Turquoise Hill Resources Ltd. (TRQ) on Q2 2021 Results - Earnings Call Transcript
Operator: Good morning, ladies and gentlemen and welcome to Turquoise Hill Second Quarter Financial Results Conference Call. Also note that the call is being recorded on Friday, July 30, 2021. And I would like to turn the conference over to Roy McDowall. Please go ahead, sir.
Roy McDowall: Thank you, Sylvie. Good morning. I am Roy McDowall, Head of Investor Relations and Communications. Welcome to our second quarter 2021 financial results conference call. On Thursday, we released our second quarter 2021 results press release, MD&A and financial statements. These items are available on our website and SEDAR.
Steve Thibeault: Thank you, Roy and good morning to everyone. Thank you for joining us for our second quarter 2021 earnings call. Jo-Anne, Luke and I will be available for Q&A following our presentation. Please note Slides 2 and 3 contain our cautionary statements and I would encourage you to read through them. I will now walk through the second quarter of 2021 update and open the call up to Q&A. Turning to Slide 5, the Oyu Tolgoi team turned in another strong quarter for both from both a safety and production perspective, while considering the impact of COVID-19 related challenges. The health and safety of our workforce is our top priority. Oyu Tolgoi reported an old injury frequency rate of 0.14 for 6 six months ended June 30, 2021 and produced 36,700 tons of copper and over 113 ounces of gold. For 2021, we are maintaining our production guidance to 150,000 to 180,000 tons of copper and 400,000 to 480,000 ounces of gold. The quarter was not without its challenges as the surge in COVID-19 cases in Mongolia and on Thai prompted the theory of lockdowns in country that resulted in order to go staffing level, operating as low as 25% of planned at certain period during the quarter. Following the declaration of force majeure announced by the company in March 2021, concentrate shipments to Chinese customer had recommenced and had begun to ramp up from April 15, 2021, where the transport team continually adapting to the precautionary measures against COVID-19 transmission risk. Oyu Tolgoi continued to work closely with Mongolian and Chinese authority to manage supply chain disruption. The force majeure will remain in place until sustained volume of convoys crossing the border can meet Oyu Tolgoi ongoing commitments to customers and onsite concentrate inventory returns to target levels. We continue to advance the underground development project with overall project construction remaining broadly in line with the definitive estimate. And while all product-related technical criteria are on track to initiate the undercut, given the cumulative and ongoing impact of COVID-19 delayed commitments resulting from the non-approval of the definite estimate budget by the OT Board and outstanding non-technical issues related to the undercut decision, the company expects that there will be further impact on overall project costs in schedule.
Luke Colton: Thanks, Steve and good morning to everyone on the call. Please turn to Slide 7 and I will provide a summary of our key financial metrics for Q2 2021. Revenue for Q2 2021 increased 14% from Q2 of 2020. Gold revenue increased by $75 million and that’s driven by a 6% increase in average gold prices and a 136% increase in the volume of gold in concentrates sold, which reflected the scheduled move to the higher grade areas of Phase 4B. Copper revenue decreased by $34 million from Q2 2020, reflecting a 51% decrease in the volume of copper and concentrates sold, which was mainly the result of the force majeure partly offset by the impact of an 83% increase in average copper prices.
Jo-Anne Dudley: Thank you very much, Luke. COVID-19, if we – sorry if we could turn to Slide 9, please. COVID-19 continued to significantly impact the Oyu Tolgoi mine in Q2 2021 with constraints on site personnel numbers and domestic and international travel, which adversely impacted both open pit operations and the underground project. The additional 2021 development cost impact and COVID-19 delays up to June 30, 2021 is estimated to be approximately $100 million. This estimate includes incremental travel, accommodation, quarantine and standby costs as well as accounting for productivity impacts. As the COVID-19 impacts remain ongoing, the company will continue to monitor and update the market as appropriate. Despite these additional COVID-19 challenges, overall construction progress on Materials Handling System 1, which while not required for undercut commencement is required for sustainable production, remains broadly in line with the definitive estimate and is now over 90% complete. Work also continued on Primary Crusher 1, which is expected to be completed in Q3 of this year. Specialized shaft sinking personnel have arrived in Mongolia to prepare for the recommencement of sinking activities in Shafts 3 and 4. While Shafts 3 and 4 are not required to support the commencement of Panel 0, they are required to support production from Panels 1 and 2 during the ramp up to 95,000 tons per day. The commencement of the undercut is a key milestone and it is critical to ensure that once commenced, the uncut and drill point construction continues unimpeded. From a technical perspective, all lateral development and production drilling to initiate the undercut is complete. We are supporting infrastructure for Panel 0 production on track for completion under the current site conditions. However, the exact timing of the undercut is under increasing pressure principally due to the outstanding non-technical criteria, which are yet to be met and also the risks associated with rapidly evolving COVID-19 situation. Turquoise Hill, through its wholly owned subsidiaries, Asia Gold Mongolia, LLC, Heruga Exploration LLC and SGLS LLC operates an exploration program in Mongolia on three licenses that are not part of Oyu Tolgoi. Current restrictions on people movements in the Ömnögovi and Dornogovi provinces have resulted in delays to our field work, which we are planning to begin in Q3. Safety remains our first priority and appropriate measures will be maintained to protect our exploration team, contractors and the communities in which we work.
Steve Thibeault: Thank you, Jo-Anne. Turning to Slide 10, I’d like to highlight the key underground development milestone we are focused on for the balance of 2021 and into 2022, taking us to sustainable production for Panel 0. First and foremost, the health and safety of our employees and local community remain our top priority. Oyu Tolgoi will continue to work with the Mongolian health authorities to best manage the current COVID-19 situation. The company continued to focus on meeting the necessary criteria to enable undercut commencement. Although we faced significant challenges during Q2 2021, including from COVID-related constraint, all project-related technical criteria to support the initiation of the undercut are either completed or on track to be achieved. Turqoise Hill, Rio Tinto and Oyu Tolgoi continue to engage with various Mongolian governmental bodies with a view to resolving obtaining non-technical undercut criteria, and all party remain committed to moving the project forward in a mutually beneficial manner. However, as we have previously noted, delayed resolution on the non-technical undercut criteria thus far, has delayed the company expected timing of the initiation of the undercut. Decision on the non-technical criteria, have continued to move forward and TRQ is currently working to return to Mongolia for formal discussion with government officials. As Luke discussed, the company liquidity of $0.7 billion at the end of Q2 2021 is expected to be sufficient to meet its requirement, including funding of underground development onto Q3 2022. And we intend to continue to work with Rio Tinto, the Government of Mongolia and other stakeholder to source approval for and to implement the funding head of agreement. The company will continue to work with Rio Tinto, the Government of Mongolia and other stakeholders with a focus on advancing these important priorities and will continue to provide updates as and when appropriate. Before I turn the call for Q&A, I would like to extend my sincere gratitude to the Oyu Tolgoi team and the Government of Mongolia for their coordinated effort to prioritize the health and safety of the Oyu Tolgoi workforce and the local communities. I would like to thank you all for taking the time to join our Q2 2021 conference call. And I would like – and I would now like to turn the call back to the operator for any questions.
Operator: Thank you, Mr. Thibeault. And your first question will be from Orest Wowkodaw at Scotiabank. Please go ahead.
Orest Wowkodaw: Hi, good morning. Steve, can you give us a better sense of where things stand on the discussions with the government with respect to resolving the non-technical criteria? Like are we at the beginning stages? Are we close to the end? Any color you can share? And whether it’s – whether you need to split that up by the different issues in terms of the non-technical, maybe that would be helpful?
Steve Thibeault: Yes. Okay. First, Orest, I think it’s important to understand that over the last couple of months, we have a very difficult situation in terms of environment, okay? We have the COVID-19 that has hit the site in Mongolia. There was a presidential election that created a focus on the government on that particular thing, and we had that. And so there was a difficult environment. In meantime, what we’ve done is that during that period of time, we have first progressed on the technical criteria, as we mentioned. But we have also continue having discussion with some of the government official, okay? And we have continued to work continuously with the government bodies to engage and to move a couple of – to move the things on the non-critical criteria. So work has been done and has continued, okay. Now, Orest, it’s very important. I mean everybody wants to – all committed to the project. And what we want to do is to make sure that we’re moving as fast as possible. And that’s why the TRQ and Rio Tinto team will be back in Mongolia in August to start the discussion and continue the discussion on a more formally basis – on a more formal basis. But you should expect also that the first discussion would be really to discuss the aspect related to the undercut criteria, okay? That will be the first one. And we believe that discussion around cost and benefit and Resolution 92 can be in parallel, but will be – could take more time. That would be our view.
Orest Wowkodaw: Okay. And just following up on that, Steve, can you – like your disclosure talks about the delays in these – in starting the undercut at some point are going to have a material impact on the scannable first production and capital numbers, etcetera. I realize it’s not linear. But at what point does that happen? Is it a 3-month delay, a 5-month delay? Like when do we need to get concerned that we’ve reached that materiality threshold of delay?
Steve Thibeault: Yes. No, you’re right, Orest. It’s not linear. And it’s difficult for me to tell you exactly is that 3-month will give you a significant one because there is a lot of activity that needs to be undertaken to evaluate what will be the impact and what will be the consequences. So I would say that – the only thing I can tell you is that we will definitely work and inform you when these things – when we have better information and when we progress. So the key point is that we’re focusing on the negotiation. We have the team, and we’re working as fast as possible to resolve it. And when we have better information, we will update it.
Orest Wowkodaw: But if this is not resolved in this quarter, let’s say, by the end of the third quarter, is that material or not material?
Steve Thibeault: No, I would – I mean it’s – I don’t want to give a number, but I would not say that would be material in terms of – it depends on what – it depends on the delay, you are right, but this quarter, from my point of view, could that be material always.
Orest Wowkodaw: Okay, that’s helpful. Thank you, Steve.
Steve Thibeault: Okay.
Operator: Thank you. Next question will be from Ralph Profiti at Eight Capital. Please go ahead.
Ralph Profiti: Hi, good morning. Thanks for taking my questions.
Steve Thibeault: Hi, Ralph. How are you?
Ralph Profiti: I am good, Steve. Thank you. Steve, I want to delve into specifically the approval of the definitive estimate and the budget uptake. And I’m trying to understand a little bit better the body of work that the government is doing to get themselves comfortable with the original cost overruns. Are these strictly discussions that you’re having with them and sort of at the table? Or is the government performing things like independent economic evaluations outside of the scope of the technical report where these go further than just merely discussions of you getting them over the line? And I’m trying to understand what exactly is needed to convince them to sign off on those two specific matters?
Steve Thibeault: Okay. Some work was being done by – the OT Board has commissioned an independent consulting group to review these costs and the schedule, okay? And that report will be deposited shortly. And based on that information, the government, that will be a report – that will be available for the government as a shareholder as we are in TRQ to understand more clearly the cause and the reason of the delays and also the additional costs. And based on that, there are going to be – that’s then – that definitely will be information that will be used. I know also they are definitely – or I’m assuming they would have people that would help them from a financial perspective, true models to understand what it is. But firstly, the core of the information would be that portfolio.
Ralph Profiti: Okay. Okay. Thanks for that. That’s helpful. Yes. My second question is, as it pertains to the debt reprofiling, and in the contingency that there are scheduling delays and the potential to roll over into different tranches of project finance is coming due, are you limited only to the $1.4 billion in debt reprofiling? Can you go more or does that risk of scheduling and CapEx strictly fall on the potential funding gap from an equity issue perspective?
Steve Thibeault: Luke, would you like to take that – to answer that question?
Luke Colton: Sure. I will do my best to answer that question. So I mean, just generally from a reprofiling perspective, while we do provide the lenders with status updates, etcetera, we haven’t been able to formally progress those reprofiling discussions. We’re still waiting to source the necessary approval at the OT Board level and to get our fellow directors comfortable with the commencement of those reprofiling efforts, but we are working hard to do that. And that’s something that we absolutely want to progress over the next few months. In terms of the benefit we think that we can get from reprofiling, we do still think we can get a benefit of up to $1.4 billion. And that’s just a function of the sort of principal repayments that come due over the relevant period of the incremental funding requirements. So if we are able to reprofile the debt, and our intention is still to do that, then over the relevant funding gap period, the benefit of that would be up to $1.4 billion. So that remains our focus.
Ralph Profiti: Got it. Understood. Okay. Thanks, Luke. Thank you, Steve.
Steve Thibeault: Thank you, Ralph.
Operator: And your next question will be from Hayden Bairstow at Macquarie. Please go ahead.
Hayden Bairstow: Hi guys. It’s Hayden Bairstow from Macquarie. Just a couple of questions from me. Firstly, just on the shafts, particularly three and four, just interested to understand the timing on that. I mean you’ve got – assuming we get Panel 0 underway, I mean, at what point do those shafts need to be finished to start the development work? I think Panel 2 is coming for Panel 1 from memory to make sure that when you run-up panels are under full production, you can then transfer into Panel 2 without slowing down again.
Steve Thibeault: Okay. Jo-Anne will answer that question for you, Hayden.
Jo-Anne Dudley: Thanks, Hayden, for that question. So just in terms of some shafts are in four and the delays that we’re seeing at the moment as a result of the COVID situation and impact, in particular, on travel as well as restrictions on people movement, we don’t need shelter for the Panel 0 production to ramp up to approximately 30,000 tons a day. We do need it to ramp up post Panel 0. And so as you noted, Panels 2 and 1. So optimization work has been carried out to date to try to minimize the impact of delays, but there are limits on what we can do with the ventilation that we have. And any further significant delays could impact that ramp up post Panel 0, causing a delay to the increase in production beyond about 30,000 tons per day. We continue to work on trying to optimize the work that’s done with the ventilation we have. However, the schedule impacts of COVID-19 being assessed and they will continue to be assessed and we will provide an update as and when we are able to. As you can appreciate, it is a difficult action at this time.
Hayden Bairstow: So you are comfortable, Jo-Anne, that no matter how much of a delay there is on this, all it means is you just – you don’t – you run Panel 0. We don’t have a massive amount of reserves in it at 30,000 ton a day and you don’t push the expansion through. Is that the main impact here? Or is there a risk to a slowing of production between the two panels?
Jo-Anne Dudley: Yes. So I mean, I guess, I’d say that the kinds of delays that we might be looking at the moment are not long delays. So I think that’s something to really think about is that we have personnel on-site, and well, in-country and some on-site to recommence work. And at the moment, we’re planning to recommence in August. There are plans at the moment to remobilize larger amounts of people to site. And all the workforce working on-site is vaccinated. So although we are seeing ongoing impacts of COVID, it is a situation that we are certainly working to try to ramp up personnel. And so the kind of delay that we are see – that we may see is something that we certainly will come back with. But we’re not in the position at this stage, definitively say, there is a delay. Hopefully, that helps that we are hoping to restart thinking in August.
Hayden Bairstow: Yes. Okay. And then on the undercut itself, I’m just interested to know how many people do you actually need on-site to start that up? I mean, and what – how much do these restrictions need to be lifted? And given we’ve seen wave 2, 3, 4 and in some countries, 5, how comfortable do you need today that you can run it and have people restrictions come – be put back on the business at some point and still be able to manage the operation okay?
Jo-Anne Dudley: Yes, absolutely. And it’s a really good question. And I guess, something that we would say is that there is high rates of vaccination. And certainly, all personnel site are vaccinated right now. We are still adhering to and we always will, of course, adhere to the government bodies requests on how to manage COVID. At the moment, we are seeing ongoing impacts and in terms of roster duration – and this requires careful management to ensure that there would be the appropriate amount of personnel and personnel with the right skills available to start undercutting activities. And so as you say, there is – it is certainly something that needs to be considered prior to starting blasting. And we wouldn’t start until we’re confident that we can maintain staffing levels to allow us to do so safely and efficiently. So while we’ve seen some improvement in staffing levels in recent weeks, they have been sporadic and they have varied depending on the COVID situation in-country and the flow-on restrictions that need to be implemented at the mine site. And so ultimately, we will take a risk-based decision on this, but it is something that we will factor into that.
Hayden Bairstow: Yes. Okay. Thanks, Jo-Anne. And so just one last one on the government negotiations, we had a chat with Jacob and Rio earlier this week. But I’m just – it feels to me like it’s more of a – it’s just – it’s everything or nothing. There is not a phased approach here. You need to – you have to get agreement on everything in order to say yes or no. Is that sort of where it’s heading to in your mine?
Steve Thibeault: No, that’s not – no, that’s – I think definitely, we can resolve and move on some area, I mean, shortly, I believe, okay? And that I’ll be able to tell you when we will be done and finished. But at the moment, I believe that we can resolve and focus on the cut criteria. And as I said, I mean, a lot of these discussions are not with the overall government or they are – at the governmental body, okay? And we’re working very closely. OT is working very close to get these things moving. And we see good improvement. We see improvement in that area and movement. And but – so personally, I believe that it’s not all or nothing. It’s – there can be – I hope that we’re going to be able to move on the discussion necessary for the undercut. And then the cost and benefit and the requirement from the government, we can concurrently move on those things on parallel and resolve them at the right time. But like I said, we will see – I’ll be able to tell you when we’re done.
Hayden Bairstow: Okay. Maybe just a final comment, I don’t – I know you won’t comment on what Rio are doing. But the discussions I’ve had and what they have been saying publicly, they are clearly taking a less aggressive approach with TSG and government relations. So whether that expedites the process, I don’t know, but maybe it does result in foregoing a bit more to the government than what was going to be the case on the previous management.
Steve Thibeault: Can’t comment on that, but you’re right.
Hayden Bairstow: Thanks.
Steve Thibeault: Okay, thank you.
Operator: Thank you. And your next question will be from Dalton Baretto at Canaccord. Please go ahead.
Dalton Baretto: Thank you. Good morning, Steve and team.
Steve Thibeault: Good morning, Dalton.
Dalton Baretto: I just want – I want to start out by following up on that last line of question there. So from a procedural perspective, on the assumption that the negotiating team from your side as well as the government’s negotiating team come to terms, does that agreement then still might need to get approved by Parliament?
Steve Thibeault: You know what, I am not certain of – I guess there is from – Dalton, and I will be honest. I am not quite sure exactly with the process. And I apologize on the…
Dalton Baretto: Okay. It is – yes. No worries. Just because it could add substantial time to the process, right, is what I am asking.
Steve Thibeault: I understand, but we will check that because I don’t want to give you a wrong answer here, okay.
Dalton Baretto: Perfect. And then on that kind of same vein, if the undercut is delayed, like Orest was suggesting materially, do you have a sense for what your holding cost would be as well as the costs associated with demobilizing and then remobilizing your contractor of course?
Steve Thibeault: Okay. Jo-Anne, do you have an answer on that or can you provide some answer on this?
Jo-Anne Dudley: Thank you, Steve. So, in terms of costs, this is something that the projects team are continually evaluating. And so it is something that is being worked on. We would say that in terms of cost incurred, we have obviously disclosed the information we have at hand now. And from that, we can look at the kinds of costs that are happening at the moment without – with the current situation and delays that we are having. And we are seeing slower cost expenditures than planned, reflecting the reduced work at the moment. In terms of what would happen post the undercut firing, we continue, and certainly, the team at OT continues to seek opportunities to try to maintain schedule. But there will be a limit ultimately as to how much schedule can be maintained, if we continue to see delays. And there certainly are opportunities that are being looked at to try to maintain that schedule, and we will continue to do that. So, that’s – it may not be the full answer that you would like, but that’s sort of where we are at on costs at the moment.
Dalton Baretto: Yes. No, that’s fine, right. I mean, I already assumed the schedule is going to slip. I was more concerned around the cost. Okay. Maybe a couple of kind of longer term questions here. First, there seems to be some new language in the disclosure around power supply. And specifically cautioning that there is a chance you may end up being connected to the Mongolian grid without Tavan Tolgoi online. How much of a probability is that?
Steve Thibeault: Okay. Luke will answer that question, Dalton.
Luke Colton: So, the discussions on power with the Government of Mongolia are ongoing discussions. From an OT perspective, as you can appreciate, it’s very important for us to mitigate the relevant risks and to make sure that we do have power certainty going forward. And that will be an important focus, a critical point of focus for us in those discussions with the Government of Mongolia. So any solution, whatever the solution ends up being is going to have to provide the relevance degree of power certainty, whether or not that – the primary solution in the amended PSFA or if it’s one of the alternative solutions, including grid supply. Over the relevant period of time, we are going to have to make sure that we have the sort of write-back up the ability to access power, while whatever is being constructed needs to be constructed or upgraded or whatever it is. So, that’s going to be a focus. It has been and will continue to be a focus in the discussions with government around power. The discussions with government around power are actually in process in the moment. And we are hopeful that we can make good progress around this particular area over the course of the next few months. Certainly, from our perspective, that’s the intention, and we will get to an answer that makes sure that – that we put OT in a position where at all points in the process, OT will have stable, reliable power.
Dalton Baretto: Got it. Okay. Thanks for that. And then another kind of longer term question, so, Shafts 3 and 4, for all intents and purposes are now delayed. And then now dwell with infrastructure moving and so on, which is very reminiscent of what happened with Panel 0. When will we see some sort of estimate in terms of what that’s going to cost you from a capital perspective as well as from a schedule perspective?
Steve Thibeault: Yes. Jo-Anne, would you give the answer on this, please?
Jo-Anne Dudley: Yes. Thanks, Steve. So, in terms of when – what we would see, we are at this stage. As I was saying earlier, we are expecting that shaft sinking should be going to commence in the near future. And once we start to see the progress on work and what’s going to happen with the COVID situation that will put us in a better position to be able to understand the overarching impacts, to the extent there are some or how large they could be on the overall project cost and schedule. At this stage, we have certainly disclosed the information that we have at hand, including where we are on schedule, such that we understand it. As I was saying before, the planning team have done their very best to continue to optimize the work that is done to minimize delays. But if we continue to say shaft sinking delayed, then we will need to review what that looks like. And so we don’t have any update beyond what we have provided to-date, but it is a piece of work that we are obviously keeping a very close eye on. And we do have a reasonable transparency around that and are working with the OT team on it.
Dalton Baretto: Understood. Okay. And then maybe just one last one for me and this is kind of a more definitive answer. The $137 million cash inflow this past quarter that – or you have attributed to deferred revenue and contingency for OT short-term liquidity and funding. Can you very simply explain to me what the source of that fund is?
Steve Thibeault: Yes. Luke will handle that question for you, Dalton.
Luke Colton: I don’t know. I will try to put it as simply as I can. The process effectively from a deferred revenue perspective is, at the point where the concentrate inventory gets loaded onto a truck and leaves the mine site, a short period of time after that happens, we receive a cash payment from the relevant customer. But the revenue isn’t recognized until the final sale occurs, title transfers, etcetera. And that actually happens not when the concentrate leaves the mine site, but when the customer picks up the concentrate from the warehouse in China. So, over that period of time between when we receive that initial cash payment and the customer actually picks up the order from the Chinese warehouse, we recognize deferred revenue. So, the reason that you are seeing the increase in deferred revenue over the Q2 period, it really just has to do with the ramp-up where – we began to ramp up our shipments again in April, following the declaration of force majeure and that – there have been ups and downs over the quarter. But we just had better ability to get those shipments across the border towards the end of Q2 of this year, and that’s effectively what’s resulted in the higher deferred revenue – new revenue balance this quarter versus last quarter. So, in terms of what we might expect going forward, we are hoping, obviously, that – and all of this is subject to COVID. But we are hoping that we are able to bring down our on-site inventory levels over the second half of this year and hopefully put ourselves in a position where we can lift the force majeure. That’s obviously something that we are working towards at the moment, subject to COVID, etcetera. So, we are hoping, obviously, that we can bring those inventory levels down over the course of the next three months to six months, and that will obviously realize the cash that’s currently locked up in inventory. So listen, I don’t know, hopefully, that was…
Dalton Baretto: No, that was fairly clear. And I do understand the deferred revenue side. I was more focused on the contingency funding for OT short-term. I was just wondering if you have kind of a separate facility for short-term liquidity that’s outside of everything we have seen.
Luke Colton: So, the contingency measures that I mentioned in the script are really around sort of short-term working capital related measures that were implemented to try and bring some cash forward, so as opposed to something sort of short-term facility financing related. But OT does have a small revolver that it can draw on. And we actually did draw on it, I believe, towards the beginning of this year or around Q1, and that’s going to be reflected, obviously, in our financial statements for the year-to-date. So, it does have a small revolver that it can draw on just for mainly to sort of help to manage working capital. But the contingency measures that I refer to are more around the short-term measures that were implemented over the course of Q2, just to try and bring some cash forward into Q2.
Dalton Baretto: Understood. Thank you, guys. That’s all for me.
Steve Thibeault: Thank you, Dalton.
Operator: Thank you. And your next question will be from Craig Hutchison at TD Securities. Please go ahead.
Steve Thibeault: Good morning Craig.
Craig Hutchison: Good morning. You guys mentioned a plan to resume the sinking of Shafts 3 and 4 in August. But does it make sense to invest in the underground work Panels 2 and 3, or sort of Panels 2 and 1 ahead of an undercut decision on Panel 0? And I guess, at what point you delay future investments in their underground to preserve capital here?
Steve Thibeault: Okay. Jo-Anne, would you like to answer that question for Craig?
Jo-Anne Dudley: Yes. Sure. Thanks very much, Craig. It absolutely makes sense to resume thinking of the shafts as soon as we possibly can. There is no doubt that the COVID situation has forced the team at site to really look at what is the most important components of the schedule to progress, given the concerns that we have had around getting people at site and keeping them at site and managing quarantine. So, we have been focused on the Materials Handling System 1, which of course supports the Panel 0 production. And so, that has gone relatively well given the circumstances. It has been impacted, but they are continuing to make progress. And we understand that the rates of progress with the numbers of personnel, we have been able to maintain at site over the last few months. And shaft sinking for Shafts 3 and 4 is behind that Materials Handling System 1 work, which is some of the reason that we haven’t been able to progress that. But it also needs a more complex workforce because we do need international experts to provide us with assistance on that shaft sinking work, because it is complex work and the safety is complex as well around those shafts. And we do need quite a number of people to progress them. However, it is very important because these pieces of infrastructure take some time to complete. There is variability around their completion timing depending on the ground conditions and other factors that are encountered during sinking. And they support the ramp-up of Panels 2 and 1, which are required. And we require multiple panels to be able to ramp up to the 95,000 tons a day. And so it is important that we bring those panels on as soon as possible. So, that’s the reason why that work is absolutely critical at the moment to progress despite the kinds of challenges that you are raising there. I hope that answers the question.
Craig Hutchison: It does. Thanks. And just maybe one last question for me. Luke talked about the force majeure. What’s kind of required to lift that force majeure? I think you guys said earlier that 100% of your workforce has now been vaccinated.
Steve Thibeault: Luke, do you want to answer that?
Luke Colton: Sure. Craig, obviously, the focus there is getting the concentrate across the border and having enough concentrate in those Chinese warehouses, where we have the right level of confidence that we can meet our ongoing commitments to customers. So, in that regard, obviously, we are focusing on measures to get the concentrate across the board or more quickly and to bring down those on-site inventory levels. COVID is creating a bit of drama there, but we are doing our best to work through that. And we are hopeful that over the course of the second half of this year, hopefully, sooner rather than later, we can continue to bring those on-site inventory levels down, get the concentrate across the border. And then when we have the right level of confidence that we have got enough concentrate in the right place to meet our ongoing customer commitments, that would be the point that we would consider. And hopefully, we will be able to look the force majeure.
Craig Hutchison: Okay. Thanks guys.
Operator: Thank you. Ladies and gentlemen, this does conclude our question session for today as well as the conference call. We thank you for attending. And at this time, ask that you please disconnect your lines. Have yourselves a good weekend.
