IAMGOLD Corporation (IAG) Q3 2015 Earnings Report, Transcript and Summary

Welcome to the IAMGOLD 2015 Third Quarter Operating and Financial Results Conference Call and Webcast. As a reminder, all participants are in listen only mode. And the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] At this time, I would like to turn the conference over to Bob Tait, Vice President, and Investor Relations for IAMGOLD. Please go ahead, Mr. Tait.

Thank you. Welcome to the IAMGOLD conference call. Our remarks on this call will include forward-looking statements. Please refer to the cautionary language regarding forward-looking information in our disclosure documents and be advised that the same cautionary language applies to our remarks during the call. During our opening remarks, we will refer to slides which can be viewed on our website iamgold.com. Joining me on the call today are Steve Letwin, President and CEO; Gord Stothart, Executive VP and COO; Carol Banducci, Executive VP and CFO; Craig MacDougall, Senior VP, Exploration and Jeff Snow, General Counsel and Senior VP, Business Development. I will now turn the call over to President and CEO, Steve Letwin.

Thanks Bob. Well, as we all know we continue to operate in tough times and because of that there has been no break from our drive to further reduce cost. And there is no decision we make that doesn't consider the impact on our balance sheet. Our total cash cost per ounce for the quarter were $791 and all-in sustaining $1,027. So we continue to improve from the previous year and from the second quarter. That's against performance in particular with outstanding all-in sustaining cost were $922 an ounce, $227 an ounce lower than the previous year. So our continuous improvement efforts continue at other sites where the emphasis on streamlining and reducing overhead cost. Rosebel is an excellent example of this having recently begun the process to reduce the number of employees by 10%. This will better aligned our labor cost with production levels. The actual progress that we have made to further reduce our all-in sustaining cost has allowed us to lower our cost guidance for 2015. Total cash cost for the year are now expected to range between $825 and $865 an ounce and all-in sustaining cost between $1,050 and $1,150 an ounce. Turning to production. Essakane achieved record production in the third quarter with a 29% growth year-over-year. The additional ore from the Falagountou satellite deposit was a significant contributor, a great example of the upside potential of our existing assets. At the consolidated level, we produced 197,000 ounces in the quarter bringing year-to-date production at 607,000 ounces. We maintained our production guidance for the year at 780,000 to 815,000 ounces. Great work continues on the exploration side, several projects at the resource delineation stage or moving forward including an initial resource estimate expected for Diakha by the end of the year. A resource update will be completed for Boto by yearend and we recently amended our earning option agreement with TomaGold enabling us to acquire immediate 50% in the Monster Lake project in Quebec. Our balance sheet remains very strong with $683 million in cash and volume and we continue to maintain good access to capital. Just to note as team continues to evaluate investment opportunities that would offer attractive returns with the potential for enhancing near-term cash flow. While Carol will provide some clarity on the deployment of cash from the sale of assets, I want to emphasize that we do not expect to be required to purchase any of our bonds at par next year. As we head to the final quarter of the year, we will continue to focus on cost reduction and capital preservation. At Westwood on Slide 5, the focus over the past several months has been on rehabilitation and underground development. A thorough review has completed enabling the development of revised mine plan; the team has outstanding work on that and Gord will tell you more about it. Obviously, I am very excited about what lies ahead not just for Westwood but for all of our mines. This will become more evident in the coming months with the completion of our mine plans by the end of the year. In January 2016, we plan to communicate positive news about the four past or Westwood and early in the New Year we will provide an update on our mine plan for Rosebel and Essakane. Together they will bring greater clarity around our future. And I am extremely excited about the way this looks. With that I'll now call on Carol to talk about our financial results.

Thanks, Steve. And good morning, everyone. As Steve mentioned we continue to manage our business prudently in a volatile gold price environment. Our balance sheet remains strong with a net cash position. We are looking to refinance our credit facility but given the cash amount that we have on our balance sheet as well as if you not to pay fees for capacity that we don't intend to use will be looking for a smaller amount. We've done well to further reduce cost and we'll continue on that track. In the third quarter 2015 we reported a net loss from continuing operations of $85 million. Note that two significant adjusting items the $20 million unrealized derivative loss related to field contract and the $15 million adjustment to normalize Westwood cost given the interruption in production. Together these two items had a per share impact of $0.09. After normalizing earnings for all one time items, the adjusted net loss was $0.12 per share for the third quarter 2015. This compared to an adjusted net loss of $0.03 per share in the third quarter of 2014. Year-over-year variance and adjusted net earnings was a result of lower operating earnings. While cost of sales was down 13%, revenues decline by 28%. Revenues from continuing operations in the third quarter 2015 were $208 million, down from $287 million the year before. And this is mainly due to the lower gold sales and 12% decrease in the gold price. Gold sales were lower by 40,000 ounces due to lower production at Westwood and Rosebel as well as the closure Mouska in the third quarter 2014. Commercial production at Westwood began in the third quarter 2014, the production interruption in the second quarter of 2015 limited production and sales in the third quarter to 2,000 ounces. Rosebel sales were lower due to a decrease in production resulting from lower grade and throughput, partially offsetting the lower sales from Westwood and Rosebel was a 15% increase in sales at Essakane. This reflects the 29% increase in production partially offset by a temporary delay and end of quarter of shipment. Sales from that shipment were recorded in the fourth quarter. Cost of sales decline to 13% year-over-year, this reflects Rosebel and Essakane's success in lowering mining and milling cost including energy cost and consumables. Depreciation expense increased $4.5 million from the previous year; this is mainly due to higher production at Essakane partially offset by lower depreciation at the other sites. Based on where depreciation is tracking year-to-date, we've lowered depreciation guidance for 2015 to $270 million to $275 million. Net cast from operating activity after removing the impact of changes in working capital was $35 million, or $0.09 a share. The year-over-year variance was the result of lower earnings from operations including the absence of earnings to Niobec which was $12 million in the previous year. At the end of the third quarter, cash, cash equivalent and gold bullion was $783 million, together with the current $500 million unused credit facility, total liquidity was nearly $1.3 billion. IAMGOLD's long-term debt is not due until 2020. And year-to-date we purchase $50 million of bonds representing the face value leaving a carrying amount of $635 million. Our net debt to EBITDA is zero and that's well in compliance with their loan covenant of 3.5x. I am going to take a moment to talk about the bond covenant governing the use of proceeds from after sales. As set out in the bond indenture, we are required to use the proceeds from asset sales to reinvest or commit to reinvest in our business and/or repay debt obligations. Reinvesting or committing to reinvest must begun within 365 days from the date of sale. The proceed from the sales of Niobec and Diavik royalty can be used in a number of ways such as capital expenditures, acquisitions, then one unwinding of derivative obligations and the retirement of capital leases. If after 365 days, remaining proceeds exceed $50 million, it is only the excess amount that would have to be used to purchase the senior unsecured notes at par and as we mentioned in our disclosure and Steve also mentioned, we do not expect that to be the case. Turning to production and cost for the quarter. Attributable to gold production in the third quarter 2015 was 197,000 ounces, and this reflects record production at Essakane with a 29% increase driven by higher grades, higher throughput and additional softer ore from Falagountou. Production was lower at Rosebel due to lower grades and it has the production interruption and shift to the mine development at Westwood. Compared to the second quarter of this year, overall production fell slightly above Essakane's production rose 20%. Rosebel was virtually flat quarter-over-quarter and Westwood was down as I noted earlier. Turning to cost. All-in sustaining cost of $1,027 per ounce in the third quarter 2015, or $88 per ounce lower than the same quarter 2014. Compared to the second quarter 2015, they were $49 an ounce lower. As with the previous quarter unit cost included real life hedge and non-hedge derivative losses. The impact on all-in sustaining cost in the third quarter of 2015 was $73 an ounce on a hedge. Note as well that as a result of the interruption of production at Westwood, cost attributed to inventory was reduced by $15 million in the third quarter to normalize the six overhead allocated on a per unit basis. The $15 million relates to the full three month of the quarter. As a result, cash cost per ounce in all-in sustaining cost per ounce were reduced accordingly and at the consolidated level this reduce all-in sustaining cost by $80 an ounce sold. While we expect cost to turn higher in the fourth quarter due to increasing hard rock at Rosebel and Essakane, for the full year we lowered our cost guidance at the consolidated level. Gord will now provide an update on operations.

Thanks Carol. Looking at the third quarter for IAMGOLD, this was very productive for us on several fronts. Essakane carried outstanding news with record production and lower cost. Rosebel took steps to reduce its cost structure to better align with production. Westwood completed a comprehensive review enabling us to layout the plan for moving forward. And Sadiola continues to be a cost effective operator. Additionally, we continue to develop and refine our long-term plan that we all operations to incorporate the improvements realized and to ensure that our business is viable even in a sustained low gold price environment. We plan to be in a position to share some of this longer-term picture with the market in the New Year. Beginning at Essakane, we had a record quarter on all key production metrics. Production increased 20% from the second quarter and 29% from a year ago. The record production year-over-year was due to higher throughput and higher grades. Net throughput increased 22% as the proportion of soft rock was 19% compared to 5% the year before. That might seem somewhat contrary to our previous messaging that the percentage of hard rock is increasing. So let me explain. In the first and second quarters of this year, we benefited from satellite stockpile drawdown and fed to the mill. And in the third quarter we benefited from the satellite ore coming from Falagountou encountering additional ore than was initially modeled and at higher grade. We currently estimate that there is sufficient satellite at Falagountou to take us through the end of this year. In addition to the positive situation at Falagountou, we also encountered additional transition ore at higher grades and plant in the new push back are at the north end of Essakane main pit. We expect that early in 2016, the percentage of hard rock mill will move over 90% as the north push back area and the Falagountou satellite pit mine deeper into fresh rock zones. Compared to the same quarter a year ago, cash, cost of $747 per ounce were 13% lower and all-in sustaining cost fell $227 to $922 an ounce. Beyond the higher production of sales, unit costs were driven lower by lower fuel prices, lower mill consumables and improved operating efficiency. Operating expenditures fell 11% and sustaining capital expenditures were down 24%. On going with all planning at Essakane continues to demonstrate a robust profitable operations going forward. I'll add here that the political disruption in Burkina Faso in the third quarter was short lived not only was there no impact on production but it was, as I have just described, the best quarter-to-date for Essakane. Given the record production in the third quarter, we've increased the production guidance for Essakane to 365,000 to 380,000 ounces for 2015 which translates into expected production this year being 10% to 14% higher than last year. Moving to our Suriname operation. Rosebel produced 70,000 attributable ounces of gold in the third quarter of 2015, virtually unchanged from the previous quarter. Production was down from the third quarter of 2014 due to lower grades and throughput. The decline in grade year-over-year was due to pit sequencing which offset the benefits from better dilution control through our RC drilling. Throughput was lower than the previous year due to an extended time mill shutdown in the quarter and the treatment of a higher proportion of hard rock than we saw a year ago. Total cash cost were $866 per ounce in the third quarter of 2015. Although essentially unchanged from the second quarter, they have increased year-over-year due to lower production. All-in sustaining cost of $1,111 per ounce were up almost slightly from the second quarter but up 6% from the third quarter a year ago due to both lower sales and higher sustaining capital. Success at improving operating efficiency, lower power cost, lower fuel cost and a decrease in consumables have helped mitigate the impact of lower grades on production. Rosebel's total operating cost in the third quarter of this year is down 24% from the third quarter of 2014. I mentioned last quarter that much work has been done to redesign the business plan at Rosebel including the recently announced labor cost reductions to better align with the production profile. Rosebel will continue its focus on improving productivity, reducing dilution and optimizing throughput. The operating and planning team has done an exceptional job putting together a viable business plan going forward for the next seven years or so, despite an increasing proportion of hard ore and reduced gold prices and without relying on any additional soft rock being identified through exploration. This provides a platform from which to go forward if and when additional soft rock is identified. Looking at Westwood. In our news release for the quarter we provided an update as to what has transpired at Westwood over the past five months. An exhaustive review is completed to improve our understanding of the seismic event and to determine the path forward. The effort was carried out by a team of internal experts and external consultants. Data was collected in a multitude of areas including seismic history, geologic characterization, stress distribution and mine sequencing. Based on this data, a recovery plan was developed to rehabilitate the affected area and to enhance the design strategy for ground control and for mining of new areas. The pace of production during the quarter was moderate; many employees who previously worked on stooping activities were refocused on development. The site underwent a reorganization discipline to revise mining plan including a reduction in contract employees and similar rationalization of the mill workforce given the low level of production. The review of the study and recommendations by an independent panel of geo technical experts had a positive outcome is now before provincial authorities. We plan to communicate Westwood's revised life and mine plan to the market in January 2016. The interruption in production since the seismic event resulted in distorted unit cost, Carol has already covered the adjustments to cash cost and all-in sustaining cost as a result. We continue to expect Westwood all-in sustaining cost to be within the range of $1,300 to $1,400 an ounce for 2015. With the limited production in the third quarter, Westwood's production guidance for 2015 has been reduced to 55,000 to 65,000 ounces for 2015. At Sadiola, attributable production of 17,000 ounces in the third quarter of 2015 was 19% lower than the previous year. This was the result of lower grades. Sadiola was our lowest cost operation in the third quarter and unit cost continue to fall with cash cost of $661 an ounce and all-in sustaining cost of $695 an ounce. Lower prices for fuel and consumables and favorable foreign exchange rates have offset the impact of lower production. At the end of the second quarter we said that we had initiated a reverse circulation drilling program to test oxide targets at Sadiola. Since then results have been encouraging and we will be evaluated as part of our year end reserves and resources update and incorporated into our revised mining plan. A preliminary assessment indicates the potential to continue mining and milling of oxides at Sadiola into early 2018. We continue to update the feasibility study on sulphur expansion project and with our partner AngloGold Ashanti look at options to extend the life of the mine. That concludes my comments. And I pass the call over to Craig for an update on exploration.

Thank you, Gord. And good morning, everyone. In the face of budget pressures and cost cutting initiatives across the industry, our exploration program continues to deliver positive results for the number of projects advancing as planned. Year-to-date expenditures of $36 million were 27% below what they were in the same nine months last year. For this reason we've lowered our spending outlook for 2015 by $6 million to $50 million and we will continue to look for more savings. As I give you an update on our exploration projects, please keep in mind that the drilling results have been previously disclosed in accordance with securities regulations and have been duly signed off by the qualified persons within the company who reported. I am going to begin with the Monster Lake project in Quebec. On Monday, TomaGold announced an amendment to the earning option agreement that we had with them respecting the Monster Lake project. Our original agreement with TomaGold commenced in November of 2013. That gave us an option to earn 50% interest in the Monster Lake project by completing exploration expenditures totaling C$17.6 million over 5.5 years to 2019. The amendment to the agreement gives us the option to earn an immediate 50% undivided interest in the project or one time cash payment of C$3.2 million. This means we will acquire 50% interest now rather than waiting until the completion of the expenditure commitment. In addition, we now have the options to increase our interest to 75% by spending a further C$10 million in exploration expenditures by the end of 2021. The amendment to this agreement underscores our confidence from this new discovery stage project based on the encouraging results we've seen to date. As most of you know the excellent grades that have been reported from our drilling results to date follow previously drilling program that reported similar high grade intervals. High grade began three to five zone extensive depths and several new gold bearing structures have been identified for further exploration. In the third quarter, we completed the summer field program, the results of which have been used to prioritize future drill program. A 4,000 meter drilling program is currently underway targeting again three to five zones as well as other priority target. Turning now to the Diakha prospect on our Siribaya joint venture project in Mali. Final assay results from the delineation drilling program completed in the first half have been received. Reported highlights included 11.99 grams per ton gold over 34 meters which included an interval of 18 meters grading 18.1 grams per ton gold. All results are now being incorporated into a geological model to support the estimation of a 43-101 compliant mineral resource by year end. To support this estimate preliminary metallurgical testing has also begun at an independent lab to evaluate gold recovery. At our Boto Gold project in nearby Senegal having completed the infill delineation drilling program at the Malikoundi deposit in the second quarter, work in the third quarter has focused on validating and incorporating the drilling results into revised resource model. This will be used along with updated pit parameters to update the resource estimate. Metallurgical testing also continued during the quarter and technical and environmental studies are in progress to advance the economic evaluation of the project. At our wholly owned Pitangui project in Brazil, the resource delineation program to upgrade the resource within the core area of the Sao Sebastian deposit has also been completed. Again these results are being incorporated into an updated resource model. Following the completion of the drilling program, drilling commence to begin testing various electromagnetic anomalies that have been previously identified on the property. These anomalies which are similar to the ones observed at the Sao Sebastian deposit represent priority exploration target for future growing program. Moving on to the Eastern Borosi project in northeast Nicaragua where we have been focused on drill testing select gold and silver vein systems. In the third quarter, we received final assay results from the diamond drilling program completed in the previous quarter. Highlights from results on the Blag system reported in July included 5.4 meters grading 2.99 grams per ton gold and 31.6 grams per ton of silver and 4.6 meters grading 7.8 grams per ton of gold and 6 grams per ton of silver and a 19.2 meter internal grading 1.1 grams per ton gold and 223.4 grams per ton silver. With the 2015 program now complete, the focus will be on compiling these results to determine the direction of future programs. Overall, we made excellent progress moving our exploration projects through the pipeline and we have three projects at the resource delineation stage which are the direct result of discovery from iron gold exploration program. This is an outstanding achievement by the exploration team and especially so given the current environment. With that I'll turn you over to Steve.

Thanks Craig. Well, look in closing as I said at the beginning our plan is to continue to focus on cost reduction and cash preservation. We can't do anything about the price of gold. It is out of our control. And we can't do much about the sentiment. But what we can do is work and continues to focus on our costs. So that's what we are going to continue to do. We are going to focus on cash preservation. We are going to make sure that balance sheet stays strong. And as you heard from Gord there is a lot of optimism about our mine plans going forward, which we are going to be communicating in January with specific emphasis on Westwood. So we will continue to do what we always do. And on that note we will take questions.

[Operator Instructions] The first question today is from Anita Soni with Credit Suisse. Please go ahead.

Hi, good morning. Just a couple of questions. First with regard to the use of proceeds from the Niobec sale. Could you give a little bit of color on and maybe color on in terms of just sort of allocating out exactly where you guys are planning to spend that $600 million? I know you said that you will not be using it to pay back any more debt; I was just wondering what the capital plans are for that?

Hi. Anita. We just Niobec as an example and use $500 million, right now based on where we are tracking for our capital expenditure this year and based on what we expect to commit for next year and spend in the first half of the year, we are looking at somewhere approximately $300 million. And on top of that we would look at our capital leases, the settlement of our hedges and then what we announced earlier this month as the year resources, acquisitions and Craig spoke to Monster Lake. So when you add up all those components, you are looking at somewhere around $170 million and so we add the $300 million capital to the $170 million with these other components and of course we got others, there are other sort of applications on those lines that satisfies the requirement of these covenant.

All right. So then at this time there are no plans to I think obviously previously you guys have been talking about looking to acquiring as opposed to the production profile there.

While we were -- we definitely were having lucky meeting, we need to look the challenge we seemed to have in the environment and that's probably the same challenge everybody else has is finding assets that are cash flow generating positively cash flow generating. After you take a look at paying a premium et cetera so not too much out there. We are much better off investing in our own assets organically improving our cost structure and maximizing revenue because we just can't seem to find anything out there that we can add to our portfolio right now that is going to be generating cash as opposed to using cash. Lots of development projects out there Anita but the last thing we want right now is the development project.

Right. And then moving on to Westwood. I would just want to get some color on the plans. I know that you are going to reveal that in January and it is before the provincial story at this point but do you anticipate an impact to production levels in 2016 and 2017, my experience usually tell me that generally after taking a little bit easy and slower when you have issues of those kind.

Yes. I mean as we said we'll talk about it at some length early in January. Yes, I mean there is -- it is ramp up schedule. The preliminary plans we've seen get us back to where we were supposed to be, and we have talked about previously more of us in similar sorts of time frame so there is a ramp up to it and it looks quite promising.

The next question is from David Haughton with CIBC. Please go ahead.

Good morning, Steve, Carol, Gord and Craig. Thank you for the update. Just a high level question for you. You must be going through your budget planning cycles right now. Last year your reserves were at $1,300, I am just wondering what you are thinking is firstly for your budget planning what sort of gold price you are assuming and secondly for reserves what kind of price you might adopt there?

I'll back it and turn it around for you. On reserves we have done a fair bit of analysis and we are right now planning our reserves at $1,200 looking forward. So thus it is a drop from where we were last year. We are still quite comfortable with -- that's an appropriate level for reserve planning. And our cost or sorry the prices we are looking at in the near term are below that but climbing over it sort of longer in the five year time frame.

And I presume one of the things you are looking at within your budget not withstanding you got some things to spend like the Westwood fill and et cetera that your goal here would be to go free cash like positive in 2016?

It’s certainly yes. Not withstanding what we need to do at Westwood, everything else is more than focused in that direction.

Okay. And by going from $1,300 down to $1,200 I presume to the extent that you have got a strong U.S. dollar and softer domestic currency that would help that step down in the gold price assumption?

Yes. I mean there are some offsetting movement certainly for North America and West Africa. Fuel price is obviously another offset for us that are working in our favor. And really good work that the sites have done bring down their cost to date is also working in our favor. By coincidence we've spent a fair bit of work at the open pit, you want to operate open pits anywhere in Rosebel and Essakane over the past years looking geo technically at our slope designs and have received a fair bit of joy with respect to that. At least something is breaking in our favor.

Okay. Just going either to Essakane, good to see the contribution from the satellite and that satellite from there could extend into at least to the year end and maybe even to the New Year. What kind of sort of throughput should we be thinking about? I mean you had 35,000 tons a day in the September quarter, clearly that's not sustainable as your percentage hard rock goes up but can you see it is let say 32,000 -33,000 kind of range for the next couple of quarters?

Yes. I mean we are actually trying to find ways is best as possible to sort of stick at the number that you are talking about long term even with higher rock percentages. We've done -- we did a fair bit of investment obviously in the front end of the circuit in 2013 and now we are optimizing that. So looking at primary crushing, secondary crushing and what we can do there. And also spending a lot of effort right now on looking at blasting practices and sees what we can do for augmentation lies with that. I mean our long-term goal would be -- we would like to be running around 10% or above our nameplate capacity.

Okay. And just to remind of that nameplate is 30,000 tons a day.

Nameplate 10.8 million a year.

10.8 million, okay. All right, just going over to Westwood, I know that you are going to come out with more detail in the next quarter, but just looking at getting to your target for the year, I mean that implies something like 10,000 -15,000 ounces in the December quarter. Are you still comfortable with that given where you have been and the kind of remedial work that you had and uncertainty of seismicity?

Yes. We are comfortable with it. That's a question that I have asked repeatedly at the site. There are some positive things. We have a fair bit of ore, reasonable grade ore in the surge system right now, and so working through that and understanding the exact stoops that are in front of us right now and also looking at some twin up and some surface material, we are comfortable where we fall comfortable within that new range.

And just more generally what do you understand of the triggers and the causes and ways to avoid the seismicity that you have seen recently?

Yes, triggers and causes was really a localized weak zone that was over stressed and ruptured, it was a rock burst incidence, it was not a movement along a surface plain, I've just look through or translated about 400 slides with this technical information for our Board, so it is not a simple thing to describe in a two minute answer. What our opportunities are going forward specifically in designing our new areas ensuring that we are in the right ground that we are not moving parallel to shift seismicity when we are driving dress and installing the appropriate ground control package for appropriate areas, avoiding stocking of intersections and keeping away from four way intersection. So it has been a lot of design criteria come out of it. And reviewed by a very distinguished pre review group so we are pleased we can go back in and that our people will be safe. And that we can reach the productivities that this mine needs to have and we are happy it's going to be around for the next 20 plus years.

Okay. So is there a certain location within say looking at the plan view of Westwood that you need to avoid or you need to be more careful obviously and area where you have more jointing or seismicity or some other structure that you got to stay away from?

It's not an area we have to stay away from but we have to understand how to develop it appropriately. But yes there are specific zones that are -- they require a greater amount of technical attention to be mined appropriately. It is not that can't be mined, it's just we need to pay attention to them.

And just one last one if I may over to Carol please. You've got $150 million worth of bullion on the books. What's your intention there? Just want to keep a status quo or do you want to top it up or sell it down? What's your thinking?

Our thinking right now David is to keep a status quo, I mean again to provide our investors at the greater leverage to gold price and we are confident at some point that we will see the commodity rebound but we are not as Steve said counting on it. But you know what if we need to access it as we did when we acquired Essakane we will access it. So to us it is equivalent to cash or cash equivalent. So it is there for us to access and use within the business as we deem appropriate.

So when we see a gap between production and sales, it is not you putting into the -- so it's just happens to be a slip shipment by one week to or a day or whatever happens beginning at the quarter.

Absolutely, absolutely, we don't play those games.

Next question from Vishal Puri [ph] with Golden Tree. Please go ahead.

Hey, how you are guys do? So you made a pretty clear that you are not going to buying back any bond at par but will you be buying any bond in the open market?

And that's a good question. I mean we are very proactive about how we manage our capital structure. And as we noted we purchased $50 million already, so it is something that we will continually look at as we reach maturity. So it is something that is available to us. And we have the -- As Steve said the priority right now for us is maintaining our liquidity and using those funds right now to invest in the business to drive more attractive return to enhance the cash flows with long term. But it is something that we will continually look at. And if appropriate we will see whether it makes sense.

Next question is from CJ Baldoni with Principal Global Investors. Please go ahead.

Yes. I guess touching on what you just said maintain liquidity, I was curious about your comments earlier about refinancing your credit facility and reducing the size. It would seem that commitment fees are like its pretty small cost to pay as an insurance policy.

Well, when we take a look at the overall capacity and again as I said earlier we are sitting with close to $800 million of cash and bullion and these facilities are quite expensive and we are not talking hundreds and thousands, we are talking about millions of dollars. And so as we look at our five year outlook and what our intentions are, the current facility has not been drawn and we take a look at our outlook over the course of the next five years. It is not our intention to draw on that facility. So it's there as capacity and so that factored into our decision.

And what kind of reduction and extension of maturity we should be thinking about?

We are currently would launch the new syndicate so it is in process right now. And I will be able to talk more to that in the next quarter.

The next question is a follow up from Anita Soni with Credit Suisse. Please go ahead.

Hi. Just a little bit more on Westwood. I was wondering in the areas that you too I guess pay a little bit more extra attention too, is there a difference in the grade from the outline areas that you are currently mining in. I noticed that the grades dropped that you have not doing mining in the areas that were affected.

Look the couple of lands that were immediate affected by the seismic incident, yes, they are higher grade lenses that being said there is a wide variety of great materials that are available in both the more seismic area and in the more massive areas. It is high grade specifically there and that's one of the reasons we were there and mining. And also one of the reasons why it has impacted our production. But it is by no means disproportionately higher grade in that area versus other areas.

And then, as my understanding is you have a couple of horizons including that one that has been impacted that you opened the stage ultimately what -- how many mining horizons do you plan to get to?

Main horizon, so let me count them in my head. There is about seven main mine horizon.

And then in terms of stocking the intersection, that's interesting commentary I mean is that going to necessitate moving some of the or sort of staggering from the infrastructure that you have already in place, I mean you got sort of ramp winding down and I think that's where some of the issues happen so will be there a plan now to stagger some of that or --

Yes. There is a bunch of things we can do. I think it will take us away from more conventional layout that require some thinking but it doesn't take us that far out. It is all completely manageable both from an operational standpoint and a geometry standpoint. It is just requires a lot more rigger at the design stage to make sure that we are not putting ourselves in a situation that's going to cause us problem.

And then into lastly on development capital. Is that -- how do you see that impacting your Westwood development CapEx for next year?

That's exactly what we are working through right now and our budgeting is how much we want to do. We feel and the site has recovered their cadence if you will with respect to development. So we are hitting nice development numbers right now. And the opportunity to ramp up and also to develop multiple areas so that we are not as exposed to a single incident in the future. That's part of the recovery plan. So we are looking at what's the appropriate level of the development we need over the next couple of years to get us up to the design rate that we are looking for.

Yes. Usually this requires a bit more flexibility in terms of being able to mine on different front so good luck guys, thank you.

Exactly, Anita.

This concludes today's question-and-answer session and the conference call. Thank you for joining us. You may disconnect your lines. Thank you for participating. And have a pleasant day.