Alamos Gold's (AGI) CEO John McCluskey on Q3 2017 Results - Earnings Call Transcript

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About: Alamos Gold Inc (AGI)
by: SA Transcripts

Alamos Gold Inc (NYSE:AGI) Q3 2017 Earnings Conference Call November 2, 2017 11:00 AM ET

Executives

Jamie Porter - Chief Financial Officer

John McCluskey - President and Chief Executive Officer

Peter MacPhail - Vice President and Chief Operating Officer

Aoife McGrath - Vice President, Exploration

Analysts

Rahul Paul - Canaccord Genuity

Dan Rollins - RBC Capital Markets

Kerry Smith - Haywood Securities

Mike Parkin - National Bank Financial

Anita Soni - Credit Suisse

Bryce Adams - Scotiabank

Operator

Good morning. I would now like to turn the meeting over to Mr. Jamie Porter, Chief Financial Officer. Please go ahead.

Jamie Porter

Thank you, operator and thanks to everyone for attending Alamos’ third quarter 2017 conference call. In addition to myself, we have on the line today, John McCluskey, President and CEO and Peter MacPhail, Vice President and COO. I would like to remind everyone that our presentation will be followed by a Q&A session.

On this call, we will be making forward-looking statements. Please refer to the disclaimer on forward-looking statements in our news release and MD&A as well as the risk factors set out in our Annual Information Forms. All forward-looking statements on this call are qualified by these cautionary statements. There can be no assurance that our forward-looking statements, even though considered reasonable by management based on information on hand, will prove to be accurate. Future results and events could differ materially. Technical information in this presentation has been reviewed and approved by Chris Bostwick, our Vice President of Technical Services and a qualified person. Also, please bear in mind that all of the dollar amounts mentioned in this conference call today are in United States dollars, unless otherwise noted.

Now, John will provide you with an overview.

John McCluskey

Thank you, Jamie and good morning everyone. Operationally and financially, we delivered our strongest quarter in years. We produced a record 107,000 ounces in total in the third quarter and saw our margins expand with all-in sustaining costs decrease to a multi-year low of $884 per ounce. This translated into our highest earnings, cash flow and free cash flow since our merger with AuRico in 2015. This included $21 million of mine site free cash flow and corporate wide free cash flow. We expect another solid performance in the fourth quarter and remain firmly on track to achieve our 2017 production and cost guidance.

Young-Davidson had a breakout quarter with production increasing to a new record of 55,800 ounces while all-in sustaining costs decreased to a new low of $744 per ounce. The higher production and margins drove mine site free cash flow to a new high of $13 million. We expect this strong performance to continue into the fourth quarter with the operations having recently achieved two key milestones, the completion of the MCM waste pass in August and the installation of the pebble crusher in October.

Mulatos also had a solid third quarter including initial production from La Yaqui Phase 1 which was completed ahead of schedule and on budget. Mulatos generated another $6 million of mine site free cash flow bringing year-to-date free cash flow to $20 million excluding development spending at La Yaqui Phase 1. Reflecting a full quarter from La Yaqui, we expect higher production and free cash flow from the Mulatos complex in the fourth quarter. We anticipate that Mulatos will finish the year near the top end of its production guidance and below its all-in sustaining cost guidance.

El Chanate continued to steady state performance generating $2 million of free cash flow in the third quarter and it’s on track to meet the top end of its full year production guidance. Within our growth projects, we began tree clearing and started work on road relocation and power line construction at Kirazli in the third quarter. We expect to award other key contracts for earth works and the water reservoir later this month. We are also advancing work on the feasibility study from our Lynn Lake project in Manitoba and expect to have the results finalized and published later this quarter.

Lastly, we announced the friendly acquisition of Richmont Mines in September. Richmont’s Island Gold is a long life underground mine and is one of the highest grade and lowest cost operation in Canada. With a growing production base, track record to preserve and resource growth and significant exploration potential, this asset is only going to get better in our opinion. Island Gold is already demonstrating this by outperforming on all key metrics of its expansion PEA from earlier this year. The Richmont acquisition is immediately accretive to earnings and cash flow and consistent with our long-term strategy and track record of creating shareholder value. The addition of Island Gold will transform Alamos into a stronger and more profitable company. We will have three core long life mines and creating a stable production base of 500,000 ounces per year, all coming from North America. We will also have peer-leading growth supported by a stronger cash flow profile and an industry-leading balance sheet. With Island Gold in our portfolio, we are in a better position to deliver long-term shareholder value.

I will now turn the call over to our CFO, Jamie Porter, to comment on our third quarter 2017 financial performance.

Jamie Porter

Thanks, John. I am very pleased to report that our financial results continue to improve every quarter. In the third quarter, we reported the highest earnings in mine site free cash flow since the merger with AuRico over 2 years ago reflecting continued cost improvements and margin expansion. All of this was achieved despite selling 6,500 ounces less than what we produced in the quarter. Those deferred ounces will benefit our revenues and cash flow in the fourth quarter of the year. We sold 100,600 ounces of gold in the third quarter at an average realized price of $1,281 per ounce, $3 above the average London PM fix, for revenues of $129 million.

Our margins continued to improve with total cash costs of $720 per ounce and all-in-sustaining costs of $884 per ounce, down 8% and 6% respectively from the second quarter. Lower costs helped to drive stronger mine site free cash of $21 million in the quarter led by a record $13 million generated at Young-Davidson. We have seen a tremendous improvement in margins at Young-Davidson with third quarter all-in sustaining costs of $744 per ounce, coming in over $100 below third quarter 2016 levels. We expect strong free cash flow to continue in the fourth quarter driven by higher underground mining rates at Young-Davidson as well as a greater contribution of lower cost production at La Yaqui Phase 1.

Our net earnings increased to a post-merger record of $29 million in the quarter or $0.10 per share, which included unrealized foreign exchange gains of $13 million or $0.04 per share. Operating cash flow before changes in non-cash working capital increased to $51 million or $0.17 per share in the third quarter, another post-merger record. Capital spending for the quarter totaled $38 million including $11 million of sustaining capital and $27 million of growth capital. Capital spending at our operating mines remains on track with guidance. Our corporate G&A expense for the third quarter of $3.6 million was in line with our full year guidance of $16 million and well below our peers. Amortization expense totaled $28 million in the third quarter or $280 per ounce, consistent with a year ago and with the first half of this year.

We further strengthened our balance sheet and financial flexibility in the third quarter with cash and equity securities of $168 million at the end of September, up from $150 million at the end of June. We also expanded our undrawn credit facility in the third quarter, adding two new banks into the syndicate and increasing the facility size from $150 million to $400 million on improved terms. We have taken several important steps in strengthening our balance sheet in 2017. We are now debt free and with $568 million of total liquidity, we are well positioned to fund development of our growth pipeline. We anticipate closing the Richmont acquisition at the end of November. As a result, we expect our fourth quarter financial results to include approximately 1 month of results from the Island Gold mine as well as the related transaction cost. I look forward to maintaining our trend of improved operating and financial results going forward.

At this point, I will turn the call over to Alamos’ COO, Peter MacPhail to provide an overview of our operations.

Peter MacPhail

Thank you, Jamie. Young-Davidson had a record quarter on multiple fronts. Gold production of 55,800 ounces represented an 18% increase from our previous record in the second quarter, while total cash costs and all-in sustaining costs decreased to new lows of $572 and $744 per ounce respectively. This reflected higher underground grades and mining rates as well as higher mill throughput. Underground mining rates averaged 6,500 tonnes per day in the quarter and 6,900 tonnes a day in September, the latter up sharply from the first half average of 6,400 tonnes per day. The step change improvement in September followed the completion of the MCM waste pass in August which is allowing us to better utilize our ore and waste giving capacity.

As planned, underground mining grades increased to average 2.9 grams per tonne, up from 2.6 grams per tonne in the second quarter. Year-to-date, grades are averaging 2.7 grams per tonne which is consistent with the reserve grade and our full year guidance. Mill throughput also increased to average 7,600 tonnes per day, up from 6,900 tonnes per day in the second quarter reflecting improvements in our reprocessing of mill scats. With the installation of the pebble crusher completed in October, we expect further improvement with the mill throughput expected to increase to steady state levels of approximately 8,000 tonnes per day during the fourth quarter. Young-Davidson generated a record $13 million in free cash flow in the quarter and we expect to build on this strong performance in the fourth quarter with higher underground mining rates and mill throughput.

Mulatos produced 36,300 ounces of gold in the third quarter at total cash costs of $785 per ounce and all-in sustaining costs of $864 per ounce. This included approximately 2,800 ounces from La Yaqui which was completed on budget and ahead of schedule in early September. Total crusher and throughput of 19,300 tonnes per day and average grade stacked of 0.96 grams per tonne benefit from the startup of La Yaqui which is higher grade, depends on the independent crushing heap leaching circuit. This was partially offset by lower recoveries in the quarter reflecting a buildup of leach pad inventory during the rainy reason. This is just a timing issue with this deferred production to come out in the fourth quarter. We are already seeing the benefit with October production of about 13,000 ounces. The high grade mill processed approximately 330 tonnes per day in the third quarter with grades averaging 10 grams per tonne. This exceeded underground mining rates at San Carlos, which is operating at reduced levels as it approaches the end of its planned mine life. With approximately 35,000 tonnes of high grade stockpile at the end of September, we’ll continue topping up the mill through the end of the year.

Mulatos generated $5.9 million in mine site free cash flow in the third quarter, excluding $1.7 million of development spending at La Yaqui Phase 1. With La Yaqui operating for a full quarter, we expect stronger production and free cash flow from Mulatos in the fourth quarter. Given its solid year-to-date performance, Mulatos is well positioned to achieve near the top end of its production guidance while beating on costs.

El Chanate produced 14,900 ounces of gold in the third quarter at all-in sustaining costs of $1,164 per ounce. Production was down from earlier in the year reflecting fewer tonnes stacked during the push back in the first half of 2017. Production is expected to remain at lower levels in the fourth quarter. However given its strong start, El Chanate is expected to meet the top end of its production guidance of 60,000 ounces. On the development front, we continue to advance early stage construction activities at Kirazli including tree clearing and road and power line construction. We are currently in the process of tendering more significant contracts including the civil works and the development of the water reservoir.

With that, I will turn the call back to John.

John McCluskey

Thank very much, Peter. That concludes the formal presentation. I will ask the operator now to open the lines for your questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] The first question is from Rahul Paul of Canaccord Genuity. Please proceed.

Rahul Paul

Hi, everyone. Congratulations on the strong Q3. Peter, it looks like you stacked 170,000 tonnes of ore from La Yaqui in Q3, that’s a little more than 1,800 tonnes a day which is more than 20% higher than the last study, I think it had 1,500 tonnes a day. Do you expect to continue stacking at those rates going forward or maybe increase stacking rates from here?

Peter MacPhail

I think we will just maintain the 1,500 tonnes per day at La Yaqui, that’s our plan and that’s where I expect to be.

Rahul Paul

Okay, thanks. And then La Yaqui Phase 1 again, can you remind us of the lead cycle for the materials from there, I mean, I think 75% is the ultimate forecast recoveries, how much of that gold would you expect to recover say in the first 30 days and 90 days and how long would it take to recover the last bit?

Jamie Porter

It’s quicker reaching than the Mulatos ore and its…

Peter MacPhail

I think we get most of it in the first 30 days, a little bit more carries on, but it’s pretty quick reaching well.

Rahul Paul

Okay, so in excess of 50% recoveries in the first 30 days roughly?

Peter MacPhail

Yes, it would be.

Rahul Paul

Okay, thanks. And then last question from me, how much metallurgical testing have you done on the material from La Yaqui Grande?

Peter MacPhail

Yes, we have ’ve done quite a bit and it’s quite similar material.

Rahul Paul

Okay, thanks. That’s all that I have.

Operator

Thank you. The next question is from Dan Rollins of RBC Capital Markets. Please proceed.

Dan Rollins

Yes, thanks very much. Just a couple of questions regarding Mulatos and just some of the exploration targets you are drilling there. I noticed that Bajios wasn’t discussed in the Q3 report, I know in Q2 you were doing some scout drilling, but are you still planning on carrying out a program at Bajios or are you moving on to other targets?

John McCluskey

No, we have got to finish that one, Dan and we are moving on to other things. It didn’t quite pan out the way we hoped and we decided to move the rates on to other targets that look a little more promising.

Dan Rollins

Okay. And then just on the La Yaqui Grande, obviously you are in the Zone 3, is a lot of that step out or most of work this year that infilled to upgrade the existing inferred resource there to measure and indicate it.

John McCluskey

No, it’s pretty much still earlier stage exploration. We are not really grade drilling resource or anything along those lines. We are still sort of defining the zone itself and luckily, you can tell from some of the results we have just published, we started to get into some interesting grades and widths that are somewhat closer to surface. We are closer to the ridge line now and we seem to be getting better results there, but still very much a work-in-progress.

Dan Rollins

Okay. Is that more oxide in nature material given its close to surface or are you getting some mix in transition?

John McCluskey

Yes, the latter results were virtually all oxides, but we have got results which we published earlier – but get down into mix than qualified material. So, I would add we felt a quite bit that deeper and it looks a bit too deep frankly given the grade and the strip that would be involved. So unless we – it’s really difficult to judge what the geometry of it is going to be right now, but unless we find more material that moves to the surface, gives us way to get down into the deeper ore, it will likely not be able to make it, but there is – we are still pretty hopeful that we haven’t finished drilling it, we have still got work to do, but we are still pretty hopeful that we will be able to define those resources there.

Peter MacPhail

Yes. I would add that in all of our reserves are in Zones 1 and 2 and so anything we get in Zone 3 here will be an addition.

Dan Rollins

Okay, perfect. And then San Carlos, I know you have been looking and trying to squeeze much out of that little – the little underground as you could. Has it sort of run its course now or do you need to take to get back in there, really step across to the other side of the river to figure out what you have got there?

John McCluskey

Well, what I would say is that it’s already run sort of beyond our expectations. We are shifting mining outside of our mine plant for going on three quarters. So far it’s the gift that keeps on giving, but there’s a lot of additional potential for high-grade elevation along that trend, but not in the immediate area that we have developed. So it will turn back into an exploration play again after we finish mining out the current length of this. So there’s still more potential there.

Dan Rollins

Okay, great. And then Jamie, just on the currency hedges you have for the CAD, obviously you’ve got 2018 big chunk covered for YD. Would you be looking at covering off some of the costs at Island in 2018 once that acquisition is closed or are you pretty comfortable with where YD is now to sort of just let the currency run its course going forward?

Jamie Porter

Yes. No, I think we would look to potentially add. I mean we are covered on about 90% of our exposure YD for the first half of next year. So we’ll look to layer on some – likely some collars for the second half of the year YD and then post November 23, closing of the Richmont acquisition we’ll look to manage that exposure as well or you can see that, what we have done on the FX hedging side has been pretty beneficial to-date, it shaves almost $50 off our cash cost this quarter and will help us going into Q4 and the first half of next year. So we will look to continue with that strategy.

Dan Rollins

Okay, perfect. Thanks very much and a nice quarter guys.

Operator

Thank you. The next question is from Kerry Smith of Haywood Securities. Please proceed.

Kerry Smith

Thanks, operator. Couple of things. Jamie, just on the closing of Richmont for the transaction cost, roughly what would they be and will that all get expensed in Q4?

Jamie Porter

So, the transaction costs were disclosed in the circular at $23 million. About half of those are linked to the value of the transaction. So provided the share price was lower on closing than it was on announcement, those transaction costs will go down. There was also $3 million to $4 million in there of RSU and other kind of equity-linked payments that are really costs of Richmont. So if you back those out, our transaction costs are sub $20 million and yes, the majority of those – all those costs will flow through P&L in the fourth quarter.

Kerry Smith

Okay. So, $20 million rough numbers would be about the right number then?

Jamie Porter

I think that’s right.

Kerry Smith

Okay, okay. And you talked in the exploration section about MacLellan and Lynn Lake that it looks like you have got some kind of a new zone just northeast of the pit. And then you had some interesting results from around the Gordon deposit as well, but you only gave one drill result from MacLellan. So I am curious how it’s actually a new zone when you have only released one hole or maybe there is more holes and you just didn’t put them in, but I was just kind of curious how many holes you might have in that zone and if you could give me a bit more information on it?

Aoife McGrath

It’s Aoife here. We have been drilling MacLellan steadily through the year and waiting for results and seeing what we have got and then moving further along the strip. There were a few holes from that same zone put out at the end of Q2. At the moment, we are pretty limited in terms of access because of the wet nature of the ground. So in total, it was about 6 holes – 6 to 8 holes in there now and with a few more to do once winter freeze out comes and it’s essentially a continuation of the main ore body further to the Northeast, but we expect to finish drilling once it freezes over and hopefully that will contribute to year end resources moving up.

Kerry Smith

Okay, okay. And would that be the same commentary for the Gordon results too? You are waiting for freeze up to finish some more work, but do some more drilling there?

Aoife McGrath

With Gordon, there is a few more holes that we need to do, but it’s really more in testing some structural ideas and some vanes, some things like that. So that’s going to continue sort of on a steady basis again once we get more access.

Kerry Smith

Okay. Thank you, Aoife. And John, just on the GSM in Turkey for Kirazli, is it the intention to have the GSM in hand before you actually tender or award these contracts for the civil works that you talked about or is the plan to actually go ahead and do the water reservoir and some of these other civil works even if you don’t have the GSM in hand. I am just wondering about the timing?

John McCluskey

The way it typically goes is you think your contractor – you award the contract in other words contingent on the contractor contingent on the receipt of the GSM. So effectively you get the contractor, which is typically a very large Turkish concern, you get them working alongside of you to accomplish a lot of that. Originally it was indicated to us that we wouldn’t be able to commence work on tree clearing, power line, road, all the things that we were doing, we didn’t think we could actually – in fact, we were told we couldn’t actually do that until the GSM was in hand. Well, things have evolved a little bit in terms of what we have been entrusted. We are basically doing the road work, the power lines, the trees clearing even though we don’t have the GSM yet and it just isn’t – this isn’t atypical for Turkey. This seems to happen more often than not. My feeling is, once we’ve awarded these relatively large contracts, we are going to see with the assistance of the contractor we think a much stronger sort of lobbying capacity in order to push for the GSM to come through pretty much the contract looks on track in terms of all the work that we are doing and the timing for completion of the project and start of production.

Kerry Smith

So John, do you think you will award that civil works contract in the water reservoir by year end you think or is that going to push over?

John McCluskey

We are going to award it before the end of this month.

Kerry Smith

Before the end of this month, okay, got it and then it will be contingent, they can’t start work effectively until the GSM is awarded, then I got it.

John McCluskey

Yes, they are pretty combined there, but close to $100 million worth of construction contract and that’s going to be a huge amount of labor and activity in that region. So I have a feeling that final step is going to be sort of the critical one. They are more or less using all the work we are creating through the granting of these contracts, these projects, they are kind of using that as a sort of a positive news backdrop to finally granting us the last permit.

Kerry Smith

Okay, great. Thanks very much.

Operator

Thank you. The next question is from Mike Parkin of National Bank Financial. Please proceed, sir.

Mike Parkin

Hi, guys. Just a couple of questions from me. With the pebble crusher at Young-Davidson, can you just give us an update in terms of how I think it’s installed now and is it operating to spec or is there a bit of a commissioning phase on that and what would you expect that to do to the overall throughput rates?

Peter MacPhail

Hey Mike, it’s Peter. Yes, it’s been installed. We’re still in commissioning mode. We are seeing the tonnage start to come up. I would expect that we should be running at 8,000 tonnes a day steady here kind of mid-quarter.

Mike Parkin

Okay. What are you running at like right now?

Peter MacPhail

Last quarter was about 7,600. I think we are somewhere between that and 8,000 so far in the quarter.

Mike Parkin

Okay. And then I remember you guys – in the exploration section, I didn’t see it, but in terms of the Mulatos district, you are doing some holes at San Carlos testing for the extension of that high grade zone. Is that something that’s been proven up or when could we expect that to kind of stop producing?

John McCluskey

We expect to be able to mine through to the end of the year. We might get into early next year. The mill should continue to go at capacity through that period of time. The mining rate is dropping off and we are milling more than we are mining, so we are depleting the stockpile. And we are starting to do some exploration from underground down there, some more – poking some holes out in some different directions just to – while we are there to see if we can find anything else, but I wouldn’t expect – I wouldn’t plan on anything more than that.

Mike Parkin

Okay, so kind of watch for an update in Q4 in terms of success on that program?

John McCluskey

Yes.

Mike Parkin

Alright. That’s it for me. Congrats, guys. Good quarter.

John McCluskey

Thank you.

Operator

Thank you. The next question is from Anita Soni of Credit Suisse. Please proceed.

Anita Soni

Hi. I was just curious with regards to Mulatos, what kind of growth capital spending should we be seeing now that La Yaqui is relatively up and running at this point?

Jamie Porter

It’s Jamie. Going forward, the majority of the growth capital of Mulatos will be on La Yaqui Grande served well. So, there is a little bit here for the remainder of the year, but in January we’ll be publishing our guidance and we’ll update our spending, but it’s to the tune of – order of magnitude maybe $10 million to $15 million for next year on those two projects on advancing those.

Anita Soni

Okay. And then with regards to the – I think you have growth capital related there at Mulatos this quarter that some of it is capitalized stripping and you got a separate category for La Yaqui construction. So, can you tell me what the remaining portion of that growth capital is?

Jamie Porter

Sure. So, we broke out La Yaqui Phase 1 construction, that part from the other Mulatos growth capital. So the breakdown of the rest it I think it’s around $6 million. It’s split between a few things, some of that is capitalized exploration at La Yaqui Grande Zones 2 and 3. Some relates to pre-stripping that we are doing on one part of the pit access additional reserves in around El Salto and there is other spending in there related to the relocation of the Mulatos town, which will give us additional access in around our concessions.

Anita Soni

Alright. And then just with respect to what tonnages we could expect to see out of Young-Davidson in 2019? Can you give us some color on that?

Peter MacPhail

Did you mean ‘18 or ‘19?

Anita Soni

2019 and ‘18 – I think 2019 if there is some kind of a tie-in or shutdown that happens that year?

Peter MacPhail

Yes. We will be tying in the lower mine. So we will be connecting up the hoisting facility right to the bottom of the mine, so 1,500 meters down. Once that’s done, we’d expect to be able to do 8,000 tonnes a day going forward after that. So that will happen sometime during 2019 and will be down for I guess 4 to 6 weeks while we do that. And during that downtime, we’ll be able to hoist from both the MCM and also the truck ore up the ramp. So we can run at a somewhat reduced level during that period.

Anita Soni

Great. And as you get down to – once you have tied that in, how do you expect the mining costs to develop from there?

Jamie Porter

I think we will see a further reduction of the tonnes go up, the cost won’t be anymore other than such as the spend won’t be any higher. And so we will get the benefit of or we will be much higher when we get the benefit of more tonnes.

Peter MacPhail

Get all that particular capital reduction – our capital spending at YD once that finishes is down into that sort of $40 million, $50 million range.

Anita Soni

Alright. And then just in terms of the Richmont acquisition, I am just curious in terms of subsequent to your bid at this point, have you done any more site visits and due diligence on – and are you comfortable with what the feasibility study or the PFS that was put out earlier this year?

Jamie Porter

I wouldn’t characterize it as due diligence because that was all done prior to making a bid hopefully, but we have been out to the mine in various groups for different purposes. Yes, we are going back and forth quite frequently.

Peter MacPhail

Yes. I guess I’d add, yes, we’ve been up there through their budgeting cycle where we’re pretty plugged into what they’re doing and just this is going to be quite seamless once it closes later this month. I’d also point out that it is a PEA that they put out, but it is a PEA on an operating line. So there is very – almost no concerns with respect to cost, the cost side, it’s usually a cost side on PEA. People are worried about it. This thing has been operating for some time and the costs are very solid. They have been in fact beating it.

Anita Soni

Alright. So I mean, seeing as this is relatively close to the end of the year, when do you anticipate being able to get sort of your thumb prints on the reserve and resource statement, in particular, getting in that inferred category into the reserve category?

Jamie Porter

That work is ongoing and will be counted when we put out our reserves and resources at year end. So in the first quarter of next year, that will be signed out by our key piece.

Anita Soni

So you will be able to get it done this year then, get some of that in?

Jamie Porter

Well, we will be reporting reserves and resources at Island in conjunction with our year end reports. So that will be in February, March of next year and that will reflect all the progress that was made through exploration in 2017 at Island.

Anita Soni

No, what I was driving at was, when could we expect to see some conversion of those – that inferred that Island’s already reported into…

Jamie Porter

In the first quarter.

Anita Soni

Okay.

Jamie Porter

It will be at our year end reserve and resource update.

Anita Soni

Alright. Okay, thank you very much.

Operator

Thank you. [Operator Instructions] The next question is from Bryce Adams of Scotiabank. Please proceed.

Bryce Adams

Thanks. Underground at YD, with the waste completion, you recorded 6,900 tonnes in September, tonnes per day. How is that throughput looking in October?

Peter MacPhail

Well, very similar I would say.

Bryce Adams

Very similar? And for the rest of the quarter, you expect improvements? Think you will go pass 7,000 tonnes a day this year?

Peter MacPhail

I mean, Q4 we are in for 7,000. I think we will be there or very close. I mean we are only 1 month into the quarter and we are knocking at the door excitedly, we are in pretty good shape.

Bryce Adams

Okay. Good grades in Q3, do you think those will hold up for Q4 or is it going to come back down to reserves?

Peter MacPhail

We are guiding reserve grade for the year and it will be in around there.

Jamie Porter

And that’s where we are running year-to-date be in the Q3. So you are expecting around the same for the fourth quarter.

Bryce Adams

Okay. So, Q3 was just a short-term benefit from sequencing?

Peter MacPhail

It was a bit higher in Q3, but I mean we are seeing the tonnes go up in Q4. So I think ounces should be – have a chance to be similar. I wouldn’t say it’s – I mean if you look at our guidance at 200 to 210, we needed to get a similar quarter in Q4 and that’s what we guided.

Bryce Adams

Okay, that’s it for me. Thank you.

Operator

Thank you. There are no further questions at this time. This concludes this morning’s call. If you have any further questions that have not been answered, please feel free to contact Mr. Scott Parsons at 416-368-9932 at extension 5439. Thank you.