping question on Kumtor, I know stripping ratios are going to move around a bit during the year. But the full mining rate in terms of material, you are looking to move, are we still looking at something on the order of 400,000 tons. I think that’s what you did in 2016?

Well, actually, we should see an improvement on that, because our distances are shorter this year. But we have the same number of equipment operating at the same rate, it’s just is shorter, so we will see more material movements here than in 2016.

And that’s because you are opening the Sarytor pit that holdage has changed a bit.

Well, actually it’s primarily because we move back to top of the mine on cut-back 18, and there are shorter hauls to the top of the IC and the top of the central valuations. We were mined for deeper in the pit last year and we had longer hauls to the base of licensee. So it’s just a function of the mine plan. So we have the same number of equipments. The trucks and the shovels are the same. They will operate at full capacity, but we anticipate more tonnage than 2016 because of the shorter hauls.

Okay. I appreciate that. Thanks.

Our next question comes from the line of Robert Reynolds with Credit Suisse. Please go ahead.

Good morning guys. Just a couple of questions for me, on the acquisition facility, it was mentioned that the covenants were revised to reflect the 2017 production profile at Mount Milligan, could you just touch on what the covenants are and perhaps what the amendments were?

The only one-off note is the leverage ratio. So given, when we just start off with the facility, the first quarter becomes a multiple, so Q1 earnings results as you talk before Q1, Q2, x2, to get your annualized earnings. So that was the only one in which we needed to amend. So it’s EBITDA x3 for leverage ratio. So given the profile as we mentioned in earlier guidance it was back end loaded. So to speak, so you needed to make an adjustment for that. Those are the adjustments we need to make, others are just generalized capitalization and things of that nature that we didn’t have to amend. The full document is actually on the SEDAR website, so.

Great. And then just on the gold derivative contracts that you are using to I guess mitigate the gold price risk on your concentrate sales at Mount Milligan, how should we think about the realized pricing versus say, the quarterly average LME price for gold at Mount Milligan going forward?

So I just want to be clear. So those derivatives we only put in place to mitigate price movements from the price [ph] we have realize from selling – or from sales received from smelters and then the delivery of gold to Royal Gold. So that’s the only gold derivatives we have got in place. If you are referring to the other is the copper, that was put in place in January and in February and that’s pretty simple with the swaps that averaging at 2.69, approximately 55% of the copper production on stream and 10% on zero cost covers between 2.25 and 3.21 for the year. So does that answer your question, because the [indiscernible] is just simply to price protect us from what we have to deliver to Royal Gold.

So just to be clear, there you would still have then the provisional pricing adjustment on your sales to smelters on the concentrate?

Yes.

You are not hedging that portion?

Not hedging that component, correct.

Okay.

[Operator Instructions] We do have a question from the line of Greg Barnes from TD Securities. Please go ahead.

I think I actually got a couple of questions, the first one around Mount Milligan, maybe jumping ahead of the technical sales, but what is the planned or targeted daily throughput rate, now that you have the secondary pressures in place and you are optimizing it?

Yes. We budgeted the throughput rate of 60,200 tons a day in 2017. That’s an average throughput rate throughout the year, accounting for plant availability.

And what do you hope to get that to when you have optimized…?

Well, we targeted – we are targeting 62,500, once we – like you say optimize the combination stream.

Okay, great. Thank you. Second question, Scott I just want to understand negotiations with the Kyrgyz government, I think they are no longer pursuing an idea where they swap their equity stake in Centerra for a direct state in Kumtor that’s no longer on the table, am I correct?

Yes. Correct.

So what is it and I guess coming back to David Haughton’s question, is it just more even split of the economics or something what are they pursuing?

Again, I apologize, but I would just refer you back to the press release. The number of matters there that have resulted in various disputes of various levels, if you will and so in terms of the negotiations, which are very active, we are looking to resolve each of these matters in a manner that’s acceptable to both parties and in a manner that is all-encompassing such that we have a clean pathway moving forward. Very active at the moment, which is why – it’s a sensitive subject. I just think it would be inappropriate to go on anymore detail than that.

So basically it sounds like you want to resolve all these outstanding issues, but the ownership structure as it stands now is not in discussion at the moment?

No. That’s correct.

Okay, thank you.

And we have no further questions on the phone line.

With that then, we thank everyone for participating in the call. If you have further questions, management is available. Just let us know. Thank you.