Sibanye Stillwater Limited (SBSW) Q1 2016 Earnings Report, Transcript and Summary

Greetings and welcome to the Stillwater Mining Company’s First Quarter 2016 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to your host, Mr. Mick McMullen, President and CEO with Stillwater Mining Company. Thank you. You may begin.

Thank you very much and thank you everybody for joining us. I am joined today here by Chris Bateman, our Chief Financial Officer and we will go through the deck that we have available. And as I go through, I will do a page turn and draw your attention to the page numbers. Firstly, I would like to draw everyone’s attention to Slide 2, the forward-looking statements, in particular, the assumption and analysis we have made in light of our experience. And we are making all of the statements contained in this release. Going to Slide 3, the first quarter highlights, we had another strong performance both in terms of cost per ounce. All-in sustaining cost was down, again, around about $613, in line with the previous quarter, but down nearing up to 20% from the prior quarter in 2015. Cash, we ended the period with about $452 million of cash, cash equivalents and highly liquid investments. Production was very strong from the mines, just over 137,000 ounces, up from 133,000 ounces from the same period in the previous year. Recycling volume was very strong. We were just over 154,000 ounces of PGMs produced and that was nearing up to 42% increase from 2015. We did have a loss of just under $10 million. And again, we had a very strong quarter operationally which was offset by the decline in the metal price, down to $612 an ounce versus $871 in the same period of 2015. Moving to Slide 4, when we look at that, all of the results, you can see again about a 3% improvement year-on-year in ounces. Sales price down nearly 30%. Now, cash costs came down almost 17%. Our all-in sustaining costs were down about 20%. SG&A was broadly in line with where we were a year ago. Sustaining capital was down by about 33.5% and project capital was also down. So, overall, total capital expenditures were down about 32.6% year-on-year, again, very strong performance in the recycling, up 42%. As I said earlier overall, I think a very strong operational result offset by the fall in the metal price. Over at the Stillwater Mine, which is one of our two mines, it’s the larger of the two mines we have. You can see on Slide 5, if you look at the graphic on the bottom there, you can see within the red is the area of our proven and probable reserves and that’s just over 15 million short tons at about 0.58 ounce to the ton. You can also see on that graph the Blitz project, which is off to the right and I will talk in some detail on what we have been doing at the Blitz project in a few slides. So, our production was down about 3.3% year-on-year at the Stillwater Mine. Our cash costs were down 16% and our total employees, excluding our project employees, so we define the project as the Blitz project, so our total, let’s call it, operational employees was down about 21.5% year-on-year. So, the reduction in headcount has really driven the reduction in our cash costs. When we look at our sustaining capital and why it’s come down so much? One of the big drivers has been that as we have increased productivity, our unit rates have come down materially. So, when we look at unit rates which is how much does it cost to put in advance, that’s down almost 21% year-on-year. So, that’s allowed us to do the amount of development we do for a lot less money, hence the big reduction in the sustaining CapEx. Turning to the next page, on Slide 6, our East Boulder Mine is the smaller of our two operations. You can see there on the graphic, the area within the red that contains our proven and probable reserves, there is just over 28 million tons of the 0.4 ounces to the ton. And this mine has had a very strong quarter. We saw Q1 was a record high. It was a 13.7% increase from the prior year. That’s the best quarter in the history of that mine. Similarly, the cash costs were down to $446 an ounce, which was another record low, down 18.5% from the previous year. We had a few monthly records as well. So, we produced 20,400 ounces from that mine in the month of March, best ever. We look at productivity in many ways. One of the metrics we look at is how many ounces per employee per month did we produce. So, Q1 was a record high. The month of March was a record high at 49 ounces per employee per month. The cash costs at that site of $411 in January were also a record low. So overall, the East Boulder Mine had a very, very strong Q1 and we continue to see opportunities to improve both productivity and costs at both operations. Moving on to Slide 7, on our recycling, again you can see from the graph there that we have seen volumes pick up quite significantly from a year ago. What we saw happening during the back half of ‘15 as prices came off, particularly scrap steel prices, which really do drive the volumes in this market, we saw volumes come off. We then signed a few contracts, which were sort of more long-term type contracts and for some different types of material, which has really underpinned that big jump in volumes really from Q2 2015 onwards. So, the recycling market we see is improving. As PGM prices recover, we do see a bit of inventory coming out of the scrap yards, but more importantly, scrap steel prices have bounced quite significantly from their lows earlier in the year and we do see a bit of a loosening in the market and some of that material coming back to the market. We do have a lot of excess capacity in that met complex. So really, we are looking to grow that business still and we can grow that business with very limited or no capital spend. So, again, we have a facility that has lots of excess capacity. For the next couple of slides, from Slide 8, I am going to turn over to my CFO, Chris Bateman.

Thanks, Mick. As Mick mentioned earlier, we reported a loss for the quarter of $9.9 million and we had a very strong quarter from a production and cost performance basis. However, the basket price was the lowest in years, with prices bottoming out at $555 on January 12. The good news is we saw a recovery and by April 29, the price – our basket price was up 31% to $727. As of this morning, the basket price is sitting at $707, so prices really drove the performance from a profitability perspective and offset by very good cost performance and productivity. Moving on to Slide 9, we continue to maintain a very strong and conservative balance sheet. Despite the price falls, we have maintained a strong net cash position and we ended the quarter with $452.4 million of cash and cash equivalents plus highly liquid investments. We continue to fund the business from internal cash. So, we are pursuing both the development capital to maintain the developed state as well as the Blitz project with internal resources. Next major debt repayment would be October 2019 when the convertible bond becomes due. As volumes and prices have increased in the recycling area, we have seen that feed through in the quarter to recycle working capital and that increased $5.2 million in the quarter, contributing to the total cash reduction.

Thanks Chris. We will just go to Slide 10, which is a sort of standard slide we put out, which allows people to sort of to see the various cost components of each operation and how they are tracking. Overall, a pretty good performance on both sides from costs per ton. I will just note that the mining costs at Stillwater Mine did go up quarter-on-quarter, very much driven by the tons milled reducing and actually that’s a good thing, because what that’s been attributed to has been, we have really had a big drive on dilution and we managed to reduce the amount of tons that we mine and mill and yet still get the same or more ounces out. So the overall absolute dollars spent on mining are about the same, but because we mine less ore tons, but still got the same ounces, our cost per ton went up slightly. Again, you will note there on the top line, East Boulder’s cost per ton came down quite significantly, again driven by the fact that we actually had a very strong performance from tons mined. Overall, pretty good result on our cost control. I think we continue to demonstrate that we are very cost disciplined and we think that as we improve productivity at both operations, we have further room to move on some of those costs. Moving to Slide 11, this is really the key metric that we measure the business on from a financial perspective, which is all-in sustaining cost. As I have mentioned earlier, another strong result, very similar to Q4, about $613 an ounce. And again, whenever I talk about an ounce, it’s a mix of platinum and palladium in the ratio, approximately 3.4 to 1. We are maintaining a very disciplined approach to capital deployment. We think we are spending the amount of capital that is necessary to maintain the developed state of the mine. We in fact, continue – as we improve productivity, we continue to develop ahead of what our plan is. And all of our cost reductions have been achieved without the benefit of any currency. These are true operational cost reductions. So historically, we have put out aspirational goals in terms of where we would like our cost to be. Several years ago, 2 years ago, we said that we wanted to get to the low 700s. We achieved that. We then said that, in Q3 of last year, we wanted to get to the mid-600s. We have clearly achieved that for 2 quarters now. So I think our new goal that we would like to put out is that we want to get our all-in sustaining costs down into the mid to high-500s over the medium-term. There is a lot of work happening on that at the moment. We feel that that is a reasonable goal for us to set, but it will require us to get further productivity improvements over the operations in order to get there. Going on to Slide 12 then, productivity, we can measure productivity in many ways, but as I said, one of the ways we like to look at that is how many ounces per non-project employee per month are we achieving. And you can see from this graph that we have had a quite significant improvement in both operations over the last 2 years to 3 years in our productivity. And that’s come about really from a number of ways, reduced headcount, changing the way we mine, actually having a very strong focus on mining practices so that again we cut down on dilution. You can see there actually, 2016 Q1, we have seen East Boulder has again pulled ahead of the Stillwater Mine after the gap was closed a little bit in the previous quarter and very much driven by multiple records being broken at East Boulder in the first quarter. We still think there is room to move on this and when we look at the historical structural issue of the business, it has been low productivity. And that’s what we focused on, so a really good performance from both operations I think over the last couple of years, but we still believe that we can make some further improvements. Going to Slide 13, so we have got a couple of slides on Blitz here. Blitz, as I have said earlier is our mine development project. We are spending just over $200 million on that over a sort of a 4-year, 5-year period. And at the end of the quarter, we were around just over $80 million into that. It’s really is our key development project. We think that if we can accelerate the development and ramp up of this, it can really have a positive impact to shareholders. To that end, we have had a big push on increasing those advance rates. So when I say advance rates, that’s how many feet or meters a month of tunnel we excavate. We have so far in 2016, increased production rates there by about 45% versus the average of last year. And in the more recent past, we were well over the 50% mark. In order to bring this into reserve, we have to drill about from underground and so the 56 conventional drive is really the mine drill platform and so that’s the area where we are very focused on at the moment in terms of advancing that. And we have been drilling that out with two drill rigs from underground as quickly as we can. And you can see here on that little graphic on the right there, we have pulled out some of the ore grade mineralization drill results. We do have in the appendices at the back of this deck the full drill results. What we are seeing here is the grades are fairly consistent with what they call off-shaft material, which is the mineralization the mine was started on. It’s running in the order of 0.6 ounce to 0.7 ounce to the ton. And if you look at some of those areas there, we will be releasing the drill results by campaign or blocks, so each of those little black squares is a drill campaign that we have done. So there is a couple of key interesting things on this where the 50 East 8.9 block has had some quite reasonable drill results in it and that’s actually in an area that was thought to be barren, so that opens up some interesting potential for additional reserves in mining that were not previously planned. The 56 East 10.4, you can clearly see that we have got some very good drill results in that area. And I will call your attention to some of the results, such as 66.8 feet of 1.58-ounce to the ton and 33.6 feet at just over 1 ounce to the ton. These are sort of typical ballroom type intercepts. And for the people that have covered this company for a while, you will recall in the original off-shaft, these didn’t have the potential to produce a lot of ounces at relatively low cost. So this is very encouraging, it’s early days. But we will look to continue to release results by campaign or block as and when we complete the interpretation. The Blitz project consists of three almost distinct components. One is the 56 decline, which is where most of this drilling has been done from. The other is Tunnel Boring Machine, the TBM down on the 5,000. And the third component is the decline of the Benbow aimed, which is the far end of this project. The Benbow service work is underway. We are pushing on with that as quickly as we can and we will in the very near-term award a contract for a contractor to do the decline from the far end of the Benbow. And we are looking to accelerate production as much as we can here. At this stage, we expect first production in mid-’18, roughly. And when fully ramped up, the Blitz project will add 150,000 ounces to 200,000 ounces to our production. This production will primarily be growth for the first decade of its life, after which it will start to be a combination of growth and some replacement of the existing mine. Going to Slide 14, this really sort of shows the extent of this project as we step back out and see the whole straight length of it. You can see there is sort of the 56 East 10.4 block and the 56 East 8.9 block and you can see some of the surface drill results there. And you can understand from a scale why we have to drill this out from underground. It’s just not feasible to drill this thing out from surface at a surface elevation of 8,000 feet down to 5,000 feet, 5,500 feet. It’s just not feasible to drill that out to a reserve status from surface, so you have to drill this up from underground and you can also see the Benbow portal pad on the very far right side of that – all that long section and actually, there is a limit there of us doing the work there. So this is a very big project for us. We think it’s got the potential to be very exciting for shareholders. And as and when we get new information, we will continue to release it. Moving on to Slide 15, as we look at our asset base and prioritize what we can do for shareholders over the next say, 5 years to 10 years, we are looking at a conceptual lower East Boulder project. So, lower East Boulder is defined as all of the mineralization below the rile level on the 6,500 foot level. We do currently have a proven and probable reserve in that area of about 10.4 million tons of just under 0.4 ounce to the ton. And we are starting to pull together some plans as to how we may develop that effectively as a whole new operation. We are spending some money this year on some deep drilling to define where the ore body is below those reserves and to sort of come up with the optimal place where we may put some development. This thing is in early stage yet, but it is important, I think that we can demonstrate to shareholders that we actually have a very strong growth pipeline of things that we can be doing with our existing asset base. Going to the next slide, our Altar, which is Slide 16. We are looking at all alternatives to see how we realize value for shareholders there. We have seen a change of government in Argentina, which I think has definitely enhanced the country as an investment destination. We have spent some money on this project this year, just done a modest drilling program there. Just to test some of the other exploration areas. And this project, I think at the appropriate time will allow us to realize some reasonable value for shareholders. It does contain just over 8 million tons of copper and 6 million ounces of gold and I think it provides a bit of optionality for our shareholders. The next slide, Slide 17, our guidance we have left unchanged at this time. And if you look historically generally not changed our guidance this time of the year, if we look to do that, we would typically do that later on in the year. But again, if you look where we have come in, our all-in sustaining costs, we are – we have now had two quarters below the bottom end of our guidance. Our production for Q1 is tracking above on an annualized basis above our guidance. It was a very strong quarter for us. I will say that the second quarter to-date is also looking to be quite strong. So, we will look to evaluate these later on in the year. Going to Slide 18, I do get a lot of questions from shareholders on what’s happening with the market, the metals market, worldwide PGM prices being where they have been. If we look at the top part of this slide, the forecast supply and demand dynamics for platinum and palladium look to be very strong. There is a different scale on platinum and palladium, so actually the forecast deficit for palladium is about double that of platinum. So what we have seen happening in prices has very much not been driven by the underlying fundamentals particularly in January, but very much by speculative investors moving out of the metals. If we take the consensus estimates for broker, price forecast, actually both the platinum and palladium appear to have quite strong long-term price appreciation potential, in particular, palladium, which again will be driven by the significantly larger deficit in the palladium market. If we go to Slide 19, again looking at the consensus forecast. In general, most analysts are forecasting quite strong upside potential on a long-term basis. And if we look at the percentage of brokers forecasting the price range, particularly for palladium, we have 64% forecasting prices greater than $800 an ounce for the long-term and that’s all great for the long-term. However, we look at the price on a day-to-day basis and make sure that we spend accordingly based on what we can afford. As Chris said, even with the very poor prices we saw during Q1, we have maintained a very, very strong balance sheet. We continue to invest in the business and actually are looking to accelerate our spend on Blitz and we seem to be able to do that even with the very low prices by self funding. Going to Slide 20 on governance, so a couple of key items here. So, my contract has been extended by 2 years to the end of 2018, which provides some certainty for shareholders. Yesterday, we held the Annual Shareholder Meeting. We had very favorable voting results. The average board full vote was 96.7%. And I think also importantly, the advisory vote on executive comp came in with a 98.3% vote cast in favor. I think that demonstrates that the executive compensation is closely aligned with shareholder outcomes and that appears to be something that people are happy with. So, coming to the last Slide 21, just in summary, I think we have demonstrated some sustainable operational improvements in Q1 building on our Q4 result. I think when we delivered that very strong result in Q4 there was potentially some skepticism that, that was a sustainable run-rate for us. I think Q1 clearly demonstrates that it is. Productivity continues to improve at both mines. We have made some huge improvements quite frankly. But yet, when we look at other operations and best practice, we think that we still have some runway in front of us in terms of making further improvements. We have seen some very strong recycling volumes and that were extremely strong in Q1. We had expected that they may weaken a little bit in Q2. But to be honest, I think that actually, the volumes have continued very strongly during Q2 so far. Balance sheet, really very strong, strong liquidity position. I think we are being very disciplined the way we spend our money gives us a lot of optionality in the current marketplace and we are seeing some signs of metal price recovery. The PGM prices, particularly palladium, are starting to sort of reflect the fundamentals, again I think as opposed to where they were in the early part of Q1. And the current basket price of $707 was up significantly on where we were in Q1. So, I think our strategy hasn’t really changed. It’s continued to fix the underlying issues that we have had in the business. It’s continued to get real and lasting change on our cost base. And we think that over time, the PGM basket price will continue to recover, which will see us have margin expansion. With that Rob, I think I would like to turn the floor over for any questions.

Thank you. [Operator Instructions] Our first question comes from Lucas Pipes with FBR & Company. Please proceed with your question.

Hey, good afternoon or I guess good morning everybody. Good job again on the cost side and that’s also where my first question is. So, obviously, in Q1, you were below the low end of your full year guidance. I was curious at what point do you think it may make sense to look at that or rather why do you expect it to ramp up over the course of the year on the cost side to maintain the guidance? I just was hoping for a little bit more context around that full year cost guide.

Sure. If we look at our costs over a multiple views, typically, Q3 can often be a little bit weaker on production, coming into the summer months. And as the warm weather is there, then we can do a bit more of our capital budget. So, we are always a little bit vary of amending our guidance too early. And again, if you look historically, we have typically done that in the sort of July update if we do that. So, that’s probably why we haven’t adjusted it yet, but we did think about it internally quite obviously for that very reason that we have had two quarters below the bottom end of the guidance budget at the moment, but Q3 can, at times, be slightly higher cost to the quarter.

Got it. So, I look forward to that. And then in terms of your new medium-term cost in the mid to high 500s, what kind of – what’s your checklist to get there in terms of what you have to do operationally? And then also what do you think is the right timing in terms of how would you define medium-term? Is that sometime in ’17, ‘18, when would you like to reach that new goal?

Well, I would like to reach it as soon as possible, but I think realistically when we put these goals out, we have sort of had an 18-month timeframe in mind. And what do we need to do to get there? Well, I think realistically, it really comes down to productivity guidance and I think in terms of stripping absolute cost out of the business, we have been very successful of that. We realistically will probably need to produce some more ounces in a cost effective manner. So not just go chasing ounces for the sake of chasing ounces. And we do have excess capacity in our mills. They only run – have been running 10 days on, 4 days off, which is going to 11-day on, 3-day off roster at Stillwater Mine. So we have to produce more ounces with the same or less people I think realistically.

Got it, okay, that’s helpful. And then maybe one last question for me before I jump back in the queue and that’s on the Blitz project Mick, I think you mentioned a few times in your prepared remarks and then also – and I think there was – it was in the release, that you are accelerating the development or at least are looking at speeding up the process of Blitz, but then when I look at the CapEx guidance for this year, it wouldn’t show up in the spend in terms of your capital outlay, should we be thinking about an effective reduction in the capital costs, essentially you get more for less or you get kind of a faster development for the same amount of capital, any kind of parameters or context you could give around that prioritization and that acceleration, I would appreciate that?

Well, at this stage, we haven’t changed the overall budget for the project. It’s around about $205 million. And we did bake in a little bit of extra spend in our guidance relative to what our internal budget was. So I don’t think the overall spend on Blitz have changed materially to your thoughts range. Having said that, we had assumed to spend on it when we put that guidance out.

Got it.

Which is a dragging forward of spend as opposed to absolute dollars gain. I will say, whilst we haven’t changed the budgets for the project yet, my experience of building things is that time equals money and the quicker you can do something, the cheaper it usually costs you.

Perfect. Yes. So in terms of the timing and the ramp up in 2018, do you have a sense for what period in 2018 it would make sense to – or it could – we could realistically see it ramp up and get towards your targeted rate?

I do. We are not publishing the full ramp up at this stage because this work is sort of happening as we speak I guess. We have said publicly, mid-’18 is when we expect some first production out of Blitz. I think I would like to get another quarter of work underway and see the results of that before we start to sort of change what we have said publicly about it. What I can say is, we have had some very good success in the last couple of months in terms of accelerating development rates in the 56. Let’s make sure we just build on that before we start publicly saying that we are going to significantly accelerate this project.

Very good. Well, it sounds like we have a lot to look forward to. Good luck with everything and I appreciate all the detail. Thank you.

Thanks.

Our next question comes from Dave Gagliano with BMO Capital Markets. Please proceed with your question.

Hi, great. Thank you for taking my questions. I just have a couple of quick ones. The – we have seen this in the past, I just wanted to ask, the production volumes are running ahead of the sales volumes, it was a little bit of an inventory build over the last three quarters in a row, when should we expect that to reverse and what’s the reason behind that?

Dave I think you all have seen January, February prices were less than stellar. So the agency is pushing ounces in that there is a couple of months in the quarter and it wasn’t there in our opinion. We saw on a month basis, sales significantly exceeded production in March. And we have continued to push strongly through April with ounces out of the system. So as prices become a little bit more reasonable, you will see us pushing harder on sales.

Okay. Just a follow-up, it’s been – I think it’s been three quarters in a row, so I mean if you just added up, over the last two quarters – I think like 22,000 ounces, 23,000 ounces of higher production in sales, should we expect that to basically be a net zero by the end of the year?

I mean we will – yes, we will be pushing out the ounces, but what we expect will be somewhat determined by what the price environment is over there the remainder of the year.

Okay, alright. Thank you. And then just – go ahead. I am sorry.

I think we do look at the prices closely and the sense of urgency when the prices dip is not the same as when we see a recovery. The prices have also been extremely volatile.

Got it, okay. And unrelated question, the mid – or sorry, medium-term goal to mid-$500 per ounce goal, does that include anything associated with the Blitz project?

Not.

Okay. Where do you think that numbers could go when Blitz...?

That’s Blitz comes on.

And where do you think the number could go once Blitz is up?

Well, we have said that Blitz should be our lowest-cost production. I don’t – I have only five minutes ago put out the mid to high-500 as a goal, Dave. But let me just do some more work Blitz before we put the next goal out.

Alright. Thank you very much.

We obviously have some internal numbers, but I don’t think it’s appropriate for us to put it up two minutes after I have just put the last aspirational goal there.

Got it. Thank you.

Our next question comes from Sam Crittenden with RBC Capital Markets. Please proceed with your question.

Hi. Thank you. And thanks for providing me update on the Blitz drilling. I am just curious how much engineering work has been done on the mine plan, for those for couple of years, I would in Blitz, so I am just wondering if that grade range of 0.6 ounces to 0.7 ounces per ton is based on those mine plans or is that just a feel from the drill results?

No. That’s sort of based on the mine plan. And it’s being updated on a regular basis as we get information in. But when we look at the drill results and the sort of the way the ore body sits and the ground conditions and everything and the average sheet grade. If you look at the mineralization, typically the off-shaft stuff you get 40% to 50% of the rate is mineralized above ore grade. And we are within that range or slightly at the top end of that range. So that 0.6 ounces to 0.7 ounces is I think it’s reasonably conservative based on the last lot of drilling that we have got in.

And would you use similar mining methods to the main Stillwater Mine or I am just trying to figure out, I mean are you getting similar cost production performance with better grades or is it more narrow mining to get those higher grades?

No. It’s probably water, probably more difficult ground conditions, so the cost per ton is likely to be similar, maybe to slightly high than what the original the old Stillwater Mining stuff is.

Okay. Thanks very much Mick.

But if you look at the grades, the grades are significantly higher than what we are mining now. And similarly, all your logistics are way lower.

Okay, it sounds good. Thank you.

[Operator Instructions] Our next question comes from Andrew Quail with Goldman Sachs. Please proceed with your question.

Yes. Hi Mick, Chris. Thanks for the update guys especially on costs. A couple of questions, first can you just breakdown that CapEx between the two mines, I think its 8.9, can you just breakdown that between Stillwater and East Boulder, the sustaining?

I will need to dig that out of the top of my head, it’s historically been sort of one-third, two-third off the top of my head. But Chris might be able to find it for you just...

I will give you my second question then. Is the grade, obviously at Stillwater picked up slightly and it’s probably – it’s only the best grade you have had for eight quarters, is that something that you guys can keep up or is that just an anomaly?

Well, that’s almost a two-part answer. We did have some better stopes or better grade stopes. We are really only for about half the quarter there. But actually, the – probably equally as big driver or may be even bigger has been this dilution control. We have gone from and don’t quote me exactly on this, but we have gone from something like close to two sort of unplanned dilution to about 8 inches of what we call over break or unplanned dilution at the Stillwater Mine and that’s very much a result of some new technology we put in place and a strong focus on mining practices. And again, that’s why on that Slide 10, you saw the tons milled go down quite a bit, but we still got the ounces because we weren’t shipping waste to the mill.

Good.

So overall we see the grade has improved, because obviously, if you are shipping a pile of waste to the mill, your head grade is going down.

Got it, okay. Well, you guys can just get back to me on the CapEx breakown. Thanks both.

Alright. No problems, Andrew.

Our next question comes from John Bridges with JPMorgan. Please proceed with your question.

Morning math everybody. I will show some results and especially your boardroom, it seems like an awful long time since if I walk to one of our boardrooms?

Look, we actually do. We do get the old ones still, John, but not of the scale that you would have known from the past, in the old off shaft area.

I remember that go from one of the bigger ones. So, you are thinking about trying to accelerate the access for Blitz. What sort of buttons can you press to make that happen? What are the areas you are looking out to bring things forward?

The critical path items for first production at the Blitz, is driving the 56 decline out as fast as we can get it out there. That does two things. First, one is it gets us out so that we can drill it, because we have to drill from underground and the other is that once we get out far enough, we can then start ramping down to the production level 300 feet below, basically halfway between the 56 and the tunnel boring drilling. So, that is the critical path item in order to get first production. And so we have – that’s why we are focused on accelerating advanced rates in that decline. We have had some help coming from Australia in terms of accelerating that. And we have had some of our guys in Australia looking at high-speed development and we have seen a significant step up in advanced rates there. That’s the thing we can do to get first production up and running. And I will make a decision later this month on where and when we are going to put that first ramp system in. The second thing that has to happen, the critical path in terms of ramp up is actually the connection between the 56 decline and the Benbow decline coming in the far end. And so we have done a lot of work in terms of accelerating how we can get that thing moving faster. And so that determines when we get ventilation breakthrough and that’s how quick we can ramp this thing up. And then the third item is the TBM, but it is a lesser priority in terms of the ranking of what we are going to do. So, we have identified the critical path item. We have focused very heavily on that. And then once that no longer becomes a critical path, then the Benbow decline will become the critical path and you can be assured that, that’s getting a fair bit of attention as well.

And imagine, what rate are you advancing 56 new decline?

We are advancing and I will convert this to metric, because that’s the way I think. So, we are advancing at around about 90 meters a month at the moment, maybe a little bit higher in the last week.

And then you mentioned ground conditions in Blitz, what are you seeing?

Yes. One of the characteristics of that off-shaft material is that when you do get those ballrooms, the big intercepts of high grade is you typically do have a bit more 14 leg. And so the very good grade and the big whips do come with slightly tougher ground, not impossible to mine, but the mining costs, the actually mining costs per ton there will be slightly high than where we have got better ground, but that will be more than offset by the whips the grades and just the whole – the fact that we can get people into the working phase in half the time or third of the time for the rest of the mine will make a big difference to productivity.

Okay, great. Well congratulations on results. We are looking to update on Blitz as well.

Just jump back on the sustaining capital, Stillwater Mine in the year, Q1 was just under $9 million. East Boulder was just a tad over $4 million. Okay, any other questions.

There are no further questions at this time. At this point, I would like to turn the call back over to Mick McMullen for closing remarks.

Alright. Well, thanks everybody for joining. And I think it was a strong quarter operationally for us and we look forward to giving people further updates on our progress on our new goal of reducing costs and accelerating our Blitz project. Thank you, everyone.

This concludes today’s teleconference. We thank you for your participation. You may disconnect your lines at this time and have a great day.