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Nevsun Resources Ltd (NYSEMKT:NSU)

Q2 2014 Results Earnings Conference Call

August 1, 2014, 11:00 AM ET

Executives

Cliff Davis – CEO

Frazer Bourchier – COO

Tom Whelan – CFO

Analysts

Adam Low – Raymond James Ltd.

Matt Murphy – UBS Securities Canada, Inc.

Stefan Ioannou - Haywood Securities

David Forster - Merrill Lynch

James Hader - Rossport

Cliff Hale-Sanders - Cormark Securities

Mark Turner - Scotia Bank

Ian Gazard's - BlueMountain

Adam Low - Raymond James

Operator

Good morning, ladies and gentlemen. Welcome to the Nevsun Resources Q2 2014 Earnings Results Conference Call. I would now like to turn the meeting over to Mr. Cliff Davis, President and CEO. Please go ahead, Mr. Davis.

Cliff Davis

Good morning from Vancouver. With me today is our Chief Operating Officer, Frazer Bourchier and our Chief Financial Officer, Tom Whelan. Before I begin, a few cautionary comments.

The following prepared statements and discussion contains forward-looking statements regarding production forecasts, future financial results, as well as the potential arising from exploration programs and potential M&A activity.

Forward-looking statements are frequently but not always identified by words such as expects, anticipates, believes and similar expressions. We encourage all listeners to thoroughly read yesterday’s news release as well as the quarterly financial statements and the entire M&A.

Now I am going to provide my views of what we've accomplished in Q2 and where we are headed. Then we will open up the call to your question-and-answer period. I do not plan to reiterate the details that included in our MD&A.

We had a very good quarter. We mined 6% copper from the Bisha open pit, producing over 47 million pounds of copper and concentrate. We are in 30 million for our Nevsun shareholders, resulting in $0.15 earnings per share and declared a quarterly dividend of $0.035, representing a payout of 23% of our earnings.

Copper production is up, earnings are up and our balance sheet is even stronger. We now have approximately $500 million in working capital and we expect our cash flow in the next 12 months should add even more to our balance sheet.

We are in an enviable position to carry out our growth strategy. We are having successes in exploration of Bisha. Early drill results were released in mid June on two holes from Eritrea, a new area on our exploration license near Bisha. The results included one hole of 1.4% copper and 7.8% zinc and a second hold of 1.1% copper and 11% zinc.

We expect to have additional drill results in early August and as a sign of our optimism, Bisha has increased the exploration budget for the second half of the year, drilling will continue.

Our second quarter demonstrated once again on our ability to deliver results. Production increases, revenue increases, earnings increases and cash flow increases all confirmed what we said we would do. We also had record production in the month of June of 17.8 million pounds of copper and that's about 8,000 tons of copper in the month. During Q2, our operating margin was over $2 a pound or about $4,400 per ton.

All this said, mining is a tough business. It requires a lot of management and attention to detail. The MD&A describes the challenges that are faced and what we have done to manage such a ripper ore body to try to maximize the financial rewards. The key drivers are to produce the highest number of copper units, while ensuring that we comply with off-take commitments on the concentrate.

This means we need to carefully monitor penalty elements that could crop up in the concentrate without sacrificing recoveries and maximizing the copper content in concentrate. As we noted in the news release, during Q2, Bisha mined 697,000 tons of ore, 43% more than Q1 and milled 386,000 tons at 6.6% copper with an 84.6 recovery rate produced to produce 21,500 tons of copper or about 47 million pounds.

We increased recoveries. We accelerated production as we said we would in our last conference call. Also during our Q1 conference call, we advised that our trucking logistics would be fixed in Q2. This has been successfully accomplished with the assistance from Bisha's Eritrea contract trucking firm.

We will continue to focus on and improve our logistics to sell even more copper in Q3 and Q4. We are focused on making money. Our biggest challenge is related to our very high grade and somewhat unpredictable ore body. It requires very careful management to maximize returns. The higher the grade, the more carefully you need to be.

Our financial success in this quarter can again be attributed to two things, high grade copper ore and strong precious metals credits. Our guidance for 2014 remains at 180 million pounds to 200 million pounds of copper at lowest quartile C1 cash cost.

Nevsun remains the highest yielding and one of the most profitable companies in our peer group. In the past three years, Nevsun has returned over $80 million to shareholders in dividends and share buybacks, continually rewarding our shareholders for their investment in the company.

Our shareholders, which together own over 50% of the company, include BlackRock, Vanguard managed by M&G Investments, Franklin Templeton, Oppenheimer and Geologic Resource Partners. We are proud to have such reputable organizations on our shareholder list.

Another integral part of our success is the State of Eritrea. Through our 16 years in Eritrea, we have seen a stable, regulatory and legal environment. This state is our partner in Bisha and together we have both achieved tremendous return on investment. We would like to thank the State of Eritrea for their ongoing support and partnership in Bisha.

Something we did not talk about in our MD&A is our safety record. We are now well over 1,000 days without a loss time injury at Bisha. In other words, we are approaching three years since the last loss time injury. This accomplishment takes effort and discipline, driven by our senior managers at Bisha. It's a remarkable statistic that we are very proud of.

The team at both our corporate office and at the Bisha mine site, puts in huge effort to manage our business and pays a lot of attention to the risk we face. Our enterprise risk management approach to the business is now in its fourth year of implementation and it focuses our attention to the highest priority strategic operating and financial risk. It's a very effective business approach that engages all our management team.

Growth is a very big part of our future, be it in our Bisha regional exploration program or zinc expansion project or M&A. Our shareholders support our investment in growth. Our growth strategy in both exploration and M&A is based on capital discipline with total shareholder return as the fundamental driving principle.

M&A is core to our growth strategy. We intend to build the company on the back of effective due diligence of opportunistic acquisitions or mergers. We've not yet pulled the trigger on a merger or acquisition and we do not plan to get into any more specifics, but I can say we are actively engaged and believe we have the team in place to identify the value and manage M&A opportunities as well as any future development project.

In short we had a very good second quarter. Our 2014 production plan will generate significant free cash flow and we look forward to some exciting exploration results in the coming months.

With that, I will pass the call back to the operator to manage the question-and-answer period. Operator?

Question-and-Answer Session

Operator

Thank you. Ladies and gentlemen we will now begin the question-and-answer session. (Operator instructions) Your first question is from Adam Low of Raymond James. Adam please go ahead.

Adam Low – Raymond James Ltd.

Good morning and first let me say congrats on a strong quarter, both operationally as well as financially. My first question is with regards to the changes that are going to be happening to the mining and milling over the next six months. Obviously as you guys have pointed out in the MD&Â you have to sort of hold back the throughput as grades have been so high.

I am curious as we go forward here, how much of a test have you given the mill? Has there been periods during which you run the plant 6,000 ton per day with supergene and for how long at a stretch?

Cliff Davis

Adam its Cliff, I am going to pass to Frazer Bourchier, our Chief Operating Officer.

Frazer Bourchier

Hi Adam, Frazer here. Yes, we have run the mill at over 7,000 tons a day in fact not sustained periods, we've had a few days where we've done that, either testing or the grade with lower. So as far as the ability for the mill to process 7,000 tons a day or really will probably be 6500 tons a day, that's a 2.4 million per annum run rate we had literally said 7,000.

We don't really have a concern with that. Probably the bigger focus area when the grades come down and we do increase throughput had nothing to do with the mill like I said no throughput.

It's just ensuring that the plant or the floatation plant continues to run efficiently including floatation and regrind mills etcetera. That's where the focus will be.

Adam Low – Raymond James Ltd.

All right. That gives comfort. On the ore that's been stock pilled right now, some of it is primary ore, just wondering what's the risk of some of that primary ore oxidizing to the point where it degrades the potential metal or a [couple] (ph) when you eventually get around the milling?

Frazer Bourchier

Adam its Frazer. I'll answer that again. First of all the amount of primary ore that we mined it’s pretty mine at this point, I don't have the number in front of me, but it's a pretty small amount. However, we are preparing a pad area for that as well as if we get a substantial amount, we will put a cover over top of it. So for now we consider that risk pretty low.

Adam Low – Raymond James Ltd.

Okay. On the strip ratio continues to be variable, just curious as to when we might start to see some catch-up on the stripping? Will that be happening in the second half of this year or could it be in 2015 and sort of a second part to that question, interested to know if there is any element of the strip ratio being low because what you thought would be waste is turning out to be economic mineralization?

Frazer Bourchier

Adam, again Frazer. Let me answer the last part of your question first, thing that the one I remember clearly, no, it's not an issue where we certainly are taking what we thought was waste and converting it into ore. The short answer is the strip is lower than we wanted last quarter. We were disappointed with that, but it has no impact on the overall planned guidance for this year and that we even think minimal for next year, although we haven’t given guidance for next year yet.

So if you look at the tech report, strip ratio should be about 6.7, wherein about 5.2, yet the strip will increase. Next quarter we have a new waste stop, we have new equipment in place. I would expect the year to probably finish about 15% behind plan, around 5.7 to approaching 6, I am not calling for 6.7, we want it, but have no impact on guidance.

Adam Low – Raymond James Ltd.

All right. Thanks. That provides the clarity I was looking for.

Operator

Thank you. Your next question is from Matt Murphy, UBS. Matt please go ahead.

Matt Murphy – UBS Securities Canada, Inc.

Good morning. I was just wondering with your comments on the concentrate trying to manage the penalty elements, can you comment a little more on that? Are you finding some of these elements associated with the higher grade copper and that kind of goes away as you get into the lower grade or is this a surprise how do you deal with it? Thanks.

Frazer Bourchier

Dear Matt, let me answer that first. It's Frazer. No, first of all, no surprises. We've always known that nearly a part we had some minor amounts of selenium, that all has disappeared. So the biggest thing was the sulphide deposit that's managing the arsenic and that's come in below what we thought that there are times you are going to hit high grade sections of arsenic.

So we have many options to keep that below what we want with our off-takers and that's what we're doing and worst case, we've talked about that precious metal concentrate that we have that we've talked about that previous quarters where we could add that in and blend it down.

So that's really what it is. It's a little bit of a reactive approach the way we're managing it now, but as we learn more and more about the ore body, we can be more proactive in that.

Matt Murphy – UBS Securities Canada, Inc.

Sure, okay. And you mentioned good reconciliation on grades relative to your model. How meaningful do you think this could be?

Frazer Bourchier

Matt, good reconciliation. I'm not sure if that was a comment made last quarter or something that you just heard recently, but in terms of all reconciliation. We've mined about -- it's getting a little bit more than early days, we're probably about 20% of the way through this supergene ore body. Although it's still preliminary in the reconciliation work, we had an external report that is literally due next week, so I don't have all the answers.

But roughly it looks like 50-50, 50% of the positive reconciliation was due to having a positive grade reconciliation which is good, although may be a little bit less tons that we thought. And the other 50% is just not mining according to what our original plan was in terms of location or area due to a number of reasons, some in-pit water, reactive ground, looking for some more low grade to blend.

So it's really a combination of the two. But off the positive reconciliation, yes, it's certainly would appear, part of it as a positive grade reconciliation that doesn't necessarily mean a positive metal reconciliation if their tons are a bit less. But we'll have -- I'll probably have that final answer and actions forward over the next two to three weeks for the teams to start to implement.

Matt Murphy – UBS Securities Canada, Inc.

Got it. Okay, thanks. And then just lastly on your comment in the MD&A that see when cash cost will increase on lower byproduct and increased volumes. How much byproduct do you think you might have in the second half of the year? That's it. Thanks.

Cliff Davis

Matt, thanks. It's Cliff. I'm going to turn that over to Tom Whelan, our Chief Financial Officer.

Tom Whelan

Hi, Matt. We've run about $0.39 precious metal byproduct impact on our cash cost year-to-date. You saw in the second quarter that bit down to $0.34. Again, we're thinking kind of around the $0.20 to $0.25 for modelling purposes, just to give you a sense. So that's kind of about another $0.10 drop throughout the second half of the year.

Operator

Thank you. Your next question is from Stefan Ioannou, Haywood Securities. Stefan, please go ahead.

Stefan Ioannou - Haywood Securities

Great. Thanks guys. Just with the back of the block model reconciliation stuff. I mean, obviously, it's been great, but it's been a positive reconciliation. But just where the grades have been higher in those specific blocks, is it very localized portions of the block, like is it blocks that are beside each other that are all carrying higher grade, or is it very localized? And then my, I guess the one concern might be that is there potential or potential there that you may have blocks that are actually significantly lower grade as well? How comfortable are you with the downside risk of not having the grade right in the first place?

Frazer Bourchier

Stefan, its Frazer. I mean it’s a complex issue. However, no, it's not highly localized. These are fairly large blocks that we're mining all, at this time in the past quarter was all what we call the Phase IV north end of the pit. We're now progressing down to Phase V of the south pit, not that we're done the Phase IV, we're just moving around.

Again, indications, early indications are it’s a positive grade reconciliation. There certainly are reasons, a variety of reasons for that. However, tons maybe a little bit less, so our early guess is that we have a positive metal reconciliation but not as significant as what would appear when you see these grades in 6.5% or 6% copper over a plan that's 5% or less.

Stefan Ioannou - Haywood Securities

Okay. Okay, great. And then maybe just one sort of minor accounting sort of housekeeping question just on the cash flow statement. There is a $2.2 million loan to supplier line item; does that have to do with the concentrate trucking company or anything?

Tom Whelan

Hi Stefan, it's Tom Whelan. Yeah, that is an additional loan that was provided to Transhorn.

Stefan Ioannou - Haywood Securities

Okay. So that basically -- that's presumably just to buy the additional trucks that are now -- that improve the whole protest.

Tom Whelan

Correct.

Stefan Ioannou - Haywood Securities

Okay, great. Thanks very much guys.

Operator

Thank you. Your next question is from Dave Forster, Merrill Lynch. Dave, please go ahead.

David Forster - Merrill Lynch

Good morning. I was wondering if you guys could provide a breakdown of the site operating cost, the mining on per ton on material basis and then the processing and SG&A on a per ton build basis.

Frazer Bourchier

Dave, Frazer. I'll start with that. We don't usually get that granular in terms of our unit cost. But suffice it to say on the mining side, I spoke last quarter at the $2 to $2.5 range per ton mined. It was disappointing as that were probably close to $3 right now, but that was due to a fewer issues. One was ultimately it’s all about volume because of our fixed dollar had component.

But we had some in-pit water issues that resulted in inefficient mining. The good news is we've got some bore holes in and that's -- it was started flowing a lot better. We had one last unexpected issue with reactive ground and a failed block that affected us for six, seven days, but that's now fixed. We're quite happy going forward there. And we have a new waste dump that set up now that's a lot closer. So those mining costs, sure, they were higher, but I think will start to get down below $3 going forward.

As far as all the other cost, G&A that's factors no difference there. The processing cost there pretty well in line except the fact that again that's volume driven, so on a unit basis it's about 15% to 20% higher. But its volume driven and I think we've explained -- hopefully, we've explained clearly why we pulled volume back purposely in processing because of higher grade. So the real only area that we're putting more and more focus on is on the mining.

David Forster - Merrill Lynch

Okay. Thanks for that. And on the transportation cost, were there any changes due to the fleet increasing for the trucking?

Tom Whelan

Hi Dave, it's Tom Whelan. No, we've got a fixed price contract on that. So it's just on a per ton basis.

David Forster - Merrill Lynch

Okay. Great. And last question, the timing of the zinc expansion CapEx spend, can you give us a breakdown may be by quarter on when you planning on spending it?

Tom Whelan

Thanks Dave, it's Tom again. I'll take this one. We're just putting the final touches on the budget. Again, we've disclosed publicly $90 million. That number hasn't changed quarter-over-quarter. I think we've guided that we're hoping to shave the few dollars off of that.

But for your purposes, we disclosed in the quarter some of the commitments that we've made, about $22 million disclosed in the notes, so in that $20 million to $25 million for the rest of this year. And then once we get the final budge, I'd feel more comfortable; waiting till that time to give you what it looks like for 2015, 2016.

David Forster - Merrill Lynch

Okay, sure. Okay, thanks Tom, thanks guys. That's it.

Operator

Thank you. Your next question is from James Hader, Rossport. James, please go ahead.

James Hader - Rossport

Hi guys. It's very similar question to Dave actually. Just checking when the throughput increases towards the 6,500 ton per day range. Can we still expect the milling and G&A cost head back down towards the $40 per ton mills outlined in the feasibility study?

Frazer Bourchier

Okay. James, Frazer here. Short answer is yes, that’s what we except to happen. So as to when that happens we've given guidance that we think those grades will start to fall down and hence we will put throughput up towards the end of this year. And then, because again based on our fixed cost component, we expect assuming nothing happens to the price of fuel [indiscernible] that we would get back to that range.

James Hader - Rossport

That's great. Good luck, guys. Thanks.

Operator

Thank you. Your next question is from Cliff Hale-Sanders, Cormark Securities. Cliff, please go ahead.

Cliff Hale-Sanders - Cormark Securities

Hi. Good morning, everyone. Most of my questions been answered, though I have one question on the zinc circuit obviously. Just if you can give us a little bit more color assuming you don't change your plan based on exploration success and you can talk about the opportunities there. When would you start breaking ground on the zinc circuit so that it's ready to go in what 2016?

Frazer Bourchier

Cliff, Frazer. Again, I'll answer that. The zinc circuit itself we are setting up for commissioning, coal commissioning in first half, earlier in the first half of 2016, probably end of first quarter and starting to put throughput in there during the second quarter 2016. So we're excited about the main component that Tom shared earlier, 20% commitments already in and the floatation and regrind already designed, well progressed. And we've got access to primary ore, we're going to stockpile a little bit, but it's easy to get to once we go to -- start the process there; so everything going well. I would think that we're running full tilt by second half of 2016 on the zinc.

Cliff Hale-Sanders - Cormark Securities

And on the exploration side, have you seen anything that would give me an opportunity to push that out enough, or it's not enough drilling in?

Frazer Bourchier

Cliff, by pushing out you mean as in finding more supergene in the line of zinc?

Cliff Hale-Sanders - Cormark Securities

Yeah.

Frazer Bourchier

I think, well, we have interesting results. At this time, we'll be conservative. We're going to assume that's not going to be case, that there will be an exploration, another press release probably coming out sometime this month on some more results that we have that we're pretty excited about in our both Mogoraib and Harena deposits.

Cliff Hale-Sanders - Cormark Securities

Okay. Thanks.

Operator

Thank you. (Operator Instructions) Your next question is from Mark Turner, Scotia Bank. Mark, please go ahead.

Mark Turner - Scotia Bank

Thanks, and congrats guys on a good quarter. I guess most of my questions have been answered, just a little bit of granularity or color too on the one-time charges that I guess were related to sort of supplier in the non-controlling interest. Is there anything you can sort of elaborate there? I know it's a small amount, 700,000, but just looking for some color on that.

Tom Whelan

Hi Mark, it's Tom Whelan. We -- it really relates to the amount of interest that had -- we were debating on in terms of a rate of LIBOR plus, etcetera, and there is a minor disagreement and we ultimately came to a final agreement and had -- and trued it up this quarter. So nothing…

Mark Turner - Scotia Bank

Okay. So that's been trued up for the -- okay, for that whole period. Okay, so truly one-time. All right. Thanks guys, and congrats on the quarter.

Tom Whelan

Okay. Thank you.

Operator

Thank you. (Operator Instructions) Your next question is from [indiscernible]. Vic, please go ahead.

Unidentified Analyst

Thank you. Yeah, could you talk little bit more about your M&A core strategy you've set. I know you can't go into details of what you do, but could you just spell as to what type of M&A activities you would like to see, whether it is within that same area or broader scale? And what do you do with the cash in the interim? What are you doing with the cash?

Cliff Davis

So Vic, its Cliff Davis. With respect to…

Unidentified Analyst

Hi, Cliff.

Cliff Davis

We are simply holding in a very conservative manner. We don't invest the cash in any kind of risk investments at all. So it's secure. Very little of it remains in our Eritrea disclosing our financial statements. But on the M&A front, what we've tried to do is be pretty transparent in the marketplace. We are certainly very interested in diversifying into gold, copper, zinc, other geopolitical areas. Certainly, we're looking in Africa, Europe, the Americas. We don't talk about any specifics. We try to avoid any kind of hints where we might be looking or specific companies.

But it’s a very disciplined approach. We've looked at lot of entities and project both from public companies, privates, from majors. And we're very actively engaged right now with a very good team internally as well as using outside consultants. So we're I think quite comfortable that we're taking very strong approach in identifying and evaluating opportunities as they come forward.

Unidentified Analyst

Are you concerned about being hostile offer for your company while cash is sitting and you're throwing lot of cash? So how do you react to that kind of a possibility?

Cliff Davis

Well, we haven't had any of those kinds of hostile approaches so far. We think we've got a very, very strong shareholder base that we'd not take kindly to a hostile approach unless it was very, very much in their interest, meaning a very significant premium. Our major shareholders, which I noted in my discussion, just in I think five or six of them hold more than 50% of the stock. So we're obviously concerned about them.

Unidentified Analyst

Okay. Thank you very much, Cliff. I appreciate it.

Cliff Davis

Thanks.

Operator

Thank you. Your next question is from Ian Gazard's, BlueMountain. Ian, please go ahead.

Ian Gazard's - BlueMountain

Yeah, hi. Can you talk about the spike in working capital this quarter? What was the result of that and when does that turn into cash?

Tom Whelan

You had a good question. As Cliff pointed out, June was a record month of production. As a matter of fact, we've got four ships out of Nasarawa in that month including two in the last week. So that's why our trade receivable balance spiked up to the $56 million as disclosed in our note six. But just to give you a sense, we collected 43 of that in the first couple of weeks of July.

So again, that's the reason. The timing of the shipping, again we do our best to manage the working capital, but at the end of the day we're going to -- we're not going to let the accounting wag the business dog, we're going do as customers for the business perspective. But -- and we'll hope that gives you a sense of what's happened there.

Ian Gazard's - BlueMountain

And what do you think sustainable working capital level going forward?

Tom Whelan

I would say, this would be an unusually high amount of receivable balance just because there was two ships -- two ships versus receivables that wherein usually we probably have one, so I would probably knockoff maybe $20 million to $30 million off of that number on a go forward basis. Also, the other thing that's hopefully out there, and I know a few have picked up on this is the amount of finished goods that we have on site on the pads, and so we're looking forward to at the increased coaching capacity to monetize that even further. So again, hopefully this will be the high point on a go forward basis.

Ian Gazard's - BlueMountain

Okay. Thank you. And on the exploration spend you'd opt that, where is that the increase going?

Frazer Bourchier

Ian, Frazer. I'll answer that. It's going in to I'd say evenly split between the Mogoraib license area. And probably now biased even more towards Bisha tenement arena based on some results we're publishing later this month. So and the majority of that is drilling. However, with the recent VTEM survey that we did, we're going to be doing a lot more [EM borrow EM work] (ph) just follow-up on that.

Ian Gazard's - BlueMountain

Great. Thanks very much.

Operator

Thank you. Your next question is from Adam Low, Raymond James. Adam, please go ahead.

Adam Low - Raymond James

Thanks for taking my follow-up questions, just had a few on exploration. What is the exploration budget or the remainder of the year?

Frazer Bourchier

Hi, Adam, it's Frazer. I knew you'd be back. I would say probably at least $10 million. But what we do is, its success driven, Adam, so we get some pretty exciting stuff. We haven't really capped the budget, but we approve it let's say on the quarterly or every six month basis. So, for now, it's probably going to be at least $10 million and we'll see what results are.

A little bit of a slowdown in the Mogoraib area because of the rainy season, but we've got these other areas that we're ramping up now in Harena. So we'll see what the number is later this year, but that's what that we have now.

Tom Whelan

Adam, it comes cap in hand to the finance team asking so -- but he's got to deliver result before we release the funds.

Adam Low - Raymond James

Got it. The MD&A you mentioned that there is a preliminary economic study going on for Hambok, just wonder what the timing might be on that.

Frazer Bourchier

Timing probably would be some time in the first half of next year. It won't be this year.

Adam Low - Raymond James

Okay. Last question for me, the MD&A also mentioned that you're applying for the license renewal to the Mogoraib license and there is going to be a mandated reduction in size there. I'm just curious are there other perceptive areas that are within trucking distance where you could apply for new claims. Like when I look at your claims map there are some gaps in between the various licenses. Are those taken up by other parties out there, or is there some of that that you guys could apply for?

Frazer Bourchier

Yeah. I'll answer initially, but Cliff may want to add a bit of color to it. As far as our existing Mogoraib submissions in, there's nothing out of the ordinary there. It's in a renewal process as expected. Sure, worst case is it's reduced by 25%. Even if it is, we're pretty happy with all the access to the ground that we're exploring now, but who knows, maybe it's not. But the way it stands now the usual process, it has reduced by 25% and then industry gets back in touch with this at September level last year; it probably won't take as long this year. But with the new minster in place it might take a little bit of time to get an answer. As for the new exploration licenses in ground we are pretty confident, no one is going to come in and take any of that. We've -- but I'll maybe handle, let Cliff add some color on that.

Cliff Davis

Sure. Really historically we've had a very, very strong working relationship with the State with Enamco our partner, as well as the Ministry and they all understand. It's really in the best interest to make sure that this -- anything in truck distance go through our plan, otherwise it's not very efficient cost wise for the state and we are clearly the only one operating there.

So we are pretty comfortable that the ground that we need access to, we will have access to and like Frazer said, we've got plenty of ground really right now and we are pretty optimistic on what the potential is out of our existing ground.

Adam Low - Raymond James

All right. Thank you. Much appreciated.

Operator

Thank you. There are no further questions at this time. Please proceed.

Cliff Davis

Thank you, operator. I’d like to sum up with a few key messages. First we had a strong quarter with very good financial results. We continue to deliver. We're poised to have a good second half this year.

Second, our operating practices always keep our employees and other stakeholder front of mind for their safety and security. Third, our growth strategy and exploration and M&A is based on capital discipline with total stakeholder return as the fundamental driving principal.

With that I would like to wrap up this conference call and I thank everyone for participating. Have a great day and have a great weekend.

Operator

Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

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