Gold Fields' (GFI) CEO Nick Holland on Q2 2014 Results - Earnings Call Transcript

Aug.21.14 | About: Gold Fields (GFI)

Gold Fields Limited (NYSE:GFI)

Q2 2014 Earnings Conference Call

August 21 2014 10:00 AM ET

Executives

Willie Jacobsz - Head, Investor Relations

Nick Holland - CEO

Paul Schmidt - CFO

Taryn Harmse - General Counsel

Analysts

Andrew Byrne - Barclays

David Horton - Bank of Montreal

Patrick Mann --Deutsche Bank

Operator

Good afternoon, ladies and gentlemen. And welcome to the Gold Fields' Q2 Results. All participants are now in listen only mode. And there will be an opportunity for you to ask questions after today's presentation. (Operator Instructions) Please also note that this conference is being recorded.

I would now like to hand the conference over to Nick Holland. Please go ahead, sir.

Nick Holland

Thank you, Dillon. And good afternoon, ladies and gentlemen or good morning depending on where you are in the world today. Thank you for joining us to discuss Gold Fields' result for the second quarter 2014. On the call with me today, Paul Schmidt, our Chief Financial Officer; Willie Jacobsz, our Head of Investor Relations. And Taryn Harmse, our General Counsel. I am please to report that our continued focus on improving execution and delivery at all mines within our portfolio as well as on better margins and generation of free cash flow has achieved appreciable success during the quarter. As we've previously shared with you, all activities undertaken in the Group are singularly focused on the objective of generating a sustainable free cash flow margin of at least 15% at $1,300 gold price. However, as we have also said previously this has to happen without compromising long-term sustainability of our ore bodies through a lack of investments in ore reserve development and stripping, or through high grading. Otherwise it will impact the integrity of our operations.

During this quarter, Gold Fields exceeded the 15% target for the first time by achieving a free cash flow margin of 18% compared with 13% in the March quarter. To achieve this, the Group recorded an all-in sustaining cost of $1,050/oz and all-in costs of $1,093/oz from attributable gold production of 548,000 ounces.

Compared with the same quarter a year ago, the Group's all-in sustaining cost improved by 26% from $1,416/oz down to $1,050/oz, and the all-in costs which includes everything improved by 30% from $1,572/oz to $1,093/oz, a fundamental change in our cost base as I am sure you'll agree. Over the same period, however, attributable production increased by 22% from 451,000 ounces to 548,000 ounces, reflecting the acquisition late last year of the Yilgarn South assets in Australia, so effectively we have been able to bring our cost base down 30% while at the same time increasing our production base by 22%. That's a nice story to put together.

Notably, the South Deep project, which is not yet at commercial levels of production, it really is a project still. If you exclude that from the June quarter results, then the Group's all-in cost was just over $1,000/oz, $1,030/oz and the Group's free cash flow margin was 23%. That really does demonstrate the robustness of the international assets in our portfolio.

Despite a 1% decline in the realized gold price and a 2% decline in gold production against the March quarter, cash flow from operating activities after taking account of capital expenditure, debt service, environmental payments, etcetera, improved by 20% from $54 million to $65 million this quarter. Now that $65 million is after all expenditures, so it really is what we put in the bank account at the end of the quarter -- during the quarter.

Notwithstanding a 7% decline in the gold price from $1,372/oz in the June 2013 quarter to $1,275/oz in the June 2014 quarter, cash flow over the same period improved by 128% from a cash outflow of $230 million in the June quarter to a cash inflow of $65 million in the June 2014 quarter, that's reflects a positive swing of $295 million quarter-on-quarter for the same period last year versus this year, and that is despite a 7% decline in the gold price.

This brings the total cash flow from operating activities, after capital expenditure, debt service costs, and non-recurring items for the year-to-date, to $119 million, and that places Gold Fields we believe as one of the most cash generative gold mining companies in its peer group.

And despite the lower production expected from South Deep for the year, the Group remains on track to achieve its full-year guidance of $1,125/oz all-in sustaining costs and all-in costs of $1,150/oz on attributable gold production of 2.2 million ounces for the year.

Our strong cash generation for the year to date has enabled the Group to declare an interim dividend of 20 South African cents per share. Now this is in line with our well-established dividend policy of paying out between 25% and 35% of normalized earnings to shareholders. And let me restate it again, if we generate the earnings, we will pay the dividends in line with the policy, that's our commitment.

Despite the robustness of our balance sheet, we have decided to further improve the strength and maturity of our balance sheet by reducing the absolute amount of our debt as well as improving our net debt to EBITDA ratios, and also scheduling our data to longer periods.

Now in pursuit of this objective, we've reached an agreement with our group of bankers during this last quarter to amend and extend certain facilities under our syndicated bank credit lines agreement. Under the amendment, the maturity date of commitments totaling $715 million has been extended on the same terms by two years from November 2015 to November 2017, and that really gives us great flexibility and a much improved maturity ladder of our date.

In addition, during the June 2014 quarter, we reduced our net debt by a further $52 million to $1.63 billion. And that's in addition to the $49 million reduction in the March quarter, so for year-to-date, we reduced our net debt, in other words, the capital principal amount by $101 million. Based on a 12-month rolling historical average, our net debt to EBITDA ratio improved from 1.53 in the March quarter to 1.47 in the June 2014 quarter. In fact, if you annualize the June quarter, our ratio is 1.44, so we are improving our debt-to-EBITDA ratio and we are well within our covenants which take us up to 2.5.

Now let's talk about South Deep, an important growth project for the Group.

At South Deep, all mining related activities were severely curtailed towards the end of May, for the final one month of the quarter. This followed two fatal accidents in quick succession unfortunately that was after a period of 13 months fatality free, as well as the separate and unrelated introduction of an extensive ground support remediation program. As a consequence, South Deep's production declined by 14% from 59,000 ounces in March to 51,000 ounces in the June quarter.

The remediation program took all the legacy haulages and arterial routes on the current mine, that's 95-level and above - from where approximately 70% of current production is sourced - that took it out of service. The program will continue for the entire September quarter with a commensurate impact on production for the September quarter compared to the June quarter. While normal production is expected to resume at the start of the December quarter, the ground support remediation program is delaying the opening up of a number of long-hole stopes that were planned to be mined in the December quarter that has a knock-on effect on production during that quarter.

Considering the total impact of the safety stoppages as well as the ground support remediation program, production during the second half of the year therefore is expected to be similar to that of the first half of the year. I am thankful though that we are making very good progress on the ground support, we are about 70% of the way through it, and we are certainly on track to complete this within the next four weeks.

A positive consequence of the ground support intervention, and in the absence of normal production pressures, is that it has afforded management the opportunity to fast track a number of other critical interventions aimed at setting South Deep up for long-term success. The leadership structure on the mine has undergone a fit for purpose transformation aimed at the introduction and enforcement of greater levels of accountability and responsibility through-out the operation.

Management has embarked on a program to address the surplus of old high cost equipment and people on the mine, both of which are prerequisites for an improved safety culture and improved productivity, and are deemed critical to de-risk the mine's build-up to full production. After extensive discussions with the trade unions, a voluntary separation process was implemented which resulted in a rationalization of the employee body by approximately 550 people that represents about 14% of the workforce. Further rationalization is expected as certain contractors are exited and existing employees redeployed to fill their roles. Post the voluntary separation process, South Deep currently has 3,400 employees, as well as 1,900 contractors.

The process of rationalizing the equipment is currently underway and includes the removal of surplus and redundant equipment as well as the limited introduction of more appropriate, specialized new equipment in certain areas. In addition, management and the trade unions have reached agreement on changes to the shift roster which is expected to lead to the optimal re-deployment of employees to further improve productivity. The implementation of the amended shift roster is currently underway. The mine has utilized the hiatus in normal production activities to fast-track an extensive training program aimed at improving the mechanized mining skills of employees.

It is expected that the ground support program as I mentioned will not impact the build-up to full production of 650,000 ounces by the end of 2017. In fact if anything this de-bottles neck the current haulages and ramp make the mine safer and improve logistics as well. We are still hoping that South Deep will achieve cash break-even current gold prices prevailing by the middle of 2015, as previously advised.

We've also been looking at the mining methods of South Deep and I did report on this in our presentation this morning. And soon after the appointment of the new management team in February and in line with the team's overall mandate to improve the mechanized mining culture on the mine, an International Geotechnical Advisory Board consisting of industry leaders from around the world, was appointed to review South Deep's current destress mining methodology. The Board's mandate was to consider the latest developments in the industry as well as the accumulation of new knowledge and experience in the application of the destress methodology at South Deep over the past five years, and see whether there was a different method that could be use to be more cost effective and easier in future. So after extensive studies over the past eight months, the Board have concluded that there are might be two alternative mining methods.

The first is what we call the 4X4 Meter Destress Method, which effectively reduces destress mining from a three-pass system to a one-pass system by increasing the destress excavation dimensions from 2.2m high and 5.0m wide, to 4.0m high and 4.0m wide. Now this will allow for the use of conventional equipment throughout the mine as opposed to having two pass specific equipment, convention equipment and low-profile equipment which would have been needed in the destress areas. So that gives us tremendous rationalization opportunity. In addition to removing the need for footwall stripping to increase cavity the sizes before mining, this will also alleviate logistical constraints and facilitate a fully mechanized mining process. In essence what this means is that we can use the same equipment that we use for our development drives which will very quickly and efficiently do all of the necessary follow-on support at the same time and we'll have one fleet of equipment that our operators can get used to instead of having two three equipment. Now even the dimensions of destress could increase by 4m. The beauty of this it is four on strike and it is all on reef so it won't result in additional dilution, in fact if anything it may give us a little bit of extra gold.

The second method, and the most promising, is what we call the Inclined Mining Slot Method which is a one-pass system which completely removes the need for conventional destress mining as we know today as well as the need for low-profile equipment. It also decreases the mining lead time from opening, the open stokes from around three to closer to six months. So it gives the ability to accelerate the mining.

Now both of these methods, if successful, could significantly de-risk the South Deep build-up plan and future production profiles, and have a meaningful impact on costs. I think it is also worth noting that we also looking at the mining span currently we looking at four corridors of 240 meter mining back and we are looking at reducing that to eight corridors of 120 meter back which not only could improve the geo techniques on the mine but would also provide greater flexibility and the ability to accelerate production in certain areas.

Now both of these methods will be piloted in discrete areas on the more proximal part of the mine during the period from quarter four this year toward quarter four next year. So it is too early to assess whether either of these methods could be commercially deployed, the results of the pilot studies will determine this.

But I think the one point I would make is if the studies are successful, we could potentially roll this out in 2016.

Normalizing of production at Tarkwa in Ghana has taken place. And the transition from a mixed heap leach and Carbon in Leach operation, to a Carbon in Leach only operation has progressed well. And the heap leach operations have been closed. We continue to win the heap leaches and we continue to get gold out of that. But there now new inspection taking place actually beginning of the year. And the realized yield from our CIL plant in Tarkwa increased from 1.19 grams per tonne to 1.29 grams per tonne in the June quarter. The low grade stock pile material to the multi -- then would significantly les than in the March quarter. And so that resulted in the increase in the grade.

Tarkwa achieved year to date production of 285,000 ounces at an all-in cost of just $1,021. A great performance from Tarkwa and we believer there is a lot more to come.

During the quarter, Damang delivered another strong performance despite a nine-day mill shutdown, as a result of which gold production decreased by 13% from 46,700 ounces to 40,500 ounces and all-in cost increased by 15% up to $1,282/oz. However, we believe that during the current quarter and given the fact that we shouldn't expect further more shutdowns Damang should further improver closer to current levels achieved in the March quarter.

On the year to date Damang has achieved production of 87,200 ounces at an all-in cost to $1,192. Despite the unplanned nine-day shutdown, Damang has consolidated its return to profitability from a loss making position a year ago; we think this is going to continue into the foreseeable future.

Now the strategy of revisiting historically mined open pits along the 27 kilometers of strike between Damang in the north and Tarkwa in the south, which were last drilled when the gold price was between $300/oz and $400/oz, is starting to bear fruit and is expected to contribute to an addition to Reserves and Resources by the time of the next declaration is done early next year. Success in this program will redefine the future of Damang in the Gold Fields portfolio, and has the potential to extend the life of the mine substantially.

Turning to Australia. The Group's Australian operations had an excellent quarter, recording all-in costs of $1,042/oz on gold production of 257,000 ounces. This brings total production for the year to date to 502,000 ounces at an all-in cost of $1,072/oz. Central to this performance are the newly acquired Yilgarn South assets which have now been fully integrated into the Australia region and are exceeding our expectations. The star performer was the Granny Smith mine which contributed 85,000 ounces at an all-in cost of $692/oz for the quarter. Year to date, the mine has produced 151,000 ounces at an all-in cost of just $788/oz.

The key focus of the Australian portfolio is the accelerated $52 million of near-mine exploration at all of the mines in the region which is aimed at increasing the Resource and Reserve position of these mines by the end of 2014. Good progress has been made particular at St Ives with the newly discovered high-grade-Invincible deposit and at Granny Smith where exploration results are indicating significant Resource and Reserve expansion potential at the Wallaby underground deposit. Good progress is also being made at Agnew/Lawlers with potential extensions to the Waroonga underground mine as well as the New Holland and Genesis underground ore bodies. During the last quarter, we hosted a series of site visits to our Australian mines, to give the investment community some insight into the outstanding potential of these assets. And these presentations are available on our website at www.goldfields.com.

Turning to disposal of non-core assets. During the quarter, good progress was made with the disposal of two further non-core assets in our International Projects portfolio, with the disposal of both the Yanfolila project in Mali as well as the Chucapaca project in Peru.

Gold Fields sold its 85% interest in the Yanfolila project in Mali to London-listed Hummingbird Resources for $20 million in the form of Hummingbird shares. The consideration represents an acquisition price of $16/oz, which was higher than both the weighted average enterprise value per resource ounce of listed West African gold companies; and recent M&A precedents of West African exploration and development assets, of $14/oz. Now through our shareholding in Hummingbird, which also holds the Dugbe asset in Liberia, we see real potential for Gold Fields to receive significant growth in the value of its shareholding, which was a key consideration in favoring this bid.

The latest sale is that of the Chucapaca project in southern Peru which was announced a couple of days ago. Gold Fields has sold its 51% stake in CDH which is the company owning the project to its joint venture partner Buenaventura, a Peruvian company. The total agreed sale price of $81 million all paid on closing of the agreement and in fact I am pleased to announce that we have actually have the check on hand, and in addition Gold Fields will receive an uncapped 1.5% net smelter royalty on all future gold, silver and copper sales emanating in the area of interest that was a subject of the joint venture. Not only does the consideration ensure that our historical costs on the project are essentially covered, the consideration also represents an acquisition price of $26 attributable gold resource ounce which compares favorably to deals done in Latin America. Of course the royalty of 1.5% provides us with future production upside potentially, especially as we see a company of Buenaventura standing moving this project ahead.

The sale of our holdings in these projects is in line with our strategy of focusing on growing cash flow through quality assets. And this focus has also led us to move away from greenfields exploration as a strategy for growth, in favor of the acquisition of inproduction ounces such as the Yilgarn South assets and near-mine exploration and development at our Australian, Ghanaian and Peruvian assets.

With that, I conclude my prepared remarks. Dillon, we are now ready to take some questions. Thank you.

Question-and-Answer Session

Operator

(Operator Instructions) Our next question comes from Andrew Byrne of Barclays. Please go ahead.

Andrew Byrne - Barclays

Hi, good afternoon. Couple of quick questions if I may. The first one is just around St. Ives, with Neptune and then Invincible coming on, where are you expecting the grade to go to for 2015?

Nick Holland

Yes. We haven't yet on our business plans for 2015, Andrew, but Neptune looks like it's around about 4 grams, but we will probably mine stage one by the end of the year, there’s four other stages, and we want to see the results of stage one before we carry on further. Neptune will start stripping -- no Neptune, Invincible will start stripping in quarter four, and we’ll probably get that into production, I would think around about the middle of next year, and the open pit grades look like they are some around 4 grams a tonne. So this could contribute 25% to 30% of the total mill feed. So it will definitely get the grade up, but I couldn't tell you at this stage what the grade is likely to be because in 2015, we will expect the mill contribution to come from Athena, Hamlet, Cave Rocks, and probably Invincible with a couple of peripheral open pits. So, it is going to be the weighted average of whatever they are.

Andrew Byrne - Barclays

Yes, sure, no worries. And I think with Neptune, it was duringPhase I maybe pausing and then coming back, as I remember from the site visit, just looking at Ghana, on Damang and Tarkwa, from a tonnage perspective, should we expect to see volumes closer to what we saw in Q1 for the next two quarters. I know we have the rainfall out there and then also the (inaudble) at Damang, is that the way to think about those two assets.

Nick Holland

Yes, absolutely. Because the rain was particularly tough in the last quarter. And I would think that we should see an improvement from that perspective. We have given guidance for the year for Tarkwa in February and we should actually do quite a bit better than that. But I don't want to give definitive numbers yet. And Damang I think should also do better. The nine day shutdown of course hit us as well at Damang. So I think the big thing we are looking to do on Tarkwa is finish the CIL expansion by the end of the year which would give us 13 million tonnes of processing capacity, Andrew. And we will probably see the benefit of that into quarter one next year. And the other thing is at Damang we are focusing on making sure that we are maximizing the grade through to the plan by really focusing on dilution in the pits. And we are getting into some of the better grade stuff now deeper into Huni, and in the Saddle and Juno as well. So the grade should improve. So we are more focused at Damang on the grade than we are in the volume, because we are focusing on probably about 4 million to 4.2 million tonnes a year through the plant.

Andrew Byrne - Barclays

Yes, okay, great. And then just few last questions if I may. Looking at the kind of what you have done in Australia, do you kind of look at Iduapriem at all and think there is an opportunity there to consolidate that in with Tarkwa and Damang. Even just from a regional management perspective and potentially look at some synergies on that side, is that something that you’ve looked at and/or are there some obvious reasons why you (inaudible) actually that just doesn't work. And then just go on --

Nick Holland

No. I will wait.

Andrew Byrne - Barclays

That's connected, so if you could just take that one.

Nick Holland

Yes. Look, certainly Iduapriem is contiguous to Tarkwa, the Teberebie portion of Tarkwa is contiguous to Iduapriem. Now, it really depends on what AngloGold’s aspirations are. Given the fact that pulling back Obuasi and what they want to do in the country. So it would depend on first of all their strategic direction with regard to Ghana. And then whether or not a deal could be done on terms that make sense. But I think we would not be averse to the idea. We haven't got a good idea of all the synergies that might exist between the operations. I am sure that there are some. But if the opportunity arose I guess we would look at it.

Andrew Byrne - Barclays

Sure, sounds good. And then just very, very finally, I am just looking at your full year cost guidance, given that you have done all-in sustaining cost of of $1,058 in the first half, when we look at the second half and we say look, volumes in Tarkwa and Damang are likely to be at least in line if not somewhat better. Potentially some of the volume coming in from from Neptune plays out at 4Q, when we look at your cost guidance that seems to imply a second half cost of around $1,200 an ounce. Is that you just being cautious or is there something that we really need to just be vary of?

Paul Schmidt

Andrew, it's Paul. Yes, we are just being cautious. And I think you’ll also need to understand, we’ve said that South people have tough third quarter based on the announcement we put up, but we are being cautious. But I want to bring down my all-in cost and guidance. If we beat it, we’re great, I am not going to -- we will see if we are right.

Operator

Our next question comes from David Horton from Bank of Montreal. Please go ahead.

David Horton - Bank of Montreal

Hi, Nick, thank you for the update. Can you just give us a bit of an idea for South Deep? Where are you at with these two new methodologies the 4x4 and the inclined slot? What's required for you to move beyond it just simply being on the drawing board to being implemented and what kind of timetable could you again imagine for that?

Nick Holland

Sure, David. Now what we've done is we've identified two areas to run the pilots. And these are areas outside the current plant on the eastern side of mine which is in the more distill area. And we set aside these two areas. We are hoping to get these pilots mobilized in quarter four. We need our Geo Technique Review Board to sign off on final pilots and to design that and we probably run these pilots, I don't know maybe nine months or so and then see how they go. And if it works we will decide which method to adopt. Clearly, if we could move to the inclined slot method that would do away with the need for the conventional destressing that we are currently adopt. And will enable us to open up the ore body much faster than what we currently doing. So the only thing we need to there before we could implement any of these, we have to make sure that we have all of the sizes along the one kilometer strike all in the right position because when you change this mining method, you have to obviously change it across the entire mine. And we need to keep our geo technique sequence in shape and place. That will take a few months too. So realistically if it all works, I would say we are looking at beginning of 2016 to implement one of these two methods. The conceptual work is already been done. And the Geo Technical Review Board is very confident that these methods should work. But that said, the proof is in putting, we got to put this into action, run these pilots and see how we end up. So that is the best estimate I can give at this point in time. Obviously, if it works, David, then we will have to not only implement it, but we have to remodel the entire lot of mine and that will take some time too. But I think the best estimate is hopefully by the end of next year, we might be in a position to implement either one of these methods. They are mutually exclusive of course.

David Horton - Bank of Montreal

And each of those two methods, do they use similar kind of equipment? And I guess that the follow on from that is that if you select one or other how different is the equipment and the training compared to what you do now?

Nick Holland

So, we don't need to use any different equipment. It would be the same equipment we are using. We would be using our conventional 282 drill rigs. And we will be using our long haul drill rigs. So no change there. The one benefit I comment about is we can get rid of low profile equipment. So in another words we can work with one suite of equipment that we already have. In terms of skills, this is bulk standard mechanizing mining. And whether you are drilling an inclined slot or whether you are drilling a destress phase, it is all the same principles. It is just a change in the overall mine design. So we don't see a major challenge in terms of equipments because we got the equipment. And the skills are common. Whether we mines we currently mine whether we change, we got to get skills upgraded that's common to all mines.

David Horton - Bank of Montreal

And given just sort of guestimating from the description that you have provided. It would seem that the inclined slot method might have a lower sustaining capital number to the 4x4 until existing one, is that a reasonable way to think about it? Because you are not doing the destress slot as a separate kind of exercise.

Nick Holland

Exactly. First of all, it is one pass mining instead of three pass mining. We would need much less support because the slots would be a no entry areas, so they would be unsupported and the open stuff of course is a non entry area and you just blast that up. So we need a lot less mesh steel anchors, split sets, all of those kinds of things, so we'll save some money there and we'll save time. I think the biggest benefit here is you can actually get mining areas open up in six months as opposed to anything from 24 to 36 months with the current destress mining could, which really requires us David to have a whole grid open up of main access drive, taking the access drives coming through working out the footwall to make sure we can get the big fleet in. So it's going to save a lot of time. I think that's a biggest benefit here is the time that we will save.

David Horton - Bank of Montreal

Okay. Just switching now last operational question on, looking at Granny, in your slide that give a quite number of slides about the --they show where you are sitting and expectations but the quarter itself was surprisingly good grade. Is that just a spike in the grade profile or is it something that we should be thinking about a better grade going forward? How should we be thinking about Granny in a go forward situation?

Nick Holland

Well, we said when we bought the asset that we thought the grade would improve as we get deeper. The other thing is we finding that we are getting positive reconciliations on the grade compared to the resource model. And that something we flag when we bought the mine. So that doesn't surprise us. The other thing we are doing is we are reducing our dilution. There has been a focus on reduced dilution. We probably chopped our dilution by 10% to 15% since -- if you look at the period since we bought it. But the other thing that's good and doesn't come through in heap grade but it comes through the yield is that we have improved our process plant recoveries by 5% from 87% to 92% simply by just changing the pipeline that we use, putting in smaller pipeline has given us better grant. And then also just changing pumping systems to get better water flow and more consistent flows. So that's given us 5% increase in recoveries which we think is sustainable. But I think get into the deeper parts of the mines, we will see the grade getting better and that's borne out by the expiration result. So I think this quarter is being particular good. I am not saying that you should marvel the grade that we are showing here going forward. But certainly we will be getting better grades we believe in the historical gratitude.

David Horton - Bank of Montreal

Okay. And last one probably more on accounting kind of question. With the sale of the assets, would you expect to record a profit or loss on the sale or is it close to breakeven?

Paul Schmidt

Close to breakeven on both of -- the sale of Yanfolila, actually on Yanfolila we are going to receiving $4 million of payment we did last year. So a $4 million positive and Chucapaca, it is fairly much breakeven or small positive profit we are going to make.

Nick Holland

In royalty stream

Paul Schmidt

Yes, between run accounts for the royalties stream.

Nick Holland

Royalty stream if you could value the royalty stream I think we will be in profit but --

Paul Schmidt

Yes, account value of the stretch

Nick Holland

Thanks very much, David. All right, we are going to try and Dillon give another one question -- another five minutes or so, what time we are now, we can probably do about another five to six minutes, maybe two more questions.

Operator

Thank you, sir. Our next and final question comes from Patrick Mann of Deutsche Bank. Please go ahead.

Patrick Mann - Deutsche Bank

Hi, afternoon guys. Just a follow up to the previous question. Have you got a sense of the tax implications on the sale of Chucapaca? And then I think just on the safety review when you announced the kind of the management impose one. You said that it was a new management team identifying kind of weaknesses in the system and that it could potentially -- that they could find other things or and you couldn't guarantee that they wouldn't. Have they finished that process of looking through the mine now? Are you more comfortable that they have to speed with, with everything that's going on and what the support structure across the entire mine look like? And just an update on that please. Thanks.

Nick Holland

Yes. I think we are in a much better position, Patrick, compared to where we were six months ago. But I think we probably need the rest of the year to really make sure we understand all of the issues and areas. But I think slowly but surely the list of issues coming out of the review is getting less and less in terms of new issues coming on. But I think when we finished the year, we'll identify if there is anything more but we think is going to impact any of the years that follow. But certainly much less surprises coming out. There is obviously ground support issues to be done across the mine, but these are not urgent. And we think we can do a lot of those concurrently with normal activity. We have to stop these areas because they were really impacting what we thought was safety and not really the required standard we see internationally. But I am not saying any roadblocks for us to get back to normal production. Let me put it that way in the last quarter of the year. At this stage, we believe we can get back to normal production and flow that into next year.

Paul Schmidt

And Patrick your second question as I said if anything we make it would have improved our cost and maybe made a small profit. So the tax implications are going to be negligible.

Nick Holland

Are there any more questions, Dillon? We could probably take one more.

Operator

There are no further questions, sir.

Nick Holland

Well, thanks very much everyone for joining us today. And we look forward to talking to you again following the yearend results. And seeing you lot of you face to face in the various meetings and conferences that we will be doing over the next number of months. And once again thanks for dialing in and showing your interest. And thank you, bye-bye from us.

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