New Gold's (NGD) CEO Robert Gallagher on Q1 2016 Results - Earnings Call Transcript

| About: New Gold (NGD)

New Gold, Inc. (NYSEMKT:NGD)

Q1 2016 Earnings Conference Call

April 28, 2016, 09:00 ET

Executives

Hannes Portmann - EVP, Corporate Development

Randall Oliphant - Executive Chairman & Director

David Schummer - EVP & COO

Brian Penny - EVP & CFO

Robert Gallagher - President, CEO & Director

Analysts

Rahul Paul - Canaccord Genuity

Steve Parsons - National Bank Financial

Mike Parkin - Desjardins Securities

David Haughto - CIBC World Markets Inc.

Dan Rollins - RBC Capital Markets

Anita Soni - Credit Suisse

Joseph Boskovich - Old West Investment Management

Frank Duplak - Prudential

Operator

Good morning. My name is Chrisy and I will be your conference operator today. At this time I would like to welcome everyone to the New Gold First Quarter First Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question and answer session. If you would like to ask a question during this time simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key.

I would now like to turn the call over to Mr. Hannes Portmann, Executive Vice President of Business Development. Please go ahead, sir.

Hannes Portmann

Thank you, Chrisy and good morning, everyone. We appreciate you joining us today for the New Gold 2016 first quarter earnings results conference call and webcast. On the line today we have Randall Oliphant, Executive Chairman and David Schummer, our COO. Bob Gallagher, our President and CEO, Brian Penny, our CFO and I will also be available during the Q&A period at the end of the call. Should you wish to follow along with the webcast, please sign inform our home page at www.newgold.com. If you are participating in the webcast, you can type your questions on line through the interface.

Before Mr. Oliphant provides us with an overview of the results, I would like to direct your attention to our cautionary language related to forward-looking statements found on slide three of the presentation. Today's commentary includes forward-looking statements relating to New Gold. In this respect we refer you to our detailed cautionary note regarding forward-looking statements in the presentation. You are cautioned that actual results and future events could differ materially from those expressed or implied in forward-looking statements. Slide three provides additional information and should be reviewed.

We also refer you to the section entitled risk factors in New Gold's latest MD&A and other filings on SEDAR which set out certain material factors that could cause actual results to differ. In addition, at the conclusion of the presentation there are a number of end notes that provide important information and should be reviewed in conjunction with the material presented.

I will now turn the call over to Randall.

Randall Oliphant

Thank you, Hannes. Good morning, everyone. Thank you for joining us today for New Gold's first quarter earnings call. Slide four provides a few of the highlights from the quarter. Higher quarterly production from New Afton, Mesquite and Peak resulted in consolidated gold production of 91,000 ounces and copper production of over 25 million pounds. Costs during the quarter were significantly lower than 2015 due to the combined benefit of the depreciation of the Canadian and Australian dollars, lower sustaining capital and the implementation of various cash flow optimization initiatives. This significant decrease in all in sustaining costs enabled our Company to generate a very robust margin of $448 an ounce or 37%. In the first quarter we generated $62 million of cash flow or $0.12 a share. We finished the quarter with cash of $298 million.

In addition, to our cash balance we should receive the remaining $75 million stream deposit from Royal Gold in the middle of the year. Finally, at Rainy River construction activity continues to move forward. After spending $82 million during the quarter we progressed overall construction to 30%. Today we're 35% complete. Slide five provides a summary of our quarterly financial results. Revenue for the quarter was $155 million, lower than 2015 due to the lower metal prices. Despite the decrease in revenues, our operating margin for the quarter increased by 5%. This was a result of lower operating expenses attributable to the depreciating Canadian and Australian dollars and the Company's ongoing cash flow optimization.

The Company had adjusted net earnings of nil. The $5 million change from 2015 was primarily due to the increase in the operating margin. A decrease in finance costs was offset by an increase in depreciation. The decrease in finance costs was driven by more of the Company's interests being capitalized to Rainy River. New Gold's reported quarterly earnings of $27 million or $0.05 a share. The significant improvement from 2015 was primarily due to non-cash foreign exchange movements. The first quarter of 2016 included a $34 million pretax foreign exchange gain while 2015 included a foreign exchange loss. Underpinned by our solid operating performance we generated quarterly cash flow of $62 million or $0.12 a share.

Slide six provides a summary of the gold option contracts we entered into in early March. With our focus on the development of Rainy River and our plan to spend $500 million this year, we felt it was prudent to increase our revenue certainty. The contracts covered 30,000 ounces of gold a month from April through the end of 2016 for a total of 270,000 ounces. We were able to purchase put options at $1,200 and largely covered the cost by selling call options at $1,400. The net cost of entering the contracts was $2 million. As most of you know, Bob Gallagher announced last September that he would be retiring in June of 2016. As part of our transition plan Bob has been working very closely with our COO, Dave Schummer since Dave joined New Gold in the fall of 2014. To facilitate a smooth transition Dave's initial focus was on our portfolio of operating mines.

Now with the further operating support in place, he is also taking a more active role in the management of Rainy River. Prior to joining New Gold Dave spent over 20 years building and operating mines for New Mine. We feel fortunate that Dave is bringing his significant breadth of experience to Rainy River. We look forward to Dave and Bob, who of course will remain on our Board after his retirement, continuing to work together to execute on the successful development. I'll now turn the call over to Dave, who will speak to our strong first quarter operating results and provide additional details on the developments of Rainy River. Dave?

David Schummer

Thank you, Randall and good morning, everyone. Slide seven provides a summary of our first quarter consolidated and mine-by-mine operating results. At New Afton we had a strong quarter and both gold and copper production increased relative to the first quarter of 2015 due to the combined benefit of a 14% increase in mill throughput and higher recoveries resulting from the successful mill expansion. New Afton's all in sustaining costs during the quarter were impacted as lower byproduct revenues were only partially offset by the depreciation of the Canadian dollar. Sustaining capital of $9 million was slightly below the prior year quarter. Mesquite also had a very solid year.

Gold production increased by 7% to 27,000 ounces, primarily attributable to an increase in ore tons placed on the leach pad. We expect this increase in ore price to benefit gold production for the remainder of the year. Both cash costs and all-in sustaining costs were significantly lower than the prior year quarter and really benefited from a combination of higher gold production and lower diesel prices. Sustaining capital during the quarter of $8 million was $11 million lower than the prior year quarter as we spent less on both capitalized stripping and the leach pad expansion. Now at Peak, Peak's first quarter gold production of 20,000 ounces and copper production of 3 million pounds were consistent with last year. Peak's costs during the quarter were lower than the prior year period due to the depreciation of the Australian dollar and lower sustaining costs.

As planned, at Cerro San Pedro gold production decreased to 19,000 ounces as the mine is in its final months of active mining. Costs remain low and continue to benefit from limited capital expenditures as the mine transitions into residual leaching. Our four operations are performing well and we've had a strong start to the year. As always, we'll continue to evaluate opportunities to enhance our performance and cash flow throughout the year. But I am happy with what our teams are accomplishing and remain confident that we'll achieve our production guidance of 380,000 to 400,000 ounces. Slide eight provides an overview of Rainy River. Construction activities continue to advance and at the end of the quarter overall construction was 30% complete and as of today given we've had another month after the end of the quarter, we're we sit at 35% complete. We spent $82 million during the quarter bringing our total spend on the project to almost $400 million.

As we work to progress construction through the balance of the year, our total 2016 capital program of $500 million remains unchanged. The series of photos on the right side of the slide show significant progress that has been made on our plant site over the last 12 months. Slide nine provides further details on our development progress at Rainy River. Our focus for 2016 remains on construction of the process plant, completing the power lines, completing the mine water management pond, beginning construction of the tailings dam and ramping pre-production mining activities. As previously mentioned, overall construction is over 30% complete with our goal continuing to be to get this to 75% by the end of the year. In addition to the progress that's been made on the construction side, our mining activities are also ramping up very well.

During the first quarter, the team moved over 2 million tons of waste and over burden and recently set a daily record of 65,000 tons mined. While constructing the water management facility we encountered specific areas where the strength of the foundation is less than estimated for the original design. Based on our analysis to date which includes results from additional geotechnical drilling, we expect to include additional support by simply adding rock buttresses at the base of the water management berms. This is a very widely used and proven approach. In fact, I personally have implemented this type of design modification at multiple projects throughout my career and once we complete our detailed engineering analysis and design modifications which should be in the next few weeks, we will apply for the necessary permit amendments before beginning the remediation work.

Now after encountering these ground conditions at the water management facility, we wanted to take the extra step and do additional geotechnical drilling to test the foundations of the tailing management facility. This drilling remains ongoing. However, based on the results we've seen to date, one section of the starter dam which represents approximately 30% of the initial structure is expected to be redesigned to include flatter dam slopes in certain areas and the insulation of wicks rings. We currently utilize wick rings at a few of our sites and are very familiar with the application and performance of those types of welds. Consistent with design changes for the water management facility, we will apply for any necessary permit amendments and when all of our analysis is complete which is expected to be in the third quarter, early in the third quarter.

We estimate the remediation and modifications to the construction of the water and tailing management facilities should cost approximately $35 million. Overall I remain very pleased with the construction progress that has been made at Rainy River as reflected by the completion percentages noted on the slide and we continue to target first production at Rainy River in mid 2017 and look forward to seeing the project through development and into the operating phase. With the potential to produce over 300,000 ounces at low cost it will be a very meaningful addition to our portfolio of operating mines.

I'll now turn the call back over to Randall.

Randall Oliphant

Thanks, Dave. Slide 11 provides an overview of our Canadian portfolio. As you can see, our nexus is increasingly shifting to Canada. This works well for us for a lot of reasons. Whether it's permitting experience our first nation's relationships or tax synergies the heart of our Company today is New Afton. With the successful mill expansion increasing our throughput to over 15,000 tons per day, we will continue to see significant cash flow there for many years to come.

Once in production, Rainy River will be our second flagship asset producing over 325,000 ounces at low cost. After that we have our Blackwater project, another multi-million ounce New Gold district in British Columbia. This is what makes us so excited about the future of New Gold. We're moving towards larger scale, lower cost and longer life projects and they are all in Canada. Slide 12 provides and summarizes our Company's share performance since the beginning of 2009. That's when the merger of New Gold and Western Gold Fields was announced. The stock price is more than triple what it was then with the gold price up 44% and the gold index down 37%. Consistent with our focus on long-term shareholder value creation, we're very proud that over the last seven years New Gold had generated an 18% compound annual return.

In closing, slide 13 highlights New Gold's investment proposal and why we're so excited about the future. We have a portfolio of assets and top-rated jurisdictions with our focus increasingly in Canada. Our Board and Management Team have the experience to execute on our plans. Importantly they are significantly invested in our Company. Our low costs enabled us to deliver $52 million of cash flow in the first quarter even though metal prices were lower than in 2015. Our portfolio of organic growth assets includes projects at various stages of development providing us with flexibility as we move forward. By reinvesting the free cash flow generated from our operations in longer life, larger scale and lower cost assets we believe we're well positioned to continue our track record of long-term shareholder value creation.

Thank you again for joining us today and for your continued support of New Gold. That concludes our formal remarks and now we'd be happy to answer any of your questions.

Question-and-Answer Session

Operator

[Operator Instructions]. Our first question comes from the line of Rahul Paul from Canaccord. Your line is open.

Rahul Paul

At New Afton it looks like throughput in Q1 was higher than design at 15,250 tons a day, just wondering what the reasons were for the big improvement and throughput and do you think that's sustainable going forward or would you expect it to come back down in Q2?

David Schummer

I think 15,000 is reasonable expectation going forward and it's really on the back of continued optimization with respect to as we brought the new expansion on and the good work the people have done on site and some of the continuous business improvement that we've done but I think that's a reasonable expectation going forward.

Rahul Paul

And then just moving onto site costs at New Afton, you spoke about the impact that the depreciation of the Canadian dollar but are you seeing costs come down in local currency terms as well now that the expansion is pretty much complete and the mill is doing better than you expected it to be?

David Schummer

Not dramatically. I would say that we're continuing to -- we put a business improvement function in place and we're continuing to identify opportunities to optimize costs, as everyone in the industry is, but I would expect more of the same going forward.

Rahul Paul

Okay and then last question, I guess more of a clarification, you indicated some changes to the design of the tailings facility at Rainy River that would require some amendments to the permits. Looks like you're not too concerned but is there a risk that this could impact development time lines, permitting delays and that sort of thing?

David Schummer

No we had some float in there, if you will, with respect to when the project was going to come on line and when those structures were going to be completed and not to trivialize the situation but essentially these are low level ranging from 3 meter to 12 meter dams that we're simply flattening the slopes out and buttressing a bit and we'll work closely and we continue to with the MNRF and they've been very supportive in terms of working out the best solution going forward but that one is not worrying me particularly.

Operator

Your next question comes from the line of Steve Parsons from National Bank Financial. Your line is open.

Steve Parsons

Couple questions, mainly on Rainy River, just want to drill down a bit on the geo tech issues at Rainy. Is the investigative work complete in terms of identifying the source of the issues there and then profiling the tailings to identify if there is any other problem areas?

David Schummer

We're about 90% so we've got the work done on the water storage facility which again is a low level water containment berm and we're continuing drilling on the tailings facility and we'll be done in the next few weeks and go from there.

Steve Parsons

So you're 90% done on the water management facility and 90% on the tailings too?

David Schummer

I would say 90% overall.

Steve Parsons

Okay and just on the tailings and the plan to move to shallower slopes there on a portion of the tailings, is this a strategy that you'll have to use for subsequent lifts on the tailings dam as well and will that have implications going forward on sustaining CapEx?

David Schummer

Yes potentially and likely to answer your question directly. We'll, if we have to flatten the start we'll likely have to continue in some of those zones at flatter slopes and yes that's correct.

Steve Parsons

Okay and maybe lastly, just so I understand what the regulators are going to be looking at, you still have to schedule to permit to be received for any, is that correct and will there be an impact on the schedule too with this redesign?

David Schummer

Not currently anticipated; it certainly is something we focus on actively but it's not currently viewed to be a restriction to the mid 2017 startup.

Steve Parsons

Okay and is this -- would you say this is now a critical path item for and the repair -- if the repairs and the permitting, a critical path item for Rainy going forward?

David Schummer

Well, you always have a series of critical path items, right and this is certainly one that we have to get completed but again, we had some float in there between when these structures were meant to be completed and startup so we're still targeting the mid 2017 startup.

Operator

Your next question comes from the line of Mike Parkin from Desjardins.

Mike Parkin

Just a couple questions, on CSP when do you expect the mining to be complete there?

David Schummer

Well, it's a good question and we continue to encounter pore free ore of very reasonable grade so the rough estimate would be over the next month or two but as long as we have had space which we do have some capacity there, it may continue on a month or so later.

Mike Parkin

Okay so like kind of end up Q2 is--

David Schummer

Yes I think that's fair.

Mike Parkin

And then the budget beat on the tons moved at Rainy, can you give a little more color on that as to like what was driving that? Is it you're just more efficient on your -- on how the timing of how you move that or what was it that resulted in the lower budget?

David Schummer

As a Company we try to set reasonable expectations around productivity and we knew we were going to bring in -- be bringing in some local operators as well as experienced operators so we're actually just simply beating our expectations and we've done a good job with roads and we've got a bit more rock than I probably anticipated which is always a good thing when you're starting up a mine. So we're working through the transition of clay and overburden into rock and simply beating our expectations slightly.

Mike Parkin

Okay and has the spring thaw been a challenge for you or is that proving to be okay?

David Schummer

Well, it's never any fun for sure but it's been as expected and we work through it and we've got rock which I've started mines without rock and it's a bit tough but we've got plenty of rock so that makes things go easier for us.

Mike Parkin

Okay and then just speaking to the gold and copper recoveries at New Afton, do you expect those to improve further as you kind of bringing up the mill to these very good rates? Do you expect to lose a bit because of that higher throughput or do you expect to actually maybe eke out a little extra still?

David Schummer

I would expect more of what we've seen right now. There's always a relationship, as you know, between throughput and recovery and we go to work every day focused on balancing that relationship but I would expect more of the same going forward.

Mike Parkin

So more improvement or kind of steady pace for it?

David Schummer

More of what we've seen so far. I mean we'll always try to improve it but I would say it's safe to expect more of what we've seen so far.

Mike Parkin

So then just one kind of follow-up question on Rainy, is the tailings facility design on the center line construction or if you were having to lower the angle could you move to a center line to reduce any incremental capital that might be the case of the bigger volume required because of the lower slope angle?

David Schummer

Currently the center line we will examine other opportunities to go to modified and other construction methodologies for sure but right now it's currently a center line.

Operator

Your next question comes from the line of David Haughton from CIBC. Your line is open.

David Haughton

Just following on from that materials handling at Rainy, I take it that from the commentary that at this stage it's just waste and overburden that has been moved. When would you expect to be getting some ore being mined?

David Schummer

Well, David, I'd like to pin the exact date down for you. What I know is we'll have a very significant stockpile pushing towards between 1 and 2 million tons of ore based on our most recent plans in terms of stockpile so the exact date that we encounter, I can get that to you.

David Haughton

Yes exact date is not really required. I was just wondering whether you're expecting it say in the second half of this year or that kind of broad number?

David Schummer

Yes it's going to be probably between the second half of this year and the end of the year and again at the tonnages we're moving to get the quantities I just quoted to you it's going to have to be in that period and I can get the exact date to you if you want it.

David Haughton

And just having a look at New Afton, notice that you tweaked up the operating cost and all-in sustaining cost numbers a bit and having a look at the performance in the first quarter with some pretty good byproduct cash cost. Just wondering what made you feel as though you had to lift those costs going forward, what are you seeing that once, that you want to have that conservatism in there?

Hannes Portmann

We adjusted the costs for both New Afton and Peak from our mid-January preliminary operational results and kind of outlook for the year and the formal guidance we put out at our Investor Day on February 17th and the reason for that was simply a change in the FX rate assumption because the Canadian Australia dollars appreciated from early January to mid-February so we moved from $1.45 assumption to $1.40 so that's when the slight adjustment in our cost guidance took place. Since then, so since mid-February we haven't changed any of our guidance and the guidance that we have in our Q1 results is consistent with that.

David Haughton

Yes I appreciate the FX move but I would have thought that with the copper move, course you're using a $2 assumption there that that might have partially offset it. I was just wondering whether there's anything different in what you're expecting as far as the grade goes or any specific unit costs.

David Schummer

No, no change in any of the local currency costs or grade so it's just a function of those two assumptions but what we didn't want to do is every quarter be changing FX assumptions and copper price assumption so we keep it at the level that we set at the beginning of the year and, as you know, we provide all the sensitivities to those things.

Operator

Our next question comes from the line of Dan Rollins from RBC Capital. Your line is open.

Dan Rollins

Dave, just following up on the CSP question, with the additional ore you're seeing, does this sort of change the potential to get more ounces out this year or are you just stacking a little bit of lower grade that will balance out the residual leaching that gets pushed out in 2017 and 2018?

David Schummer

Yes there's definitely some upside there because the grades that are coming through are consistent with what we've been mining lately if not slightly higher so if I had to range it, it would be in a few to 5,000 ounces potential there to obviously recovery when you get high on the pads always a bit more difficult than you'd like to predict but there's definitely some upside to do a bit better at CSP this year.

Dan Rollins

Okay and are you -- is this stuff that's pretty easy to grab, like low strip or are you -- do you have any push outs to get to some of this ore?

David Schummer

No it's we're in that phase in the pore free right now. We've already done the strip and we've drilled ahead of ourselves a bit and we keep doing that to confirm that we're not recreational mining, that we're mining profitable ore and how -- if that's going to go another bench or two is kind of hard to predict but we're drilling ahead of ourselves to -- and we've got some pad space so there's some upside there.

Dan Rollins

Nice benefit to have and then maybe if Brian is on the line he had talked about at the Analyst Day about $45 million of working capital inflow. I realize some of that is the residual leach at Peak, sorry at CSP, but there was also some discussion I thing around about a $10 million to $12 million of tax rebates coming in from the Mexican government. Have you started to see those rebates coming in?

Brian Penny

We've held our own. We're going through an extensive audit. You know [indiscernible], Bolivia is probably about four months in arrears which is spectacular considering what's going on in Mexico and the big chunk of it is we've refiled some U.S. returns carrying back some losses from last year and we expect that $7 million refund to come in the second half of this year.

Dan Rollins

And you've got that initial $4 million already then?

Brian Penny

Yes it came. Believe it or not, it came in January 3rd.

Dan Rollins

And then maybe, Dave, at Peak going into the year with the weaker copper prices when you probably put your plan together late 2015, there were some discussions about moving away from some of the copper zones focusing more on the gold rich zone. Has the copper price moving from 2 to 2.25 changed that outlook where we'll see a little bit more copper given you did produce a lot in Q1 relative to plan or is it really just still back on plan?

David Schummer

Well, it's certainly a series of deposits that's commodity price driven in terms of where we actually mine profitably. There's a slight chance or a small chance that as the copper price stays steady or increases that we'll adjust our mine plans and developments slightly but I wouldn't expect dramatic changes there.

Dan Rollins

Okay and then just one last question for me on Rainy River with the additional $35 million on the capital budget, can you confirm if the contingency originally budgeted has been used or I guess has been put towards other items or if there's still some contingency available in the budget?

David Schummer

Most of the contingency has been allocated. At this point in time there is a little bit left, probably $10 million or $20 million, but other than that we expect, as we indicated in our news release that this will increase the cost by $35 million.

Operator

Your next question comes from the line of Anita Soni from Credit Suisse. Your line is open.

Anita Soni

A few more questions for David on the dam construction, so the areas that are affected are they -- is that the south wall or is that north wall?

David Schummer

I can send you a map but it's basically on the southern side and there's a series of five dams that are all about 900 meters long and they fit together in a configuration that's hard to describe over the phone but I think it's in the -- is there a map in the--? Okay we can probably send you something to look at, Anita, but it's on the outside.

Anita Soni

Sure, and so that would be the 4.6 to 1 for 5.5 to 1 vertical?

David Schummer

Well, yes they range in slope angles from 3 to 1 to something greater than that. What we'll have to do and again I don't mean to trivialize or simplify this, but is simply flatten out some of the areas to say 5, 6 or 7 to 1 where we've had some areas that have had a little bit of settlement. It's really that simple.

Anita Soni

So it's the ground underneath the dam that's the issue rather than the actual deposition of the dam itself or the toe berm itself, right?

David Schummer

Yes there are some -- course there are sands in some areas that have settled a little bit but it's quite easily fixable.

Anita Soni

Okay and if you could just go over with me, I am looking at these, the tech report and to me it looks like these are downstream tailings designed so if you could just clarify that for me. There's a more conservative one but with all these [indiscernible] options go to upstream but if you had, sorry center line, if you had modified it from what's in the tech report maybe we could have a discussion on that.

David Schummer

Do you want to take that one, Bob?

Robert Gallagher

Really what designs evolve are yet to be seen. We're still basically doing the analysis on the tailing down but certainly our--

Anita Soni

So what's in the tech report may not be what you are actually constructing right now? Is that what you are saying?

Robert Gallagher

No we're not constructing anything right now on the tailings dams.

David Schummer

As the tech report, as you said, probably has -- it does have a downstream set up and we're looking at everything from downstream to modified center line to center line and at the appropriate time when we actually start building we'll have that worked out with the regulators and obviously the most profitable approach for us.

Operator

Your next question comes from the line of Joseph Boskovich from Old West Investment Management. Your line is open.

Joseph Boskovich

I wondered if you could add some color to a Pierre Lassonde stepping off the Board and he is a pretty large shareholder, if he has given any indication as to why -- what his plans are with his holdings in the Company and then the future of your relationship with him?

Randall Oliphant

Yes, Joe, it's Randall Oliphant speaking. I wouldn't read anything into that at all. Pierre is, as we talked and of course he and I served together on the Board of Franco-Nevada and we were just talking to all of our Directors actually about but sort of they've all been around for quite a while and what their plans are and Pierre reminded me that it's not a life sentence to join the Board so Pierre is a great friend of our Company, great friend of me personally, partners with him at Franco.

He is a significant shareholder, has no plans to do anything in terms of changing his shareholding and really believes that when Rainy River comes on stream that our stock will fly just like it did when New Afton started so he's a long-term friend and shareholder of our Company.

Operator

Your next question comes from the line of Frank Duplak from Prudential. Your line is open.

Frank Duplak

I was just curious on how I should think about the incremental $35 million CapEx at Rainy River. Is it all a 2016 number so CapEx would go from 615 to 650 in this year or just if you could give us what the 2016 CapEx thoughts are right now that would be helpful.

Brian Penny

Yes our budget and our plan for 2016 is $500 million U.S. dollars. That will be unchanged. Most of these expenditures will fall into 2017 and a few small items will go from 2016 to 2017 so in essence everything, the $35 million, is in the first quarter of 2017.

Frank Duplak

And then is 615 still the right number for 2016 for total CapEx?

Hannes Portmann

Yes for the total CapEx for the business as a whole which includes the sustaining capital at our four operations yes that is the correct number.

Operator

There are no further questions in queue at this time. I'd like to turn the call back to our presenters for any closing remarks.

Hannes Portmann

Well thank you very much, operator. To all those of you of you who have joined us today thank you once again. As always, should you have any additional questions, please don't hesitate to reach out to any of us by either phone or email. Thank you very much and good luck today.

Operator

This does conclude today's conference call. Thank you for joining us. You may now disconnect.

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