Aurizon Mines' CEO Discusses Q2 2012 Results - Earnings Call Transcript

Aug. 9.12 | About: Hecla Mining (HL)

Aurizon Mines Ltd. (AZK) Q2 2012 Earnings Call August 9, 2012 11:00 AM ET

Executives

George Paspalas - President & CEO

Ian Walton - EVP & CFO

Martin Bergeron - VP, Operations

Analysts

Ovais Habib - Deutsche Capital

Jeff Wright - Global Hunter Securities

Derek Macpherson - National Bank Financial

Chris Martino - Desjardins Capital Markets

Michael Fowler - LOM

Operator

Hello. Good morning ladies and gentlemen. Thank you for standing by. Welcome to Aurizon Mines Ltd. Conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. (Operator Instructions) At this time, I would like to turn the conference over to George Paspalas, President and CEO. Please go ahead, sir.

George Paspalas

Thank you operator, good morning everyone and welcome to the Aurizon Mines second quarter 2012 conference call and webcast. We'll be making some forward-looking statements today and I'll draw everyone’s attention to the forward-looking statements and cautionary note to you as listeners in the presentation and also available on the website.

Participating on the call with me today will be Ian Walton, Executive Vice President and CFO, and Martin Bergeron, Vice President of Operations. Also on the call is Julie Kemp, Corporate Secretary and Jennifer North, Manager, Investor Relations.

We’re starting our presentation on slide five. Quarter two 2012 was a good quarter from Casa with EBITDA at $25.4 million and net profit of $8.6 million corresponding to $0.05 per share which was 29% higher in the corresponding quarter in 2011. We crossed the quarter with approximately $290 million in cash and have started to build on this balance after the 2011 tax payments earlier in the year.

We continue to be able to self fund the significant capital requirements for Casa Berardi this year, as we set up for the future mining areas and deepened the existing shaft. We did complete the Joanna feasibility study during the quarter as forecasted and we conducted a detailed conference call to review of the feasibility study.

I will not repeat the detail here today. However, the high level summary on the project is that whilst the feasibility on the Hosco pit returned positive economics and proven and probable reserves of 1.66 million assets of gold, it was decided to defer a development decision until the full potential of the Heva and Hosco West Extension areas were fully understood.

We believe that we have to be extremely prudent in how we allocated our hard-earned capital and the potential to identify sufficient number of refractory ore despite the overall development of the property and/or supplement the current Hosco pit refractory ore with higher grade refractory ore are worthwhile programs that could reduce the execution risk, gauge capital deployment and enhance the return on the project.

Hence we have been very active this year drilling the Heva and Hosco West Extension and more of that to come later. Along with some initial encouraging good results at Heva and the Hosco West Extension, we have also enjoyed very encouraging results from the in mine exploration at Casa Berardi particularly around the 123 Zone.

Moving onto slide six, you see we have seen a significant increase in second quarter gold production projection compared to the first quarter this year. The change to the mine plan required in the first quarter is now behind us and we are producing at the expected levels.

The second half of the year will realize higher grades and slightly higher tonnage which will push us towards our annual production guidance range by 155,000 to 160,000 ounces. However, we feel it’s prudent at this point to trim our 2012 guidance to approximately 150,000 ounces as we may not fully recover from the quarter one mine plan change within this year.

The slightly lower production and rehabilitation and development costs incurred to recover from the excess drilled area [failure] in the 113 Zone earlier in the year has pushed our anticipated total costs for 2012 from $600 per ounce to $645 per ounce.

Now exploration drilling has returned some very encouraging results around Zone 123 and Martin will talk about the capital exploration in more detail later. The Shaft Sinking project is progressing and we have achieved some significant milestones with the 795 level loading pocket excavation and the sinking hoist installation for the second phase of the shaft deepening now completed.

Turning to slide seven as discussed earlier the Hosco feasibility study has been deferred and we have four drill rigs active on the Heva and the Hosco West Extension areas on the Joanna property. We are anticipating being in a position to have an understanding of the size of the Heva resource by the end of the year.

Now I will hand it over to Ian Walton, our Chief Financial Officer now for a more detailed review of the quarter two financials. Over to you, Ian.

Ian Walton

Thank you, George. As we look at the first slide of the financial highlights you can see that our second quarter revenue from Casa Berardi operations rose 3% to $60.9 million from the sale of 37,345 ounces of gold compared to revenues of $59 million from the sale of $39,900 ounces of gold from the same quarter of 2011. Our average realized gold price in the second quarter was $15.92 somewhere to the realized prices of $15.21 in the same quarter of 2011, although lower than the average London p.m. fix of $1,611 per ounce.

Total sales in the second quarter of 2012 closely matched gold production in the quarter whereas in the same second quarter of 2011, gold sales were 4% lower than production.

If you look at the second line in the slide, our net profit of $8.6 million and $0.05 a share were achieved in the second quarter, up 29% when compared to the net profits of $6.6 million and $0.04 per share in the same period last year. And compared to the second quarter, 2011 results were negatively impacted by the retroactive enactment of higher Quebec resource taxes.

If you look at the cash flow line in the slide, higher revenues and higher net profits have resulted in cash flow before changes in non-cash working capital of $19 million in the second quarter compared to cash flow of $18.4 million in the same period of 2011.

After adjusting for the change in non-cash working capital, operating activities resulted in cash flow of $21.7 million in the second quarter of this year compared to cash flow of $23.1 million in the same period of 2011.

If we look at now at the total cash cost line and the total cash costs were $671 per ounce in the second quarter, 23% higher than the $544 per ounce cost realized in the same quarter last year, as a result of a combination of higher unit operating costs on a per tonne basis together with lower order rate.

The average ore grade in the second quarter was 7.3 grams per tonne to compared to 8 grams per tonne achieved in the same quarter last year. Daily ore throughput of 1940 tonnes per day were achieved resulting in unit operating costs on a Canadian dollar basis of $142 per tonne compared to the $119 per tonne in the same quarter last year.

Now looking at the operating profit margin, the moderately higher realized gold prices were more than offset by higher operating costs resulting in our operating profit margins to decline 6% in the second quarter to $921 per ounce from the $977 per ounce in same period last year.

And then finally on the last line in the slide, our cash balances at the end of second quarter were $208 million compared to the $213 million at the beginning of the year. Our cash balances in the first half of this year will have been impacted by income and resource tax payments totaling $18.4 million in respect of taxes owing for 2011.

This point tells that for 2012 we are making regular monthly tax installments for this year's tax. Our working capital at the end of the second quarter increased to $202 million compared to our year end balance of $198 million. Aurizon continues to have no debt.

That concludes my financial review of second quarter results and I will now pass the call back to George.

George Paspalas

Thank you, Ian. Martin Bergeron, our Vice President of Operations will now take us through Casa Berardi operations and exploration in detail.

Martin Bergeron

Thank you, George and good morning everyone. 176,500 tonnes were processed at Casa Berardi during the second quarter, a 7% increase over the result that we have achieved during the first quarter at an average rate of 7.3 grams per tonne corresponding to an average daily production of 1940 tonnes. Recovery for the period reached 91.7%. As for the deepening of their shaft as George mentioned, important milestones had been reached during the last three months with the completion of the excavation of the loading pocket and the installation of the sinking hoist for Phase 2 at the 690 level.

We now expect full commissioning of Phase 1 with a loading area that 795 level to occur in October. The big backfill project and Shotcrete and cement project are underway with commissioning planned for the first quarter of next year. The transition of contracting employees to Aurizon employees is progressing well and is expected to be completed in late August.

Moving on to slide 10, the focus of the exploration program from surface during the second quarter was to continue to be hold that was started earlier and to target the southeast down dip extension of Zone 123 into the known limits identified by drilling from the 810 level.

It is currently heading toward the Casa Berardi Fault. It was also the focus to test the southwest down [dip] expansion of the enter zone to continue checking the continuity of surface resource between zones 150 and 160. And additional 12,000 meters are planned for the rest of the year from surface at Casa Berardi. From the underground, drilling realized from the 810 levels from the continuity and extension of previously identified lands in the sector of zone 123 as illustrated by the light gray area on slide 11. Infill as well as step out drilling continues to increase not only the resource space that’s gets our priority but also improved the quality of the actual resources.

Drills also operated from the 280 level, mostly these sectors of zone 159 and 160 between zone 146 and 148 to get possible extensions as well as the eastern portion of the zone 124, an additional 24,000 meter is planned until the end of the year from the underground operations.

Unidentified Company Representative

Turning to slide 12, we show a cross section of the Heva and Hosco West Extension areas. While its early day, we’re encouraged both by the extent and the grade of the mineralization we’ve seen at Heva some have found the new mineralized area, we’re calling (inaudible)

Drilling will continue here to determine the extent of the mineralization in all directions. A geological knowledge is growing here and we’re now confident that there is geological feature that divides mineralization time, with non-refractory being the predominant mineralization style with the feature and refractory piece of the feature.

We had seen areas of higher grade refractory mineralization in the Hosco West Extension area and we will continue to drill here to understand the extent of this mineralization as well.

We have a $4.2 million program approved to this year and we intend to drill, 27,000 meters to get a better understanding of the extended mineralization of the Hosco dip or the Hosco area, all the way across to the (inaudible) boundary including Heva.

Moving on to our project pipeline, in slide 13, we continue to refocus our resources here from the advanced stage project. Drilling the Heva and Hosco West Extension area, finalizing the resource estimates from Marban and Fayolle for conducting a full dynamic review for the remaining properties, so we had conducted significant exploration work over the past 18 months.

Turning now to our two months advanced stage exploration projects Marban and Fayolle. We showed Marban on slide 14. This company is a historical (inaudible) gold camp with 600,000 ounces of gold being produced. The properties are owned by NioGold Mining Corporation and we are earning in, making an option payment for ounces at the end of the earnings to get over 50% ownership a feasibility study and some financing by some 65%. This project is well positioned, but however it's on the Golden Highway between Val-D'or and (inaudible) 15 kilometers from Val-D'or. NioGold has some 850,000 ounces in resources on the property in tiny three deposits. Marban and Fayolle one of those three.

It was our intention to come in with the primary focus on the Marban deposit alone. We wanted to invest the extensions and confirmatory drilling of the service department as well as (inaudible) high grade structure that are typical in the area. Our Phase 1 drilling completed in 2011 was immediately followed up with Phase 2 which is now essentially completed as well.

The resource estimate has been completed and in the final review stages. We are riding a final classification of categories for the resource estimate and anticipate releasing this in the near future. Slide 15, takes us to Fayolle 10 kilometers to the north is Joanna property. This property is owned by Typhoon exploration and we are early into drilling and equity prices to 50% and ultimately 65% with the feasibility. Fayolle (inaudible) and has the potential of host the number of small hard drive deposits. We completed the first phase in May and are in final review prices for the result estimate which also we release soon.

And then on slide 16, we see we have more grass roots in early stages exploration projects and we have been reviewing the extensive data generated from drilling in early stage exploration work on these properties and had commenced rationalizing the portfolio to be more weighted towards the same site projects rather than grass roots.

On slide 17, we shall gold to become [independent] gold producer. We believe we are very well positioned in a good volume jurisdiction and excellent balance sheet, good cash flow and developing of exiting pipeline of projects to grow our sales to achieve that target. We continue to be active on the evaluations side, looking at potential transactions that can compliment our organic growth profile and in particular from a period between now and bringing our first organic project online, our focus target is incremental producers as they invested in the single cash flow assets we currently own it.

And we have a good operation to (inaudible). We are also looking at ready to build opportunities or advanced site exploration opportunity that will induct overall development pipeline. We have a significant amount of news flow coming out over the next three months and continued exploration results from Casa Berardi and Heva and Hosco West Extensions, Marban and Fayolle results estimates are undergoing final review and will be released shortly.

Ladies and gentlemen that concludes the formal remarks of today's presentation. Now thank you for your time to listening and we would now like to now turn it over to the operator for any questions that you might have.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) the first question comes from (inaudible) of Euro Pacific Capital. Please go ahead.

Unidentified Analyst

Just I know I've asked a somewhat similar question before but this is obviously before Joanna came out, can you give some more color on the M&A activities you guys are planning for, I mean obviously you are still drilling at Joanna with Heva, Hosco west but do they, how shocked should they be to see you guys divest the entire thing and focus on say Marban instead.

Martin Bergeron

The Joanna property is sort of changed into being more explorations focused at the moment and knowledge and data is early stage. But given that now we have 2.6 million ounces hitting on Joanna at the moment we are obviously having very encouraging drilling be it wide space at the moment we need to understand how far that comes together. You know Joanna does have the potential to host a significant number of (inaudible). I think we know well, we have a positive feed to do; we are studying the Hosco pit. We are just trying to make fully understand the property because it could be a more elegant development process functioning forward in bringing this property to fruition. So at the moment the exploration does take a little bit of time but it doesn't push Joanna up and right out at all.

Unidentified Analyst

Talking about the production guidance range you guys have put out, you are just running the math. You’re implying production of 39,346 ounces per quarter, an average cash cost of 617. That’s obviously quite a little bit lower where we’ve seen in the first half, it's also quite a bit higher than what we saw in 2011 overall. You just may be provide some color on that over 10% price increase that you are seeing?

Martin Bergeron

Sure.

Unidentified Analyst

Especially seeing that you are saving some money on the mining, on the miners that are working directly for you guys.

Martin Bergeron

That's incremental and that’s probably a larger intangible component in terms of productivity Dave but we haven't factored that in. Essentially, last year and particularly in the fourth quarter and the second half of last year, we enjoyed some large swaps that we were mining. We had some really good grade and that gave us excellent performance last year. This year has been a bit of mirror of last year, the second half is definitely lot better than last year but we don’t have the same spoke size ahead of this for the second half of this year.

So our development cost and set up cost are higher. So, inherently even though we've got more tonnes and better grade in the first half of this year, it won't be quite as good as last year because its deeper, its further away and the slopes are smaller.

Operator

The next question comes from Ovais Habib of Deutsche Capital. Please go ahead.

Ovais Habib - Deutsche Capital

Basically, I just want to get a quick recap of CapEx that you spent in the first half of 2012 and what we’re going to see in the remainder of 2012 in terms of the deepening of shaft and base backfill plant as well?

George Paspalas

Right, we spent about $19 million in Q2, $7 million, $8 million on infrastructure, the deepening of the shaft developments getting up to the new zones; all of the infrastructure associated with setting up the future, a bit over $2 million on exploration at Casa. We are anticipating spending for the second half of the year in the order of $50 million to complete a lot of that infrastructure stead up and complete the exploration program for the year. So when you are looking at probably $50 million number for the second half of 2012.

Ovais Habib - Deutsche Capital

So basically you are going to be within the $80 million that you guys are guiding or it’s going to spill over into 2013; some of that will spill over to 2013?

George Paspalas

We are going to be pretty close to the guidance on the CapEx number. The commissioning costs and a small amount of capital that will slide on the backfill in the next year, but I think significant really I think for what you need, you might go to the number that (inaudible) going to be then close to it.

Operator

The next question comes from Jeff Wright of Global Hunter Securities. Please go ahead.

Jeff Wright - Global Hunter Securities

A couple of items; you mentioned in the press release, challenging ground conditions; were there any seismic events should we be concern about seismic area?

George Paspalas

Not at all Jeff; it’s just that well as you know the better the ground the worst the ground at Casa and we will come into a high grade area and it was only access to that when we had ground floor and nothing untoward for us except all of our support and rehabilitation equipment being elsewhere, so with an event that wasn’t that significant however, because of the timing and the logistics of what we are doing underground, the recovery from (inaudible) and the thing (inaudible) won that Jeff is that what happened, the reason why the quarter one production was lower because we let some of that, we couldn’t get to that high grade material, its still late in the mine and we are going to pickup some of that in the second half of this year.

Jeff Wright - Global Hunter Securities

That leads me into another question, what should we be thinking of grade in the second half of the year. Do you have any thoughts on that?

George Paspalas

Yes it’s going to be obviously hard and what we showed in the first half, there is going to be some around 7.5, almost 7.6 grams per tonne.

Jeff Wright - Global Hunter Securities

And then I guess another question kind of setting up for 2013; with production guidance going down to about 150, should we be thinking of 2013 in the eyes of more of a 150 to 160 or do you think you would be able to get back to more of a 2011 production profile, north of 160?

George Paspalas

Well, 2011 was a record and we (inaudible) all the time and we are looking at some plans to maybe look at enhancing production on the ground, but I think it’s safe, it would be prudent at the moment to sit on that 150 to 160 number. That's a good number for cash and even if we can break that, well that's good.

Jeff Wright - Global Hunter Securities

Then last question maybe I missed this, the resource update coming from the in-pit resource at Heva; is that in the third quarter or the fourth quarter?

George Paspalas

It’s going to be pretty close to year-end. We’re still drilling, we got lots of good stuff coming in here, but it's widely spikes and you know, it's going to be cut-off as well, but it's going to be more indicative resource account so to say. Okay, this is pretty good; let’s keep going or there is not enough here. It's that sort of nature of the resource; a very much the first cut-end and a lot of wide space really.

Operator

The next question comes from Derek Macpherson of National Bank Financial. Go ahead.

Derek Macpherson - National Bank Financial

Just had a quick question about second half; the throughout [19.3] ounce per day and do you expect to see that level a little bit better in the second half?

George Paspalas

Yeah, we expect to unless it changes, in fact it’s slightly higher and we’ve started to get over the course of whole month, the last month we came and we constantly deliver around that 2,000 tonnes a day.

Operator

The next question comes from Chris Martino of Desjardins Capital Markets. Go ahead.

Chris Martino - Desjardins Capital Markets

I was just wondering, could you provide some more color where you see your per tonne cost going into next year? Are expecting any improvement over the 143 average for this year?

George Paspalas

You know, so now it’s a good number. One of the things here we are not immune from the operating cost escalations that are in the industry and we are getting a bit deeper and a bit further from the shaft with time, but what we’re hoping with some of these drill results we’re seeing in that 123 also cost might trend up slightly in the future and some of the holes will have more interesting growth if we get to that material depth.

Operator

The next question comes from [Nathan Cristo], Private Investor. Please go ahead.

Unidentified Analyst

Just a question with regard to the feasibility study that you released. One of the recommendations in it was to get the permitting process going despite your decision to delay; is that something you are considering at this point?

George Paspalas

That’s a good question. We are considering that, but given some of the initial encouraging results that we are seeing, we don’t want to start the permitting process and then come up with a status revise and that we have to reach that. So if we continue to have success on the non-refractory side, the project changes a little and you incur a cost every time (inaudible) and also the people, we want to bring people on board community, regulars, etcetera with one concept and go all the way. So we are just holding until we get a little more surety and comfort around what the non-refractory contributions go into the bringing the property.

Operator

The next question comes from [Andy Shawpick], Private Investor. Please go ahead.

Unidentified Analyst

A couple of follow ups on the resources update; George your expectation that your next future resource update will show an increase in proven and probable reserves, which I think were around 1.4 million ounces when you announced it back in February I believe; can you comment at all about just your general expectation?

George Paspalas

Sure, Andy. Thank you. What we've seen at Casa Berardi is last year we increased the resources quite significantly in the mine and particularly in the 123 Zone and the drilling we've done since we saw that 1.4 million of paying number actually identified, now extensions of what we knew, a few more ranges down.

What we've seen historically over the last seven or eight years at Casa Berardi is its difficult to find resources, drill a lot of holes, you have the means etcetera, but once you find stuff and it sticks to get resource ore, the conversion of that into the P&P reserve category is quite high. So I'm not a geologist, I'm not a modeler, but based on history the fact that we've increased the resource significantly, I think its fair to assume that at some point in time in the future when we've done the required drilling that have the confidence in the data that we will continue to increase the in-pit reserves of the property.

Unidentified Analyst

Okay, I guess I will know around the end of this year. As a follow-up to the cost pressures that are being widely experienced throughout the mining industry, your total cash costs were reported at $671 an ounce for this quarter, are you anticipating that there is going to be any further escalation of those cash costs closer to or above $700 an ounce in the remainder of this year or even going into next year?

George Paspalas

No, Andy. The $671 reflects a change we had to make at the mine plant and we incurred some unplanned rehabilitation development costs required to recover from the situation. In fact, if you look at $671, we're actually forecasting $645, so obviously we’re coming down again. The cost pressures on the industry are one thing, but when you have one-off available you have to turn around quickly; sometimes it cost you money and that’s what we experienced in the first half of the year and that’s why we’re at $671 at the moment.

Unidentified Analyst

I think that [Hiko] referenced an average cost of $617 an ounce for the year. Is that something that you're comfortable with?

George Paspalas

As to the second half of the year, we expected some $617 to $645 Andy.

Operator

(Operator Instructions) The next question comes from [Aaron Olson of TSO]. Please go ahead.

Unidentified Analyst

Thank you.

Operator

Aaron your line is cut, would you like to connect again?

George Paspalas

If you think he may – at all, you are breaking up significantly, we can’t hear you.

Operator

The next question comes from Michael Fowler of LOM. Please go ahead.

Michael Fowler - LOM

Yeah I have a question here on Marban actually. Are you still viewing this as sort of an open pit resource or are you having different sort of use on it at the moment, maybe it’s a bit premature to talk about it, but any thoughts?

George Paspalas

It is a bit early, but we came in -- a lot of the previous data was in the top 300 meters of the property and so one of the checks that cause [annuity], we found that we wanted to check for extensions and we found that. So I think it’s fair to say that the resource has an open pit component, but then we also drilled the depth and because we wanted to check for the structures and we found those as well and that data might a little bit premature to talk about on the ground with any confidence.

But it’s certainly from an open pit perspective I think that’s where the bulk of the resource will be, but it will not suit in this part of what we are trying to finalize now.

Michael Fowler - LOM

Just remind us where you are in terms of the joint venture -- how much more have you have got to spend on that and then the other one as well?

George Paspalas

At the end of through drilling at the Marban, we have another 9ish million to satisfy the monetary earning requirement and we are pretty advanced from the other one at Fayolle. It was a $10 million spend and we spent just over right. In both of those cases there is also a time component where we're working with that

Operator

(inaudible) from ANTSO

Unidentified Analyst

Why you dividing the Aurizon at above (inaudible) below 300 meters? Why the 300 meters is important in Aurizon.

George Paspalas

It's not important other than drilling techniques sort of give you a vertical limit and with the type of drilling that was done, that where a lot of the data was generated.

Unidentified Analyst

And in that context I just wanted to ask you about since you came on you looked into the whole portfolio of Aurizon, is there a way that you'll be contemplating more like a camp consolidation and I think some of your competitors in the past and have a quite a big presence. I mean you are on the Cadillac break, where you are right now is quite an important neighborhood and there are other properties in Quebec and I think that the same question is going to apply because of where the area is long.

George Paspalas

Yeah Terry, I mean obviously if you can get some camp consolidation you obviously realize some synergies and you know in the drilling world, it would be nice for us to sort of have Casa Berardi significant operations on the Joanna property and may be coming out of Marban and that will be a nice outcome for us

Unidentified Analyst

Now coming back to Joanna feasibility study, I missed the conference call but I have gone through the whole details. Is there any comeback on this in terms of some refining reengineering and as well as your understanding of some of the issues and refocusing or are you going to already have our results and maybe starting with the Heva in terms of mineralization or mining it rather than thank you I want to leave earlier, escort it earlier?

George Paspalas

Yeah, yeah this could (Inaudible) an answer because it’s a bit of a watch with a number of moving parts and the first thing is that the refractory component on its own may change if we have success in discovering higher grade refractory ore in the Hosco West Extension. If we have a lot of success in the non-refractory component because of the refractory start up it gives us some time to maybe go and negotiate refractory concentrate supplies at the facility to increase the grade of the property as well, so there's lots of flexibility on it. The actual feasibility study itself from a technical basis is pretty hard. Its obviously a part of work done, its very reproducible, we worked the CapEx and OpEx, what changes that this how you adopt non-refractory versus refractory and then bringing in high grade refractory.

Unidentified Analyst

And what would you say high refractory would be that you would define as being attractive. The cut off luckily and 2 to 1.5 grams or what is it?

George Paspalas

Yeah, well, that depends on if its accessible for, via open pit, its probably a number that's anything north of 2 grams is good, I mean if its under a gram it needs to be higher than that.

Unidentified Analyst

And remind me if you remember is the Heva there's is a small shaft diagram in the long section. Is that accessible or is not accessible to go underground and then do it from there?

George Paspalas

Its old and its very small. It goes back to 30s and I think a small amount of ounce is maybe 30,000 or 40,000 of that order. It was taken out of a Heva area. What we’ve seen in that Heva area is some evidence of hard drive binding and I am sure I was down there chasing those things.

Unidentified Analyst

Essentially, your exploration program going to be drilled from the surface period for that area. You are not going to have go underground for underground access for exploration.

George Paspalas

At the moment, the focus is more surface because you know, we keep stepping up and keep hitting mineralization in this upper levels but the geologist are interpreting some structures dipping in, I know they’re going to put some deep holes in to it as well. So it will be primarily surface focused but don’t be surprised if you can see a deep hole or two in that.

Unidentified Analyst

Okay, George can you comment about if you go back the upcoming election as well as the community area around Rouyn-Noranda. That’s a mining town but some of the mining towns are becoming unmining towns. What do you think?

George Paspalas

I think in Quebec around Rouyn-Noranda and particularly around the (inaudible) Mine (inaudible), company is. I am talking about people all being with the company lot longer than that. They’ve built some good relationships out there and we put a lot of efforts and a lot of importance on building good relationships in the community and I am going to tell you my view is that La Sarre, Rouyn-Noranda and Val-D'or mining camp and we talked to a lot of people there and the people understand that mining’s part of their history, part of what is made in the camps and what they are and you don’t get everyone across the line, but there is a lot of support there.

Unidentified Speaker

Last question on the M&A front, beside the camp consolidations I asked earlier, if you ready to go in a geographic sense north-south axis is your focus, I assume how far down south would you go?

George Paspalas

Certainly, well first of all West across Canada or even East across Canada from where we are; certain jurisdictions in the US and very good asset in Mexico with (inaudible). We feel that we are quick on our feet, a very responsive company. We don’t want to encumber around being global and complicated, we want to stick to zones where we can execute quite efficiently in.

Unidentified Analyst

So the further south you are talking about is Mexico, (inaudible) will be or a portion of this?

George Paspalas

No I mean the right asset in certain jurisdictions in Latin America will take; a real constraint is that sort of for our America’s time zone; and we never say never; there is something outstanding we got outside that, but that’s where our focus is.

Operator

There are no more questions at this time. I will now turn the call back over to George Paspalas for concluding comments.

George Paspalas

Thank you, operator and thank you everybody for participating in the call and your interest in the company and I look forward to talking to you next time. Have a good day, bye.

Operator

Ladies and gentlemen this concludes today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

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