Turquoise Hill Resources Ltd. (TRQ) on Q4 2021 Results - Earnings Call Transcript
Disclaimer*: This transcript is designed to be used alongside the freely available audio recording on this page. Timestamps within the transcript are designed to help you navigate the audio should the corresponding text be unclear. The machine-assisted output provided is partly edited and is designed as a guide.:
Operator: 00:02 Good morning, ladies and gentlemen, and welcome to the Turquoise Hill Fourth Quarter Financial Results Conference Call. At this time, all lines are in listen-only mode. And following the presentation, we will conduct a question-and-answer session. This call is being recorded on Thursday, March 3, 2022. 00:28 And I would now like to turn the conference call over to Mr. Roy McDowall. Please go ahead.
Roy McDowall: 00:32 Thank you, Kelsey. Good morning. I'm Roy McDowall, Head of Investor Relations and Communications. Welcome to our fourth quarter and year-end 2021 financial results conference call. On Wednesday, we released our fourth quarter and year end 2021 results press release, MD&A and financial statements, these items are available on our website and SEDAR. With me today on the call are Steve Thibeault, our Interim CEO; Luke Colton, our CFO; and Jo-Anne Dudley, our COO. 01:01 This call and presentation includes certain forward-looking statements and information, we refer you to the forward-looking statements section of the Annual Information Form dated March 8 of 2021 supplemented by our MD&A for 12 months ended December 31, 2021. 01:17 And now, I'd like to turn the call over to our Chief Executive Officer, Steve Thibeault.
Steve Thibeault: 01:22 Thank you, Roy and thank you all for joining us this morning. Before I turn the call over to Jo-Anne for an operational and project update and Luke for review of our finances, I will provide brief comments on OT's record performance in 2021 and review some of the key highlights from the year, which was a pivotal one for the company. 01:46 Starting with our top priority, safety. Last year, the site achieved a full year all injury frequency rate of 0.14 for 200,000 hours worked, the best ever in OT's history. We also reported record revenue of $1.971 billion, an increase of 82% versus 2020 and record income of $681 million, a year-over-year increase of 38%. 02:20 Turning to Slide 7. 2021 was a year of significant accomplishments for Turquoise Hill and its shareholders. With the critical steps towards bringing Oyu Tolgoi high-grade underground mine into production. The key achievement in 2021 was the culmination of two years of negotiation with the Government of Mongolia that reset and renew our partnership and allowed us to proceed with the blasting of Panel 0 this past January 25. 02:55 TRQ and Rio Tinto reached a binding agreement on a funding plan for Oyu Tolgoi, which provides a clear and certain path to meeting TRQ's estimated funding requirements. We work with Oyu Tolgoi to enter into electricity supply agreement with the Government of Mongolia for long-term source of power from the Mongolian grid. In spite of the challenges presented by COVID, we remain on track with key infrastructure needed to take the underground to sustainable production in the first half of 2023, which is only 12 months to 16 months from now. 03:37 Now turning to Slide 8. Despite the impact of the pandemic on OT staffing level and productivity, our 2021 copper and gold production was within our revised full year metal guidance range. Copper production for 2021 of 163,000 tons was within the guidance of 150,000 to 180,000, while gold production of 600 and -- 468,000 ounces came at the higher end of guidance. All things considered, it was a solid year that resulted in TRQ posting record revenue and income numbers. 04:22 We currently expect gold and copper production to be lower in 2022 versus 2021 due to the stripping of the next cutback and the processing lower grade stockpile material. Once the underground has ramp up, OT is expected to operate in the first stockpile of the copper cash cost curve, and is expected to produce around 500,000 tonnes of copper per year on average from 2028 to 2036 from the open pit and underground operations. 04:56 Looking now at Slide 9. As I mentioned earlier, all-injury frequency rate recorded in 2021 was the best in the site history and continue a trend in improved safety rates that has been seen at OT since 2013. This is very gratifying and a tribute to the site team. Safety is always a work-in-progress and we are not taking anything for granted, but we will maintain the discipline necessary to protect our people and communities. 05:33 Considering the COVID-related challenges, the site has faced over the last -- the past two years, this is a real tribute to the commitment of OT management and team to running a safe operation. At the bottom of Slide 8, you will see that Oyu Tolgoi mill continued to operate at above nameplate capacity for the sixth consecutive year. This consistent outperformance speaks highly of a culture of excellence at OT. 06:05 With that, I will now hand the call over to Jo-Anne Dudley, our Chief Operating Officer.
Jo-Anne Dudley: 06:12 Thank you very much, Steve. If we now turn to Slide 10. In Q4 2021, Materials Handling System 1 construction was completed and no-load commissioning commenced. Commissioning activities were completed in Q1 2022. This means the materials handling facilities, including the first primary crusher, are ready to support the ramp up of Panel 0. Construction of the first on-footprint truck chute advanced during the quarter, and this has subsequently been commissioned during Q1 2022. 06:53 The truck chute, a critical infrastructure required to support production from Panel 0 and construction of the subsequent truck chute is ongoing. Shaft 4 sinking activities rec-ommenced during the quarter and readiness works for Shaft 3 continued ahead of anticipated thinking later in Q1 2022. In terms of mine development, breakthrough of the conveyor and service declines was achieved in Q4. So now, both the conveyor and service declines are connected to the underground mine. 07:31 Drawbell drives excavation in the Panel 0 initiation area continued with drawpoint construction work also underway. Panel 1 and Panel 2 design refinement study work continued with preliminary outcome to Panel 2 expected later this year. All undercut readiness criteria were achieved on the January 24, 2022, with the first undercut fired on 25 of January. In terms of exploration, Turquoise Hill through its wholly-owned subsidiaries, Asia Gold Mongolia, Heruga Exploration, SGLS LLC operates an exploration program in Mongolia on licenses that are not part of Oyu Tolgoi. 08:18 Turquoise Hill owns three exploration licenses, Bag and Od-2 in the Umnugobi province and Khatavch in the Dornogovi province. The 2021 planned exploration program was successfully completed on all three licenses. Results have identified further signs of interest that will form part of the exploration program for 2022. 08:43 If we turn to Slide 11, we can see the key near-term milestones for Panel 0, as well as the critical activities to enable the ramp up of production to 95,000 tonnes per day. Important milestones for 2022, including -- include the first drawbell firing in Panel 0, which is anticipated in Q3. With sustainable production for Panel 0 expected in first half of 2023. COVID-19 impacts have resulted in expected commissioning dates for Shafts 3 and 4 in the second half of 2023. 09:23 Due to the impact of the Shaft delays and work restrictions impacting underground development progress as well as changes to mining scope. We now expect the first drawbell in Panel 2 to be filed in 2026 and the first drawbell in Panel 1 to filed in 2027. With the commencement of the undercut and the full budget uplift now approved at the Oyu Tolgoi or LLC Board. Our re-forecast of constant schedule for the remaining project scope including materials handling system to and concentrate a modification is underway, and is expected to be completed during Q2, 2022. 10:09 I'll now hand the call back over to Luke Colton, our Chief Financial Officer.
Luke Colton: 10:14 Many thanks for this, Jo-Anne and good morning to everyone. If you could please turn to the next slide, I'll provide a summary of our key financial metrics for 2021. Revenues of $1.97 billion in 2021 were a record for the company, they were 82.8% higher than 2020 due to a combination of higher volumes and higher prices. 10:46 Copper and gold volumes increased by 9% and 157%, respectively, despite the challenges from COVID-19. This was driven by the scheduled move to higher grade areas of Phase 4B and the company also benefited from average prices that were 53.4% higher for copper and 2.4% higher for gold. Revenue of $504 million in Q4 of 2021 increased 24.4% from the $405 million in Q4 2020 and that's due to a 35.8% higher average copper price and 54.5% higher gold sales volumes. 11:34 Net cash generated from operating activities was $576 million in 2021 versus $41 million during 2020. This was primarily due to $0.9 billion higher revenue and lower interest paid as a result of a lower average LIBOR rates. This was partially offset by an $18 million lower interest received as bank deposits and money market funds were drawn down to fund investment in the underground and $327 million higher taxes paid, which included the $356 million in payments made to the Government of Mongolia and those are related to the 2013 to 2015 and 2016 to 2018 tax assessments. These payments are the subject of the international tax arbitration proceedings that were suspended on February 11, 2022. 12:31 Net cash generated from operating activities was $149 million in Q4, 2021 versus $70 million in Q4 2020, reflecting a $91 million increase in gross margin from the higher sales revenue offset by a $11 million higher operating expenses and those are associated mainly with the implementation of COVID-19 controls. 12:56 Income attributable to owners of Turquoise Hill increased from $2.02 per share in 2020 to $2.61 per share in 2021. The increase mainly reflects again the $0.9 billion higher revenue offset by $0.6 billion additional tax charges in 2021 versus 2020. 2021 reflects the $278 million deferred tax expense from utilization of prior year tax losses against current year taxable income and from a reduction in loss carryforwards anticipated to be utilized in further -- in future periods. And those are mainly driven by the previously announced underground delays. 2020 reflected recognition of a $347 million deferred tax asset recognition, which was driven primarily by improved near-term commodity price estimates. 13:57 Income attributable to owners of Turquoise Hill decreased slightly from $0.79 per share in Q4 2020 to $0.78 per share in Q4 2021. This reflected the impact of $99 million higher revenue from higher copper prices and gold sales volumes, offset by higher tax charges as well as higher total operating cash costs. Our $20 million deferred tax expense in Q4 2021 reflected the utilization of prior year tax losses. 14:35 In Q4 2020 additional deferred taxes -- additional deferred tax assets of $86 million were recognized as a result of improved near-term commodity price estimates. 2021 C1 cash costs and all-in sustaining costs benefited from the impact of the higher gold credits. All-in sustaining costs were also impacted by a $24 million increase in open-pit sustaining CapEx, as deferred stripping was 2020 -- it was $22 million higher in 2020 due to waste mined ahead of the transition of mining to Phase 5. 15:04 Capital expenditure of $997 million in 2021 comprised $913 million related to the undergrounds, including $232 million in underground sustaining capital expenditure, as well as open-pit capital expenditure of $84 million, 2021 open-pit capital expenditure included deferred stripping of $27 million and tailings storage facility spend of $26 million. Q4 2021 capital expenditure was $300 million versus $263 million in Q4 2020 and that comprised of $259 million in underground capital expenditure, and $40 million of open-pit sustaining capital expenditure. 15:49 Our cash and cash equivalents decreased from $1.1 billion at the end of 2020 to $0.7 billion at the end of 2021. As the additional investment required to fund the underground project exceeded free cash flows generated from OT open pit operations. The base case incremental funding requirements increased from $2.3 billion at the end of 2020 to $3.4 billion at the end of 2021. That $3.4 billion is a decrease of $200 million from the $3.6 billion reported at the end of Q3 2021. 16:26 If you can move to the next slide, please. You'll see again that Turquoise Hill had liquidity of $0.7 billion at the end of Q4 2021, decreasing slightly from Q3 2021's ending balance of $0.8 billion. As noted previously, the funding gap has decreased to $3.4 billion from $3.6 billion at the end of Q3 2021. The decrease was mainly the result of update to short-term mine plan, slightly improved commodity price assumptions. Turquoise -- TRQ's base case incremental funding requirement incorporates metal price assumptions from copper and gold over the incremental funding period, which we have now included in our MD&A. 17:11 The Definitive Estimate which estimated a development capital cost of $6.75 billion. COVID-19 restrictions through the end of Q4 2021, which resulted in a cumulative increase of $175 million to the estimate of underground development capital included in the Definitive Estimate. The current forecast to sustainable production for Panel 0, which is still expected in H1 of 2023, the current forecast of delays to Shaft 3 and 4, the impact of open pit mine design in response to previously reported geotechnical events resequencing of the open-pit ore phases, due to the delayed commencement of the undercut, as well as the impacts of COVID-19 on open pit waste movement. And $1.8 billion of scheduled principal repayments, which the company of attempting to re-profile. The details of these and other items are discussed more fully in our MD&A, which is available on the company's website, SEDAR and EDGAR. 18:15 On January 24, 2022, Turquoise Hill entered into a binding Amended and Restated Heads of Agreement with Rio Tinto, which replaces the previous Heads of Agreements. Key aspects of the Amended HOA are included on this slide. The full agreement is available on the company's website, SEDAR and EDGAR. The amended HOA signals and improved relationship with Rio Tinto and an updated joined view on how to fund the underground project. 18:43 The key highlights as follows. To pursue rescheduling of principal repayments of existing debt with a target completion date of December 2022 latest; seek to raise additional supplemental senior debt of up to $500 million, which would be available for drawdown once sustainable production is achieved. And incremental coal facility provided by Rio Tinto, of up to $750 million which would also be available to be drawn down upon once sustainable production is achieved. 19:17 Rio Tinto well if needed provide a short-term secured advance directly to Turquoise Hill of up to $300 million, which would be available during the debt funding restriction period identified in Resolution 103 and the company agreeing to conduct an equity offering in a form of it choosing of at least $650 million by no-later than the end of August 2022. With the Amended HOA in place, the company has together with its partners restarted be engagement process with the project finance lenders regarding sequencing of the principal repayments and other elements of the Amended HOA. 19:54 Under the current base case assumption, additional equity in excess of the initial $650 million would not be required if the Re-profiling, SSD and Co-Lender are fully successful. The Amended HOA provide that, if necessary, Turquoise Hill could be required to raise up to a total of $1.5 billion plus the amount raised in the initial equity offering just discussed, via a further equity offering, again in the form of its choosing. Should they occur, any significant further delays to the underground project are non-fulfillment of any of the condition’s precedent identify that in the Amended HOA would also adversely affect the ability of the company and OT LLC to obtain additional funding or Re-profile of existing debt as contemplated by and/or within the time-frame set out in the Amended HOA. 20:49 Additionally, the company continues to monitor commodity markets, the ongoing impacts of COVID-19 and how the undercut progresses and the underground mine ramps up its production. Our liquidity outlook and estimated incremental funding requirements will continue to be impacted either positively or negatively by various factors in addition to the aforementioned, many of what are outside of the company's control. 21:15 And with that, I will hand the call back over to Steve to wrap things up.
Steve Thibeault: 21:23 Thank you, Luke. And to wrap up, we faced multiple challenges throughout 2021 and entered 2022 with a renewed partnership with the Government of Mongolia. We negotiated a new funding agreement with Rio Tinto, an electricity supply agreement for Oyu Tolgoi, and we have begun blasting the Hugo North H1 underground mine. 21:48 I want to thank the entire team at OT and at TRQ for their commitment that demonstrated in helping us bring the underground into production for the benefit of all stakeholders. We will continue to update the market as the underground progresses and we look forward to ramping up what will become one of the largest copper producer in the planet -- on the planet, sorry. 22:16 Thank you very much. And with that, the operator, we are open for question.
Operator: 22:22 Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Your first question comes from Ralph Profiti from Eight Capital. Please go ahead.
Ralph Profiti: 22:59 Thanks for taking my questions. Good morning, Steve and team.
Steve Thibeault: 23:02 Good morning.
Ralph Profiti: 23:05 Two questions if I may, Steve. One, perhaps for Jo-Anne and one for Luke and maybe I can start with Jo-Anne. Jo-Anne, I see in the MD&A that there has been a reduction in the number of drawbells to achieve sustainable cave propagation, moving to ‘21. And I'm just wondering, Jo-Anne, is there any offsets to that with respect to perhaps higher costs when we think about perhaps secondary breakage or say, in realignment of the scheduling? Just wondering what some of those offsets are?
Jo-Anne Dudley: 23:43 Thank you, Ralph for your question. So, that change in drawbells really is a reflection of a change, a minor modification in the sequence on the footprint that was really -- has its foundations in geotechnical concerns and trying to minimize those. And essentially, what we're trying to do here to get to sustainable production is to reach a certain area and that area is the point at which our calculations and the information that rock mass tells us the cave will start propagate. And so, although, there has been a change in the number of drawbells and we still reaching the same area. We are just doing it in a slightly different way, because the undercut is starting in a different orientation. So, there is no fundamental change to the point at which we think the cave will start, it's that we're starting in a slightly different sequence opening up a different geometry. 24:52 In terms of trade-off, we don't expect to see any cost implications of that. They ease a schedule advantage in doing that, but that was not the primary driver of or any contribution to driving that decision. The decision was driven by geotechnical concerns and trying to minimize those. So hopefully that answers your question, Ralph.
Ralph Profiti: 25:20 It does. Thanks very much. Luke, I appreciate the disclosure on the metal price assumptions used in the base case, so thank you for that. Luke, when I think about $6.75 billion in CapEx and the remaining $1.25. Could you categorize those in buckets roughly speaking, how much of that remaining CapEx is perhaps labor? How much of that is equipment, and how much is consumables, just rough numbers would be all the more helpful?
Luke Colton: 25:54 Thanks for the question and I might get Jo-Anne to help me a little bit on this one as well. If you think about -- that remaining capital to complete the underground project and to get to the $6.7 billion plus the $175 million in COVID impact. I have tended to look at it from the perspective of the, sort of major packages of work that are underway and that needs to be completed. And if you think about it from that perspective, obviously you have Shafts 3 and Shaft 4 which are underway. You also have material handling system too, which would be a large portion of that remaining capital. And I think is very similar in many respects to what we've already done with MHS1, so I think there's probably a greater degree of certainty there. 27:05 And then obviously, of the upgrade of the concentrator, which is another major piece of work that would form part of that remaining capital estimates. Obviously, a large portion of that is going to be labor-related and there are definitely going to be packages of equipment et cetera that needs to be purchased associated with those major pieces of work. And I know the underground team, they are in the process at the moment of looking at all of that carefully as part of the sort of re-forecasting work that is underway and that we hope to be able to provide further detail on -- in the coming months. 27:59 Jo-Anne, do you have any more detail there or any additional specificity that you might be able to help with?
Jo-Anne Dudley: 28:08 I think you covered it very well, Luke. The rate forecast is underway and the previous estimate contained assumptions on the mine elements and you covered the scope, the primary scope that remains.
Ralph Profiti: 28:29 Okay. Well, that's very helpful team. Thanks very much.
Steve Thibeault: 28:32 Thanks very much, Ralph.
Operator: 28:34 Thank you. Your next question comes from Orest Wowkodaw from Scotiabank. Please go ahead.
Steve Thibeault: 28:41 Good morning, Orest.
Orest Wowkodaw: 28:42 Hi. Good morning. Just following up on Ralph's questions. I realize you haven't completed the work at this point, but can you give us an indication of what you're seeing with respect to the -- with respect to what you're seeing on the CapEx front, as you're looking at re-costing the project, in terms of impacts of inflation and schedule delays to date?
Steve Thibeault: 29:05 Yeah. Ralph, -- sorry, Orest, I mean, the only thing I can give you is guidance because you will understand that it would be -- the information is being capture and is being determined at the moment, then we'll have that in Q2, okay. But what we can see share at the moment and some of the commitments has come out with a larger one related to the Material Handling System too came out pretty close to the previous estimate, okay, that we had. But definitely a guarantee for the future -- for the future one, but it came out in line with that, as well we are trying to find out there is a large portion of labor in our estimate in there too to come and that’s one, I mean we've been favorable because we're the exchange rate, not favorable I mean there is no impact on that from the inflation perspective because of the FX advantage that we have in Mongolia. So. I would say, overall, what needs to be done, Orest. There is some element there. There are going to be other elements that will vary, but what we’re seeing right now is not, there is not significant ones, But we’re -- and I'm very cautious here, okay, what needs to be completed and done before we can have certainty.
Orest Wowkodaw: 30:31 Okay. Fair enough. So, do you expect that update to come with the Q2 financial results or could it come earlier than that?
Steve Thibeault: 30:42With the Q2 result I would hope that if not, we’re going to do it in the and we're expecting that information to come in the Q2 period. So, on that --, Orest it will depend and I’m expecting though, it will be in Q2. So, it will not come with Q2, it will come at best with the Q1 results.
Orest Wowkodaw: 31:05 Okay.
Steve Thibeault: 31:06 Did that answer (ph), Orest.
Orest Wowkodaw: 31:08 Yes. Thank you. Yeah. Just a question for Luke, in terms of getting some a little bit more granularity. Thanks for the updated schedule in terms of the maturities of the project finance facility that are in the notes. But when I look at that schedule, it looks like you've got $400 million maturing this year and then $1.4 billion maturing in '23-'24. Can you give us the split between '23-'24 is that pretty even between the years? And then, similar question for $1.2 billion that's maturing in '25-'26, please?
Luke Colton: 31:54 Yeah. Thanks for the question. Listen, it's -- you're right at $400 million in 2022 and most of that is actually back ended to the December 2022 payment, which is why we're trying to get the Re-profiling done before December. And then, at $1.4 billion over kind of four payments in 2023 and 2024, so we -- the repayments profile is such that we make -- we would make principal repayments in June and December each year. So, taking that $1.4 and dividing it sort of by four, with broadly speaking, gives you that the sort of principal repayment that needs to be made each June or December. I mean -- there are slight variations due to cash sweep mechanisms, et cetera, most of that actually comes into play after 2024 actually, but broadly speaking, that's how you should think about it and that’s the level of granularity we've kind of guided the market on so far.
Orest Wowkodaw: 33:19 Okay. So, is it fair to do the same thing for that $1.2 billion that to do in '25-'26 roughly, just sort of to put in half between the years?
Luke Colton: 33:29 Yeah. I mean, I think on a rough basis, that's probably right. Again, there will be some variance due to cash sweep mechanisms and things like that. But broadly speaking, that that’s a pretty good position.
Orest Wowkodaw: 33:42 Thank you.
Steve Thibeault: 33:44 Thank you, Orest.
Operator: 33:48 Thank you. And your next question comes from Craig Hutchison from TD Securities. Please go ahead.
Craig Hutchison: 33:55 Good morning, guys.
Steve Thibeault: 33:58 Good morning.
Craig Hutchison: 33:58 With respect to your guidance for this year, in particularly the underground CapEx guidance of $1.2 billion to $1.4 billion, does that include sustaining CapEx or sustaining CapEx on top of that?
Steve Thibeault: 34:13 Luke, do you want to answer that?
Luke Colton: 34:15 Yeah. So, the $1.2 to $1.4, it doesn't include any capital expenditure for open pit, but the $1.2 to $1.4 does include both underground development CapEx and underground sustaining CapEx.
Craig Hutchison: 34:40 Okay. And then the overall kind of cost to complete the underground of $6.75 billion and the additional $175 million. Is that an all-in capital number? Does that also include sustaining CapEx or is that -- is there some kind of amount on top of that number?
Luke Colton: 35:04 The -- no, the $6.75 plus the $175 is just underground development CapEx. There is always been underground sustaining CapEx on top of that. And for example, if you look at our AIF or if you look at our technical report, you can see the underground is going to have a sustaining capital requirement for many, many years into the future. So, the $6.75 plus the $175 is exclusive of underground sustaining capital.
Craig Hutchison: 35:42 Okay. Any kind of clarity in terms of what that number could be between now and sustaining production?
Luke Colton: 35:49 And obviously the 2022 guidance that we've provided includes the amount in 2022 per underground sustaining CapEx and the technical report that we've issued would give you an idea of what the underground sustaining capital requirements are going to be broadly speaking, going forward, kind of over the life of mine I think and I believe there is some additional information on it in the AIF as well.
Craig Hutchison: 36:31 Okay. And maybe a similar question in terms of the production guidance. Does the production guidance include any underground development or is that separate? We've got into our guidance, is that, I guess there is guidance only for the open pit?
Steve Thibeault: 36:47 Yeah. Jo-Anne you want to cover that.
Jo-Anne Dudley: 36:50 Yeah. Sure. Thanks. Thanks, Steve. Thanks, Craig. Yes. So, it does include undergrounds material that will be set to the mill. So, the production guidance is inclusive of the integrated production schedule. And again, the technical report does have some scheduled minute that would help to provide information around the kind of ramp up, we would see and the proportions we would see being fed, remembering that there has been a six-months delay to undercut commencement since the technical report was completed, but it remains materially correct. Is that's helpful?
Craig Hutchison: 37:38 Okay. So, you can’t kind of provide a breakdown between on it maybe a rough percentage basis, what will come from the underground, what comes from the open pit?
Jo-Anne Dudley: 37:47 I mean, its very early days, Craig. So, we've just started beyond the cost and the first bell is in Q3. We don't start underground ramp up until half one next year with some reaching the milestone of sustainable production. So, it takes a while to build the drill points to ramp up the capacity of the underground mine. So, it remains at modest levels for some period to come yet.
Craig Hutchison: 38:19 So there is a pretty wide variance I guess, between the guidance ranges and I think it’s around 40% between copper and gold, is that because the concerns on the sort of ramp-up of the underground this year or is it more just kind of continue to see around COVID or concerns over a grade, maybe you can provide some kind of clarity there?
Jo-Anne Dudley: 38:40 Sure. So, really the production guidance predominantly fixed the open pit performance and as you know, the out of away, the open pit takes several years of cutback time to get into the higher grade areas and that means that we see variability in the delivery of the grade to the mill and that means that as you are ending a size in terms of completing the higher grade and moving into more medium grade areas, while you're trying to advance to the next high grade section. You do see that a change in grade and so the guidance reflects the differences in those areas. So, it's really driven by the open pit and the stage of mining we are at in the open pit in terms of being between anything of Phase 4B and restricting Phase 5 in the Southwest area.
Craig Hutchison: 39:47 Okay. Let me -- one last question for me. Just with respect to the re-forecast of this cost and schedule, it's going to come out in Q2. I mean, is there a risk that the funding forecast of $3.4 billion goes up on that forecast or some of those costs more pushed out to 2023?
Steve Thibeault: 40:12 Great. I would say that the funding gap, if you're talking about -- if your question relates to the new estimate could have an impact on the funding gap of 3.4?
Craig Hutchison: 40:26 Yes.
Steve Thibeault: 40:27 The 3.4, you remember Craig, is for -- it’s covering the full period of 2022 to 2024, okay. So, and the answer is yes, okay, so an increase in the underground development CapEx – development CapEx would have an impact, okay. And because that would be CapEx that will be spent within the period of 2022 to 2024. However, as we mentioned, we're always optimizing there is a lot of elements related to that and when we will have the information that's why we will give you an update on the funding gap, okay. But also, we'll need to update as we did in the last quarter, we will need to update our pricing assumptions, which also have an impact on the funding gap. So, we will give you a full update with the information we have at that time.
Craig Hutchison: 41:28 Okay. Thanks guys.
Steve Thibeault: 41:29 Okay.
Craig Hutchison: 41:30 Thank you.
Operator: 41:34 Thank you. Your next question comes from Jackie Przybylowski from BMO Capital Markets. Please go ahead.
Jackie Przybylowski: 41:49 Thanks very much. Excuse me, most of my questions have already been answered, but I just -- I wanted to ask a question to Luke, if I can. Your interest payment this quarter was quite a bit less than what I had modeled, so I was wondering, Luke, if you could walk us through how your interest expense is incurred and how it's calculated? And if we can expect sort of the similar relatively low levels of interest expense going forward or what might change that? Thank you.
Luke Colton: 42:22 Sure, I can try to give you a bit more flavor there. What you're probably seeing is the interest expense, they get reflected. The main interest payments are actually made in June and December of every year and they are on the PF debt. So, they would incorporate obviously the interest rates that we've secured with the various lenders under that debt. And if you go to the debt note in the financial statements there is actually some further breakout of the interest rates under the different tranches. It would also include the fee that we’re charged by Rio Tinto to provide their completion support undertaking. So those things -- those are the things that, those are the things that are included in that charge, so it's mainly just the interest that we pay or that we incur on that PF debt and then the actual payments to the lenders again, they happen I believe in June and December every year.
Jackie Przybylowski: 43:40 Okay. That's helpful. Thank you.
Steve Thibeault: 43:44 Thanks, Jackie.
Operator: 43:47 Thank you. And ladies and gentlemen, this does conclude your conference call for today. We thank you very much for participating, and ask that you please disconnect your lines. Have a good day.
