Trevali Mining Corp (TREVF) CEO Mark Cruise on Q3 2018 Results - Earnings Call Transcript

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About: Trevali Mining Corp. (TREVF)
by: SA Transcripts

Trevali Mining Corp (OTCQX:TREVF) Q3 2018 Earnings Conference Call November 8, 2018 10:30 AM ET

Executives

Steve Stakiw - VP, Corporate Communications

Mark Cruise - President, CEO & Director

Gerbrand Heerden - CFO

Alexander Terentiew - SVP, Corporate Development/IR

Bryant Schwengler - COO

Analysts

Jackson Harding - Eight Capital

Orest Wowkodaw - Scotiabank

Oscar Cabrera - CIBC Capital Markets

Stefan Ioannou - Cormark Securities

Keith Watson - CQS Asset Management

Pierre Vaillancourt - Haywood Securities

Operator

Good morning. My name is Christine, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Trevali Q3 2018 Financial and Earnings Conference Call. [Operator Instructions]. Thank you.

Steve Stakiw, Vice President of Investor Relations and Corporate Communications, you may begin your conference.

Steve Stakiw

Thank you, Christine. Good morning, everyone, and welcome to Trevali Mining's Third Quarter two018 Financial and Operating Results Conference Call. Trevali's Q3 results were issued yesterday and are available both on our website at www.trevali.com and online at SEDAR as well. Additionally, a corresponding news release was also issued with our financial results to review the main points, specifically production and sales statistics from our 4 mines: Perkoa, Rosh Pinah, Caribou and Santander. In conjunction with this conference call, there is an accompanying presentation available both on our website under Archived Presentations in the Investors Presentations section and also directly on our webcast.

Our main presenter today is Dr. Mark Cruise, Trevali's President and CEO, who will also be accompanied by Gerbrand Heerden, Trevali's Chief Financial Officer; Bryant Schwengler, Trevali's Chief Operating Officer; and Alex Terentiew, Trevali's Senior Vice President, Corporate Development, Investor Relations.

I would like to now turn the call over to Mark Cruise.

Mark Cruise

That's great. Thanks, Steve, and good morning, everybody. As per Steve's recommendation, please do read the news release and associated material, which is the financial statements and the MD&A, which are on the website and lodged on SEDAR. And as always, please note the cautionary language regarding forward-looking statements, which is sprinkled throughout the documents.

High level, we'll get into it now. Clearly, the third quarter was a challenging one. Production and costs were largely in line, but revenue were adversely affected by lower commodity prices that hedged through into a provisional pricing. We did have some delays in conc sales, which resulted in large swings to our revenues on a quarter-to-quarter basis. However, post quarter, we did ship Rosh Pinah concentrates, and Perkoa has delivered its best mill production quarter period. We certainly offset some short-term production challenges we experienced during the quarter at Caribou. But certainly, one of the key messages is that we do remain on track to deliver our original 2018 production guidance, up somewhere between 400 million to 430 million pounds of zinc. And we also amended our credit agreements during the period.

As Steve mentioned, while I'll do a quick overview, Gerbrand will dive into the financials. Alex will take us through some of the provisional pricing, and Bryant will give us an operational wrap-up and kind of give a snapshot of where we are operationally at the 4 mines. And then we'll flow through into exploration. We have been returning some nice results from both Peru and Burkina. Then we'll have a bit of a wrap-up and flow into the Q&A session, which will be moderated by Steve.

So looking at the summary in our initial slide. Our Q3 production numbers were approximately 101 million, 102 million payable zinc, largely flat to Q2 and certainly in line for our annual production targets, which 400 million-plus pounds of payable zinc.

As mentioned, we did record Perkoa mill production during the quarter, and the operation is working exceedingly well such that we have raised guidance to between 172 million to 180 million pounds of zinc. And certainly, that is partially offsetting some of the challenges with Caribou that we experienced during the quarter, which we'll get into in more detail.

Our costs, C1 for the quarter were $0.72 per pound; year-to-date, $0.73, so certainly within guidance ranges provided at the start of the year. As mentioned, revenues were impacted by both the timing of sales and declining commodity prices, and that really did result in a provisional pricing of $42.5 million approximately. And certainly, Q4 post, once the quarter closed, we did ship about 25,000 tonnes of conc from Rosh Pinah, so about 87% of the Q3 production. And that would have had an impact of about $0.01 in our earnings per share sold in Q3 had it come in.

But the business remains strong and healthy. We have a very strong liquidity. We're sitting on $93 million in cash, and we've only drawn about $149 million of our $275 million facility such that our total liquidity is approximately $213 million.

So going forward, with the team, we continue to optimize the operations. Exploration is continuing to extend and drill the various operations. That will get captured in our Q1 resource reserve updates as part of our normal course business, and obviously, the aim of that is to extend the life of mines. A big focus this year on Perkoa. That will roll into next year where we'll continue to focus on both Perkoa and Santander. And we do continue to pursue internal growth opportunities and kind of working ahead on Rosh P 2.0, more longer-term mine-to-mill strategy in the Bathurst Mining Camp. And clearly as well, we did announce a normal course issuer bid or share buyback scheme, which -- in conjunction with these financials.

That's kind of where we are high level, and we'll start getting into the detail now. With that, I'll hand you over to Gerbrand, who will take you through the consolidated results. Gerbrand?

Gerbrand Heerden

Hi, everybody. Thank you, Mark. On the Q3 2018 and year-to-date consolidated results, starting at the top of the page, revenues for the quarter was $30 million. This number was mainly due to lower sales volumes quarter-on-quarter, down about 34% due to mainly logistical challenges at Rosh Pinah getting the concentrate to the port, due to some moisture challenges that results quite well by the end of the quarter. Basically -- and some transporting capacity issues in-country in Burkina Faso, which is receiving ongoing attention, and we're seeing some positive outcomes with that in quarter 4. So better quarter expected in quarter 4 from that point of view.

Sales further impacted by provisional pricing. Significant drop in prices with the finalization of open invoices for effectively B quarter three shipments. On the cost side, effectively, fairly stable, as Mark mentioned. Did quite well on the production side and the cost side. Unfortunately, basic loss per share for the quarter of just under $0.04.

On the production side, as mentioned, did quite reasonably well with 101 million pounds of zinc, mainly even with quarter two production. On the left side, about 9 million pounds of lead. And then furthermore, on the silver, slightly lower than the previous quarter on 300 -- about 300,000 ounces of silver, mainly due to the mining areas that we're mining in at the moment.

As mentioned, on the sales side, a low quarter for us. Obviously, Mark has mentioned that a lot of the Rosh Pinah or Namibian sales have corrected already early in quarter 4. So -- but a bit of a luck in terms of the pricing for us there, which is going to stand as quite well for quarter 4. And I think with the lead sales, basically on track to get where we've given guidance in terms of the year.

And with that, I'll hand back over to Mark to take us through the operational results.

Mark Cruise

So thanks, Gerbrand. High-level operational, and like we said, we will get into a site-by-site snapshot as well as we run through the presentation. And you can see the graph there really, looking back quite a few periods there, but certainly, for this year, we've got the various quarters there, mimicked with sales. And certainly, the key point is that we still anticipate and we will achieve our initial January 2018 guidance ranges. So that's really where we are on track on heading into Q4.

As mentioned, costs continue to track in line, and we've kind of run through that already. And our original guidance range was between $0.67 to $0.73 per pound. And like I said, we're coming in year-to-date $0.73, and this is despite significantly weaker lead and silver prices, which obviously is a component of that as well.

Our Q3 cash costs per tonne milled are $67 per tonne; year-to-date, $66 per tonne, and then within guidance, albeit the upper end of our original guidance range of $66 per tonne, but nonetheless, still within range.

So that's kind of where we are at a high level. Like I said, Bryant will take us through on a site-by-site basis as we flow through the presentation. So really, how did that impact our quarterly in detail on a quarter-to-quarter basis, and Gerbrand will take us through the reconciliation on the next slide.

Gerbrand Heerden

Okay. The next slide just depicts basically, effectively, the line item that impacted our results for the quarter. Obviously, a net loss of $30.8 million. And the main impact is, if you look at the graph comparison from a quarter-to-quarter revenue basis, or net revenue basis quarter two to quarter 3, and mainly the 3 new main impact is the low sales volumes, as discussed, effectively 34% down from the previous quarter. And as I've mentioned, we're catching up with that quite well in quarter 4, so looking forward to a better quarter. Decline in zinc prices for the quarter, the other main impact, are up -- plus minus 26% -- $0.26 per pound, which effectively is about a 20% -- 19%, 20% drop from 1 quarter to the next quarter. And then, obviously, the provisional pricing adjustment, which is the closing of previous sales during the specific quarter, which amounted to just over $42 million net while against revenue. And just to reemphasize, basically, in the month of October, we've already basically captured and shipped about sort of 90% -- 87%, just below 90% of the concentrate produced for Rosh Pinah in quarter 3, so fully caught up with those.

And with that, and I'll hand over to Alex to take us through the provisional pricing.

Alexander Terentiew

Yes. Thanks, Gerbrand. So as you noted, due to the decline in zinc prices over the last few months, provisional pricing adjustments had a significant impact on revenues in the quarter. On Slide 8, we give some details on how we calculate provisional pricing and the parameters involved. A couple of key things to highlight here. First, I guess, as of June 30, Trevali had 147.6 million pounds of zinc provisionally priced at $1.39 a pound. Now the zinc price declined such that the average three month future price in September was $1.10, which represented $0.29 per pound drop in the zinc price used to adjust our sales.

Now some other companies, I understand, use the price at the end of the quarter to mark-to-market provisionally price sales, but we use the month average price. Given this difference in methodology and how the zinc price moves over the period, we -- if you're comparing to how some other companies report it, we essentially adjust it from a higher high to a lower low than some of our peers.

For the fourth quarter, based on the 96.3 million pounds outstanding at quarter end that we provided the numbers on here, we estimate that a $0.05 per pound move in the zinc price from the $1.10 a pound provisional price in September will impact revenues by approximately $3.5 million.

Moving on to Slide 9. I just wanted touch on our financial position. Despite the weak sales in the quarter, the company is still in a strong financial position at the end of the quarter with $93 million in cash, $62 million in net debt, which is only slightly above that in the second quarter after taking into account the increase in working capital. In September, as Mark noted, we did amend or increase our credit facility to $275 million, which replaced the previously existing facilities, reducing interest payments, providing more financial flexibility. And when you combine that with our cash, gives total liquidity at quarter end of about $213 million.

Given our financial position, and subject to TSX approval, we are planning to implement a normal course issuer bid for roughly CAD 20 million that represents approximately 6.5 million -- sorry, 6.5% of Trevali's free float. The actual amount to be repurchased will be dependent on market conditions such as the price of zinc in the outlook, Trevali's share price, other potential uses of cash and other factors.

And with that, I'm going to turn it over to Bryant to take you through the operations.

Bryant Schwengler

Thanks, Alex. Good morning, everybody, and good afternoon. Looking at the mining operations across the globe, just to reiterate Mark's comment from before, we are -- remain on track to achieve our 400 million pounds -- greater than 400 million pounds of zinc and payable metals for the year across the board. And looking at our Burkina Faso operation, it's a real shining light for us in the group this year. Record production through the mill in quarter 3 has allowed for a second increase to guidance for 2018 production. And after record performance again in October, we were seeing the site already tracking to the upper end of this guidance range. The mine tonnes and milled tonnes, you can see, there is a little bit of disparity. That's due to us balancing off the stockpiles as we lead towards the end of the year between the mine and mill.

Looking forward to key projects that we have there on site right now. The conversion from heavy -- from light fuel oil to heavy fuel oil power generation remains on track to deliver good savings for the site around $5 per tonne into half 1 in early -- into half 1 2019.

Looking at -- staying in Africa when we head down to our Rosh Pinah mine in Namibia. Zinc feed grades for the mine during the quarter has produced significant increase in the zinc metal production. So we did realize a slight reduction in mill's throughput, but that was largely due to us balancing off the capacity through the circuit and maintain the higher zinc concentrate from -- of the mine -- of the mill, sorry.

With the zinc concentrate, we did increase moisture contents, due in part to the older style of filtration and drying capacity that we have there on site. As the area is converting into summer months, we are starting to see temperatures increasing above the 40-degree range. We are seeing increased drying capacity, and material is flowing to port. And as mentioned by Gerbrand earlier, we are seeing the increase in sales going through the port in October already.

So we head north to Canada at our Bathurst Mining Camp. Certainly, the Caribou Mine had a challenging quarter, with the ground conditions deteriorating in the ore body. Decision was made to not put people or equipment at risk and to strategically step back and to reassess our measures to ensure the safety and viability of the mine long term.

I'll go -- and the next slide I'll go into will cover off a little bit on the plans around the geotechnical. It's important to note, though, the Caribou Mine did finish with spare capacity in the mill as the mill continued to improve its performance during the quarter and showed capacity above the mine at the Caribou.

Looking at the geotechnical conditions of the mine, certainly, the primary causes of the issues we see at Caribou Mine is really concentration of stress as the mining front retreats to the center of the level. You see the circle in the middle of the page highlights Zone 13 on the eastern limb. And that's the area that we have taken a strategic decision to step away from and refocus our efforts to increase the development of the mine, look at modified ground support, increase the use of cemented fill in key locations to provide additional support and stability in the mine long term. We have engaged with expert consultants globally to ensure that the long-term plans are there to -- for the site to continue to produce, and we expect normal production to resume in quarter two 2019 for the site.

As we head to Santander Mine in Peru, Santander Mine continued -- the mine and mill continued to perform very strongly for the quarter, and the full production had returned effectively in October from the mine. In fact, stockpiles that have been reestablished in the mine are now greater than 18,000 tonnes on surface, showing the strong capacity in our mining teams there at Peru and continue -- and we continue to see a strong performance at the end of this year. In fact, we have most of the development in place already for 2019 plan, so we see a little risk to the mining operations from Peru. In fact, we're seeing that the site this year is achieving between 2,550 and 2,620 tonnes per day through the mill. They continue to outperform the original nameplate capacity for the mill going forward. We are continuing the proactive and construction discussions with the community of Santa Cruz and that we expect those to continue during the month of November.

Mark Cruise

Perfect. Okay. Thanks, Bryant, on that one. So really moving into kind of value add, more long-term extending our life of mines. We'll have a bit of a -- what we've been up to exploration-wise during the quarter. Really, exploration is a key value driver for the company. We did commit to about 60,000 meters drilling this year we classified as relatively low risk. It's all in-mine and/or extending non-mineralization in general. Pretty busy quarter, we drilled about 25,000 meters in Q3. And really, how we approach exploration, it is bespoke on a site-by-site basis depending on the needs of the operation and just delivering more optional tonnage to the mines. So for example, at Rosh Pinah, really, it's our longest life of mine, but the guys are using the drill bit there to unlock value as a Tier 1 deposit and really help throughout [indiscernible] feed into our Rosh P 2.0 studies that remain ongoing.

And in the Bathurst Mining Camp, we're looking to unlock the various deposits we control in the camp, 6 VMS deposits, and [indiscernible] up these back into our more medium-term mine-to-mill strategy.

Moving to Santander. Some really nice results coming out of the pipe -- or continuing to come out of the pipe rather. Pretty excited about that one. We are starting to see copper kind of showing up in the system and, certainly, locally, in appreciable amounts. So we will continue to drill it out and see where that may go.

And obviously, Perkoa, it is our shortest life of mine. It is our highest-grade asset, which everyone is well aware of. And the guys do continue to extend that hangingwall mineralization deeper. We'll have a look at some of the latest results, roughly extend it about another 70, 80 meters deeper downtown dip. And now there was a prolonged wet season in-country, and we are starting to mobilize in extra rigs and have commenced on original drilling programs as well, which would be more medium-term, I guess, value add as we look at it.

And so getting into detail on the next slide, which is Perkoa. Really, 2 key things looking at the in-mine, which is more short-term or value add as we would term it. In Q1, Q2, we extended mineralization about 200 meters below the kind of current mine plan, which is a 500-meter level, down to about 774 feet thereabouts. And we're now down basically about 800 meters, 820 meters, so about 18 meters deeper. The deepest hole to date in the property, you can see the results there, 18 meters at 13% zinc, within which 6.7 meters at nearly 19% zinc as well. And we are starting to see some copper smiths show around. More geologically interesting, about 0.2%, 0.3% copper over those similar intervals. What it does tell us is that we're only probably getting into the midpoint of the system. So what we do know is Perkoa is a very large system, and certainly, geologically, depth-wise, we see no reason why it shouldn't continue significantly deeper, although, obviously, economics in the mining front would come into play at that point. You can see in the figure below there that the high-grade hangingwall plunge, those remain open. So certainly, nice tonnages out of there, and they will get wrapped up and rolled up into our kind of end of year resource reserve updates, which will be published in March of next year.

Regionally, a little bit behind. Just like I said, the wet season in-country lasts about 4 to 6 weeks longer than normal. Probably some of the key things the team had done and achieved year-to-date is we definitely have identified 2 new VMS systems. To be clear, we do not know if they will be productive or they could be barren, but one of the key decisions for the team was, is Perkoa an isolated system? And we've clearly demonstrated no, it is not. That means that belts or certainly the power coil into Perkoa or horizon is prospective and there are other hydrothermal VMS systems associated with it. And the 2 -- we're tackling first is the AF1 system, which is located to the south there, a little bit southwest of Perkoa, about 5k, 6k. And certainly, based on mapping, it looks like it's certainly a larger hydrothermal system than the Perkoa 1 based on the footwall alteration we've been able to pick up, and the rig is mobilizing to that one at the moment. And then to the northeast, about 10k, 15k northeast is the Byrhado system. We do have gossans on surface, about 5 stacked horizons that we are currently going to drill as well. So like I said, one rig is turning, second rig is mobing in, and we have an air-core rig so we've got 3 drill rigs working regionally at this point in time. And then one continuing just to tidy up the hangingwall mineralization from this year as well. So it's the end of the year for Perkoa and the exploration team there.

Moving on to Santander. Again, 3 rigs turning, one chasing the Magistral. So our current mining -- our mine plan that's published is just solely focused on the Magistral zones. We're really chasing extensions about 350 meters below current development, and as Bryant mentioned, that development is already in place for 2019. And we are seeing some nice hits in the Magistral in the kind of 6% to 10% zinc range. So really consolidating and seeing what we've been seeing for the last year or 2, that modest increases in zinc, broadly speaking, as we get deeper in the system, which is good and the system still remains open. And in particular, kind of Magistral South Central, where it does seem to be plunging towards the Pipe zone, which is quite interesting.

At Pipe, you can see some results there. What's interesting, we're starting to get Perkoa stall grades, except with higher copper in Peru, which does bode well for the future, although it is early stage and more work needs to be done. But you can see quite several hundred meters deeper than the historic Pipe zone where we're getting some stunning grades there, 16 meters at 15% zinc, 1% copper; 6 meters at 20% zinc, 0.8% copper. And it's not just a one-off. You can see there are holes there. So as we do get deeper into the system towards the heat source, as you would expect in the model we predict, we are seeing base metal grades coming up, and we are seeing copper come into the system as well. With time, I wouldn't be too surprised to see some gold showing its face, but we'll see where it goes. So certainly direct fill drilling continues to plug away at the Pipe, so that is ongoing as well there. We have done some retargeting there. We have identified 8 other hydrothermal centers, so we do have quite a large land package there. So a lot more tonnes to be found, in our opinion, at Santander. And given how well the mining works there and the mill is just obviously above design, certainly, shaping up well for longer-term operations.

Moving on, rolling into Bathurst. One rig, really, like I said, it's more advanced project stuff, so less exploration, and that was always the plan this year and going into next year. One rig underground, just really focusing mainly on the eastern zone and the hinge zone. And really, that's trying to mimic what the team hit last year. Last year, they had about 4.5 million tonnes inferred on the north limb. East limb tends to be a little skinnier, not as thick in general, but they are drilling it out so they expect to see some new tonnes show up in the books there. After that really, it's going to come down to the economics as we get deeper and more mining constraints, but at least we'll [indiscernible] off the Caribou this year. The exploration team will hand it over to advanced projects and the mine team, and then future programs will be planned accordingly.

And have also been supporting our Murray Brook joint venture with our partners, Puma. Really, met test work is very advanced. The results are pending in the metallurgy from Murray Brook. And obviously, contingent on positive results, that will feed into our medium- to long-term mine-to-mill strategy for the Caribou mill itself. So really, that's where we are in Bathurst.

And then finally, getting to Namibia Rosh P. Longest life of mine, although what we do like about and what we've always liked about Rosh Pinah is that it is a Tier 1 zinc deposit. From a great tonnage perspective, it still remains open, and we believe there's significantly more tonnage to be found. It focused on, last year, what we're calling the northwest extension to the Western Orefield, which does remain open to the northwest. It continues to plug away at that one. You can see some of the hits, for example, kind of 9 meters -- anywhere from kind of thick zones of 6%, so 35 meters at 6% zinc, and you do get higher-grade areas within that, anywhere from kind of 9 to plus -- 10, 10 plus meters in the kind of plus 10% zinc range with a little bit of lead byproduct as well.

Have been starting to work on the exploration lease. We have retargeted the entire property from first principles, and we had good results in Perkoa by using this approach and repeating it here. The one thing we will say is that, certainly, we've identified 5 sources or mineralization that drives the Rosh Pinah system. We think there's probably -- the ore remained open, certainly down plunge the long strike in places. We have identified several new areas that suggest that maybe a few more heat centers or basically feeder zones to be found even within the mine lease itself. And certainly, we would classify the exploration lease as underexplored, in our opinion. So more of a slower burn on that one. Although the team just started to get its hands around, that is a very large system.

So that's kind of what we're up to exploration-wise, and it will be a busy Q4 for the exploration team. Usually, back-end weighted is normally the course for exploration.

So summarizing or wrapping up. Certainly, our diversified production base is adding operational stability. Currently had a bit of ground conditions, challenges, they are underground mines in New Brunswick at Caribou, certainly offset with some of our stellar results from Perkoa. So the key point is we do remain on target for our 2018 production numbers of plus 400 million pounds zinc.

Our cash costs are within guidance, upper end albeit. Nonetheless, they are within guidance. Our Q3 revenues, yes, they were impacted by timing of sales, as Bryant mentioned, that maybe has caught up now. Declining zinc prices have hurt us, and that obviously resulted in the provisional pricing impact, but certainly, stronger sales anticipated in Q4 as well. We do maintain a strong liquidity, as mentioned, $93 million cash, total liquidity of north of $200 million, and we do continue to optimize existing operations and we are looking at ways to increase our efficiencies on a site-by-site basis as well.

Exploration does remain a key value driver. We've just gone through it. Certainly, we remain encouraged. Certainly, year-to-date, we're not seeing anything that would make us change our views that we feel there's quite a lot more tonnage to be found. Certainly, on the majority of the sites, deposits do remain open, so that should ultimately feed in contingent on commodity prices to extending our life of mines.

We do look at more and more meaty, I guess, put it that way, organic growth opportunities in both Namibia Rosh P 2.0 and that kind of more medium, longer-term mine-to-mil strategy at the Bathurst Mining Camp through the various satellite deposits or other VMSs we control in the camp as well. As mentioned, we're confident enough. The business is healthy. We have launched a normal course issuer bid for up to $20 million or roughly 6% of our free float as well.

So that's kind of how we're ending the quarter. And I think with that, I will hand it back to Steve, who will emcee any questions I hope we can answer.

Steve Stakiw

Okay. Thank you, Mark. Operator, we would now like to open up the call to questions, please.

Question-and-Answer Session

Operator

[Operator Instructions]. Your first question comes from the line of Jackson Harding from Eight Capital.

Jackson Harding

Just quick three questions here. Specifically, the first question will be for Rosh Pinah. What was the issue impact of the moisture content? Also, has this been fixed? Or is this going to be an ongoing issue?

Mark Cruise

I'll hand it over to Bryant.

Bryant Schwengler

Yes. Look, the issue -- the primary issue there at Rosh Pinah is twofold. We had the increased metal productions through the mill, and we have an oldstyle belt filter, which goes on to a drying pad at the site. Now going through the winter months, we did have a bit of a wetter winter down there in Namibia this year in the region. And as we go into the summer months now, the temperature has kicked up, and we've seen a significant increased drying capacity on the drying pads. We have -- currently have a study underway into next year to look at what opportunities we have to optimize this and upgrade that system. But at this day now that we're back into summer months, we do not anticipate any ongoing issues with drying the concentrate from the mine.

Jackson Harding

Okay. That sounds good. And for the second question, do you guys expect to sell all the built-up inventories at Rosh and to a lesser extent, Perkoa in Q4 '18? Or some of that going to all get pushed back to first quarter two019?

Mark Cruise

Yes, Mark here, Jackson. Certainly, in Rosh Pinah, we do expect to sell substantially all the conc. Obviously, you're still producing right the way through the year, the mine doesn't shut down. But between in Q4, we've got the more vessels planned, so we will sell the majority of our zinc ore it produced around the road, and we do also have a lead sale planned as well. Typically, we do two lead sales per year, one in the first half, one in the second half, just based on the byproducts. So certainly, on track to sell all our Namibian conc during the year. Moving to Perkoa, it's a kind of -- it's one of those -- it is a problem, but it's a good problem in that. As we're seeing, Perkoa is producing materially more. It's having a stellar year, mainly because mill availability has been kind of fantastic. So we are producing a lot more conc than was initially planned. But that said, I mean, we've been very open about it, it is a long trucking logistics line. It's the port in Abidjan. It's north of 1,000 kilometers. So -- but there's differently ways we can pull there.

We are trying to get more trucks at this point in time, which is more of a short term, and we're starting to see good traction into that into Q4. More medium term, we are looking at alternative ports. That's probably a couple of months out before we have a hard answer whether one way or another on that one. And also, we're looking at rail options as well. But in general, just because of the logistics line between the high-grade, the high-recoveries trucking to port and we have to build up inventory in port before a vessel comes in, we will always have approximately 30,000 tonnes of conc in the Perkoa system at this point in time. Now should some of those medium-term solutions come to play, we might be able to manage that a little bit better, but at this point in time, please do assume, always have about 30,000 tonnes of conc in the system.

Jackson Harding

Okay. No, that helps a lot. And then the final question is a bit more on provisional pricing. Are you guys in a plan to do -- give us an update for provisional pricing before Q4 reporting, specifically the zinc pounds are standing? My understanding is that you have -- the current zinc pounds are standing. That's stated in the Q3 financials, and then there's also going to be some settled and then some sales are going to come in as well. Are you guys going to give us that pound number?

Alexander Terentiew

Well, I mean, so as of Q3, I mean, 96.3, I mean, the other determinants. So there's 2 parts to provisional pricing really. I mean, there's the final settlement of sales that happen throughout the quarter, but then the rest is mark-to-market, and that depends on what the actual zinc price movements were throughout the quarter, but also how many additional pounds that we sold. So we will be reporting our financials, year-end is a little bit lag, so I imagine, we don't have a date yet, but sometime in February. But I guess one thing that we could consider when we come out with our Q1 -- sorry, Q4 production result is potentially providing some additional clarity at that point in time as to what volumes were made. But that's probably the -- yes, we'll take that into consideration.

Operator

Your next question comes from the line of Orest Wowkodaw from Scotiabank.

Orest Wowkodaw

I wanted to get a better understanding in terms of sort of state of the operations. I mean, this has been -- when I think about 2018, it's been a pretty disciplined year with respect to some of the operational issues that have kept up at -- well, I guess, at Santander, Caribou and at Rosh. When we start to think about moving ahead to 2019, can you give us a sense of whether you think these issues are now behind you or whether these are things that we should still think may negatively impact 2019? And certainly, as we move forward here, I'd love to get your sense on like what -- I guess, what procedures or what things may be coming into place to kind of improve the operations moving forward so we just see less of these operating issues creep up moving forward?

Mark Cruise

Yes, Orest, good questions, and I'll hand it over to Bryant, who will help to answer them. Bryant?

Bryant Schwengler

Look, I think it's a fair question in terms of the overall year. And we have had a very transformational year, I think, across the group, holistically. Now if I look at some of the things that we have put in place for next year to give confidence as we roll forward, I think, Santander, you look, the mine is going forward. Last year, previous best, you're looking at mill throughput ranges of that 2,400 to 2,500 tonnes per day. We are seeing significant improvements on that as we go forward. And also, mine performance has significantly stepped up from the Santander Mine. We have development already in place, and we have the water pumping system already well and truly on track there and pre-draining the areas there for Santander.

So some of the historical challenges we saw there globally is certainly a big step improvement. Largely, Santander, actually, it's been able to increase its guidance this year. And despite some of the challenges we did see, it's still tracking within the increased guidance range for the site. We look down at Rosh Pinah, significant improvements have been made through the mine. We have installed quite a few different techniques and protocols in the mining site at Rosh Pinah. And largely, we're seeing -- we've basically been able to maximize metal grade and metal production from the mine in the second half of the year. As we roll forward, again, we see the mine continuing to not be the bottleneck for Rosh Pinah, and studies are underway to look at what else we can do to currently exploit the ore body better and better enhance the overall performance and viability of the site. Very comfortable with the mining site at Rosh Pinah and what the team on-site has been able to do.

And there is a significant amount of metrics and tracking and planning and compliance monitoring that is currently underway across all the operations. When we look forward at Caribou, as we go through the derisking strategies that are currently underway for Caribou, we'll see by the time we get to quarter two next year, we'll have a significantly derisked operation, probably the most derisked the mine has ever been at that point. By engaging with the experts we have globally, we are seeing a significant increase in development front. So we'll actually have a development front 12 months ahead of our production profile for the Caribou mine, allowing us to have between probably 11 to 14 different mining horizons in the mine for us to access and taking the stress away from the parts of the ore body and allowing us to mine a lot more effectively and efficiently. So that's a little bit on the specifics of the 3 operations that you mentioned. But globally, on top of that all, right now, there is a corporate tracking and monitoring program that's going to be on top of that from the operations as well. So we're very comfortable and confident as we go forward in terms -- as we go through the group.

Orest Wowkodaw

Okay. And then just finally, on Perkoa. I mean, obviously, that operation has really overachieved this year. Do you think that's sustainable moving forward? I think you mentioned earlier about higher mill availability. But is that -- do you think that's a short-term thing? Or is that a new sustainable type of run rate for the mill at Perkoa?

Bryant Schwengler

Look, I think, Orest, the guys -- the team on-site has done a stellar job this year, and they really are refining that place and having it really humming very, very nicely. The team is very focused on maintaining their high-grade, the high availabilities, and they do a tremendous job at doing that. We will see -- as we go forward, we will see a bit of the declining grade profile in the mine, that's just part of the life of mine. However, we expect to see the current positive performance on the production side continue. The team down there is very focused and not letting that dip away.

Operator

Your next question comes from the line of Oscar Cabrera from CIBC.

Oscar Cabrera

Mark, just wanted to get back. If I compare your statements back from September when we were on site in Caribou to what we have now, there was a couple of changes I'm just wondering if you can give us a little bit more color on. One of them was Rosh Pinah's 3,000 pound per day that was supposed to, if I remember correctly, come out sometime this quarter. And now it says here in your presentation that you don't expect it until the middle of 2019. So that's one. And then the other one is Caribou. Based on what you describe as problems, which I don't think we saw on-site, or they weren't referred to anyway, you're targeting a return to normal mining rates by the second quarter two019. How do we think about all of the work that you've been doing with Restigouche and the ore that you were expecting to get in by -- again, this is by my notes, by the middle of next year? Has that changed?

Mark Cruise

Yes. No, thanks, Oscar. So I'll answer -- roll through them myself, and Bryant will answer them. Certainly, Rosh Pinah -- really, the study has been positive. Rather just to kind of control expectations -- results there are positive enough that we're moving to a kind of pre-feasibility level. So actually, we've gone to the board and we're advancing that. So the plan is if and when a final decision is made, it will be, this is it, these are the hard numbers, plus or minus 5% and these are the hard time lines, just to better manage market expectations rather than going out with a PA, which is plus or minus and it doesn't really answer anything. So that's the approach we took at a board level. So be more conservative. But I mean, it is positive enough that we are moving on to the next phase of the study.

So that's really the approach that's been taken by the board. So really, it's just better manage expectations. And at least, when it comes out there, it'll be a lot tighter rather than a PA-level study, with better time lines, better pricing and something we'll be able to stand behind, and at least then, it will minimize confusion. So that's where Rosh P is. So to be honest, substantially, unchanged from when we last talked. We are very encouraged with it, moving on to the next phase and detailed engineering. So that's where we are in Rosh P. In Caribou, I'll tag team with Bryant. Listen, Caribou has always been -- it's probably -- it has always been our geotechnically most challenging operation. We knew that from day 1. It's got a history of a weak hangingwall. So we continue to manage through it, follow basically external geotech expert recommendations.

Certainly, mining was and is continuing, basically. Where we have historic mining areas, they mine a level from both sides into the middle. We do support the cable boats, mesh, et cetera, normal course kind of standard stuff. Really, what we're seeing, as you're getting to the very end of the level, so it's relatively minor, you are seeing increased stress build up. And really, basically, late in October, I mean, really, it just got to a point where they lost the last few stopes on Level 13. The scheme of things, we only lost 50,000 tonnes. It is not a material amount. The problem is because we're catching up on development from prior years, there is no place for the mine to go. So the actual amount of tonnage lost, and the guys will probably recover that in time, is immaterial. But really, the big challenge was lack of development. That was recognized as a risk this year and the guys continue to push it.

And so really, the easiest way to derisk the operation is make sure you've got enough development in place, which Bryant just talked to, so you got sufficient stopes in other areas of the mine, just in case you do lose the last stope or 2 or it gets delayed, deferred because of ground conditions or rock mass conditions. That's one way we're tackling it, and that is in progress at the moment. And the other way is looking at optionality on the various other operations or satellites, I guess, to Caribou, which really the Restigouche. And we continue to do detailed basically mine planning studies on that one. We did do the kind of first blast to make sure that it is ready to roll if we do need to fast track it. But for now, obviously, given that we lost the stope, the main focus has been okay, push development harder in Caribou, get that derisked because the bulk of the tonnage is coming from there, but the advanced project team continues to work on Restigouche in the background. And certainly, it is still ongoing and again, we want to wait up we've got a hard answer on that one before we say anything just to make -- just to avoid confusion. But given that, obviously, Caribou is very recent and it's happening in realtime or happen in realtime. Obviously, we have to divert our resources to, one, finding a solution to the problem, derisking the mine, more importantly, derisking our people. Then, refocus on Resti. I think Bryant, do you want to say anything else to that one?

Bryant Schwengler

I think one other thing, this speaks a little bit back to Orest's question as well on Caribou. I mean, what is the most effective way that we can derisk the mill supply? So as I mentioned before earlier in the talk, I said that the mill finished the quarter with spare capacity. The fastest and the most efficient way for us to ensure that we fill the mill up to its full capacity is to put our focus and efforts into Caribou, into the first instance. And that point, once we have Caribou at a prime position by end of quarter two next year, we'll be in a much stronger position to start looking at exploiting other opportunities for contingency mapping for the -- and expanding on the camp.

Oscar Cabrera

Okay, that helps. That clarifies some of that. But as I'm looking to 2019 on Caribou on specific, would you say that you can maintain the same production that you had in 2018 and then just have the dollar per tonne stay in line with your revised guidance? Or you expect that to increase in the first half and then decrease as you improve the amount of stopes that you have to work with?

Mark Cruise

Yes, Oscar, Mark here. I mean, we will be giving -- we'll have a detailed Investor Day, and we'll have detailed operational updates, and then we'll run through the mines quarter-by-quarter in January. We're picking a hard date on that one. But -- so that will be the hard answer. But broadly speaking, from what we're seeing now, by driving the development, corporate and the site team are confident that they will materially derisk operations. So certainly, I mean, if -- being conservative, yes, we should definitely 2018 numbers. We'd like to think we can do better. But again, please wait until we do our detailed Investor Day. And obviously, we'll get it out there to the market and everyone will have the information at that point in time.

Oscar Cabrera

Okay. And then just lastly, clarification on your statement about Perkoa. And 30,000 tonnes of concentrate in the system, so that's about roughly 15,000 tonnes of inventory. Do we just assume that, that's an inventory per quarter on a rolling basis?

Mark Cruise

Yes. I mean, if nothing else changes. So like I said, next year is shaping up to look like this year, broadly speaking, which is one of Orest's question. So it's going to be another strong production year. Grades are going to be broadly the same. Mills working well. Recoveries, we don't anticipate any differences. So really, like I said, we can -- trying to get more trucks to -- basically the mine's producing so much in a monthly basis, we're just about keeping up with monthly production. Like I said, it's a good problem to have. So we're trying to get more trucks in to -- because it's overproducing, basically more trucks in to ship some of the backlog, and that's just going to take time. Like I said we're seeing good traction there. There's actually not a lot of mobile fleet available at this point in time. We do backhaul clinker. So it's basically you need to have the backhaul set up as well, otherwise they kind of hurt your economics.

So we're working on that short-term. And then medium-term, we're seeing if we can get an alternative port and -- that we can use during the year and that would shift it materially. So if nothing else changes, so let's assume we can't get an alternative port, let's be conservative, we just get more trucks on the road. I'd expect that to basically hopefully over the first half of the year start to track lower. But remember that at any given time, we're producing about 5,000 tonnes of conc a week, roughly speaking, 4,000 tonnes to 5,000 tonnes. So that gets used, that gets trucked. Some are stored in the warehouse and obviously, we have to build a warehouse inventory in the Port Abidjan before you call the vessel in. So really typically, they're 20,000-tonne vessels roughly -- sometimes it varies. So at any given stage you're going to have anywhere from basically no tonnage in that warehouse up to 20,000 tonnes waiting for your vessel or 25,000 tonnes. So there's always going to be concs in the system. And like I said being conservative at this point in time, assume the 30,000 tonnes, although we are working on making that more efficient.

Oscar Cabrera

Right. Now just -- Mark, just thinking from a provisional price perspective, if you have that in inventory all the time, then the 96.3 million tonnes which you showed this quarter is not going to change much. And so changes in zinc prices will help you at some point, but it can hurt as well, right?

Mark Cruise

Well, yes, provisional pricing obviously is a two-edged sword, yes, absolutely.

Operator

Your next question comes from the line of Stefan Ioannou from Cormark Securities.

Stefan Ioannou

Just curious, obviously with some of the exploration success you're having at all your operations, but in particular, Santander, with the Santander Pipe and stuff. Do you have a general sense of -- there had been some previous discussions about looking at a higher throughput, do you have a rough idea, like, does it mean a year of drilling or sort of where in that sort of process you think are with regards to something -- some sort of expansion there?

Mark Cruise

Yes, Mark here, Stefan. Well, I think, what -- I'm trying to answer this. Okay, what -- well, no, what we're going to do is, I guess, we're stepping back, we're going to take a breather. So the guys are going to finish off. They've got a few more holes and we're still drilling the pipe at the moment. Really then it's getting handed back to the kind of Bryant's project team. So they are and we'll start putting conceptual extraction plans around that, very broad, because really what the exploration wants to know is, okay, do we have enough tonnes here? If not, how many more do we have to find? I think we we're seeing in the pipe -- I think there's a lot more to be found there. Yes, they are deeper, so it is going to be a bit of a higher hurdle rate, there's no doubt about that. But really now the exploration team has done its job and said, right guys, here's a big lump of zinc. What are the options? Extract that, and do we need to find more? And at least when they get that into the blue pack, they can plan the next phase of exploration, whether it's a bigger step outs, more aggressive or just more infill drilling to get more clarity for better mining shapes.

So Mark's gut feeling is there definitely will be one more year of drilling, I think, but the guys do need that entry of loop to come back and to see where it is. But that said, the depths -- I mean, it is roughly where we're kind of hitting at the moment because of topography, it's approximately at current depths, are fine. Our current plan, Magistral mining levels. If the guys don't find any more. So it's actually not that deep from Santander standards. And it is only located 200 meters from mill. There is a shaft there. So there is some historical infrastructure we may go to leverage, but at this point in time, we just need to go back and have that extra sanity loop from the mining team just to see where it is. Because you know the exploration guys, I mean, you have to pull them off the rigs, especially when they're hitting grades like us. But we are -- we will circle back. But I assume at least another year.

Stefan Ioannou

Okay, great. And then just on Santander, you mentioned that through the discussions with the community post the roadblocking and stuff are ongoing into this month. Are those sort of just general conversations to garner comfort or it would be -- we should be thinking about formal community agreements being signed and things like that?

Mark Cruise

I'll hand that one over to Bryant. He has been spearheading out with the guys.

Bryant Schwengler

Look, it's more the former than the latter. We are having general conversations going on. We already have the signed agreements in place with all the communities in which we operate in. And that's we're meeting all of our obligations there. These are ongoing general conversations to continue to build our leadership better.

Stefan Ioannou

Okay. Okay, great. And then just one final sort of more housekeeping question. At Rosh Pinah, I understands the mill's throughput was down a bit just given that the grades were so high, you had to sort of manage the floatation capacity, but the mining was down as well too. Is that sort of for a similar reason? Or was there some other issues there at the mine level?

Bryant Schwengler

No issues at the mine level at all. It's about us just matching the overall sequence and not building up too much inventory in the middle and keeping a live program. One of the key features for us right now is our -- is the way we're integrating our mine planning through to our milling. And we have a very live blending program that we have now, so the mill -- that the mill has included to the mine plan as a part of the daily process there as well. So it's a pretty well -- it's a well-entrenched thing that's been developed this year for the mine.

Operator

Your next question comes from the line of Keith Watson from CQS.

Keith Watson

I was just wondering if there was -- if you felt it might be necessary to try and further improve transparency or peer comparability on provisional pricing? And if so, what you might propose to do about that?

Mark Cruise

Yes. Certainly, I'll hand that one to Alex. Obviously, he does look at all our peers in his previous existence so he's best qualified to answer that one, Keith.

Alexander Terentiew

Yes, Keith. So we did do a look at many of our peers over the past couple of months to see what other companies report. And there's a wide variety of -- well, quite a variation of what companies do report. And based on what we reported this quarter, I believe that we are providing now probably as much or more than most of the companies out there. So I think it's a big improvement over what we did in the past. But it is definitely something that we -- because provisional pricing has such a big impact, it's definitely something that we will continue to look at and try to find ways to optimize and approve that disclosure. But relative to our peers, from what I've seen, I think we are providing more than most of them at the moment.

Keith Watson

But one of the things I think investors prefer to see is what I would call "quality of earnings and less volatility". And as stated on the call, moving from higher highs and lower lows isn't particularly helpful in addressing that. Is there anything else that could be done to reduce those effects?

Alexander Terentiew

Well, one thing just to point out on that. The last couple of days in September the price did run up, right? So some of our peers may have used a slightly higher $0.05, $0.06 per pound higher price. But if the price that last week of September went the other way, we would have actually ended up using a higher price to provisionally -- relative to some of them, we would have been using a higher price than what they would have had. So it really was that last week. But yes, looking at managing that price risk is -- I don't know if you guys have anything else to add, but it's something that we are looking at. Gerbrand is going to add some comments here.

Keith Watson

Yes, I mean, I'm not just look at -- sorry, I would just look at things like the Burkina operation, and I appreciate that you're looking at alternative logistic routes. But even 1,000 kilometers, it seems a stretch -- plus some shipping, it seems a stretch to have 6 months outstanding provisional pricing on some of that material.

Gerbrand Heerden

Okay. I think just to -- coming there around on the provisional pricing side, in terms of the disclosure, we basically also are bound by the contractual confidentiality so we're disclosing as much as possible. In terms of the settlement, that's based on the average for the month, which links effectively back to the price that we realize at. In terms of the all-stake agreement, so from an accounting point of view, we believe that we showed up on the base track to account for provisional pricing. The 6 months is the 6 months.

Mark Cruise

We are looking at -- I mean, yes, we are looking other ways to kind of stabilize that though. I mean, obviously, there has been hedging discussions at a board level and we're just starting to look at that and see what makes sense. And obviously, hedging, you're going be -- well, it's 50-50 call as we know and once you start it, you kind of have to maintain it. And certainly up to here, people have been -- well, going as far as zinc leverage, and so it has been actively looked at and we are trying to see what we can do to minimize that volatility.

Keith Watson

I'm just trying to understand how it can take 6 months to transport anything anywhere. And that's -- is that actually written in the contract that some of these things have to be delivered over that period of time?

Mark Cruise

Yes. Well, in general, the contracts vary by site-by-site basis. But I mean, typically it's when they hit the smelter. So there will be -- and some of them, they will, when they hit the smelter, so there's always going to be a bit of a lag. And I mean, that can be anything from up to 6 months, but again it can just vary.

Keith Watson

And typically over the -- I mean, this was the first time that I'd seen the 1 to 6 months referred to in any financial statement. What typical proportion of your outstanding material is subject to the six month lag? Let's say the 96 or 143 5 million pounds over the last two quarters, what percentage of that would be at the longer end of that provisional six month pricing?

Mark Cruise

I mean, really, it will depend on a shipment-by-shipment where they end -- when the -- where the buyer, where it's going, so it does vary. So that's not as if it's every month it's a hard number because it will vary depending on where the customer wants it to go. So you can't just -- it's not possible just to say this month, it's a vessel-by-vessel basis effectively depending on where it goes.

Gerbrand Heerden

It would have been much easier to give you a fixed formula, and basically, it's not a divided by six, like you said, it's depending on vessel, when the vessels are booked, when you've built up enough stock during that month. So basically it's shipment-per-shipment between that.

Keith Watson

And do you manage that? Or is that being managed for you?

Mark Cruise

No, basically that's normal. I mean, the customer -- and whoever buys it -- and a normal course of business, whoever buys it, they decide where it's going. They're buying the concs, so it's their conc.

Keith Watson

Yes. Okay. And is there anything that you could do to maybe amend, what I still feel is a quite a wide range of time for provisional pricing to take place, the 6 months end?

Mark Cruise

Yes, like I said, I mean, we are looking at ways to decrease the volatility and the -- yes, is hedging applicable kind of work just looking at the risks associated with that. So we are looking at what we can do to minimize that volatility. So it has been, yes, it is a work in progress.

Keith Watson

And operationally, if I could just ask one question with Caribou. To what extent are you having any success in testing the sort of paste fill or anything to address the instability in the hanging wall?

Mark Cruise

Yes. I'll hand that one over to Bryant.

Bryant Schwengler

Yes. I got it, Keith. Look, we're having a significant amount of success on the CRF, it's not paste fill, it's a cemented rock fill program. And we're only using it in parts of the mine. So we are actually seeing a -- so the tests were coming back very, very positively. We're using a methodology that was developed at our Perkoa Mine. That's being used for quite some time there and we've already deployed it at Caribou. That will also allow us to have less dilution and also help with our silt pillar extraction as you go forward in the mine life as well.

Keith Watson

Okay. And then I think finally, it was just with regards to the proposed share buyback. Was there -- one, why is that not in place already, and given the potentially short time frame, and I think our prior mentioning of it? And secondly, what would limit the extent of that on the TSX rather the $20 million that was referred to?

Mark Cruise

Yes, I'll answer that one. Really, prior to that, I mean the board had made a decision. So the board has made its decision and thought now was -- made sense timing wise to put it in place. So that was prior to, that's why. Like I said, it is something we've been looking at for a while and just wanted to make sure that it was the right thing to do. Looking at the cash position of the company, given that this is the first year we've owned the African assets and for the full year, and obviously, we're putting new teams in place, new protocols, all the rest of it. So just getting a better comfort level with the operations of the business. And obviously, just timing felt now is an opportune time to do it. So that was kind of why it's been announced now. On the -- sorry, the second half of the question, sorry, can you repeat that again, Keith?

Keith Watson

It was just what limitation is there that would restrict that to the amounts that you've put forward? I think you'd mentioned in the statement something like $20 million -- approval for $20 million worth of buyback. Why wouldn't it just be an evergreen structure?

Mark Cruise

Yes. No, it could be and it can be revised. But I mean really -- I mean, there's obviously a few variables that go into that, commodity price being the main one and stability of the company and the use of proceeds. So it just felt that looking at peers and looking at what's in there, roughly 5% to your free float seems to be pretty normal. We said, okay, 6%, $20 million. But it's not a hard number. Like we said, if the business is doing well, if we don't get returns elsewhere with a better project, if we're not getting superior returns, I'm sure the board will look at it and then will extend if it's appropriate to do so. Conversely, if we do have some internal growth opportunities and get us better returns than buying our own shares, well, then obviously we'll probably pull back on it depending on the health of the business and cash flows and invest in that because it will give the best return to the company. So it's going to be a movable piece, but we just felt, to kick it off, that was an appropriate level number to start with. But it's by no means hard, I mean that will be reviewed and revised actively.

Keith Watson

And given the extended period of thought process by the board then, what is their estimate of the price above which internal project development would become more valuable than buying back stock?

Mark Cruise

It's really -- it's going to look on the return, basically, of it. So really -- we're just looking at for -- certainly if you're getting projects, typically our internal projects, roughly speaking, we're looking at 20%, 30% IRRs, generally speaking. So when we're looking at, say, the heavy fuel oil, for example, which was funded. I mean, I got at a 40% IRR internally, 2-year payback. So I mean, typically, we're looking for those type of things on internal projects and double-digit returns or high double-digit returns, I'd argue, and then 2-year payback. So like I said, I mean, we'll just have a look and see what makes sense.

Operator

Your next question comes from Pierre Vaillancourt with Haywood.

Pierre Vaillancourt

Just a quick question on the Restigouche, I mean, by the sound of it -- I mean, you've been talking about the prospect of bringing that into production midyear next year. That is likely optimistic, right? I mean, we should expect the later start to Restigouche, if we see it at all?

Mark Cruise

I'll hand that one to Bryant.

Bryant Schwengler

Pierre, look, the Restigouche, obviously, in northern New Brunswick, conditions at wintertime are quite interesting. So optimally, letting us to do the work at Caribou, when we did the strategy, made most sense. And then once we had Caribou at a much better state rolling into quarter two, that gives a much better time frame for us to commence operations at Restigouche should everything look good during our review is all I can say. And there is the 2019, our Investor Day, which should be announced -- for January, some signs, I guess, we'll be able to announce a bit more clarity on that one as we go forward.

Pierre Vaillancourt

Okay. And with respect to Caribou, given your use of cemented rock fill and the number of stopes, I mean, we -- looking at this guidance here, the cost guidance, is that -- going in to 2019 on a sustaining basis, that's probably going to go up, I guess?

Bryant Schwengler

Look, I think next year -- when we all rollout the plan for next year, we'll probably detail a lot more of what we're seeing going forward. I think what I will say right now is we're conducting a lot of work right now to get ourselves in front. So we're doing -- we're laying a lot of groundwork and foundation work to set ourselves up better for the future, which is having a cost impact to the current year.

Pierre Vaillancourt

Right. And any -- on that score, I mean, does it make sense to continue to aim for the throughput 2,700 tonnes per day? Or you're just making life more difficult for yourself by trying to uphold that target? I mean, do you just kind of scale back and work with more manageable program going forward?

Bryant Schwengler

Look, I think, certainly, there's a lot of work going on there, and that's part of our overall strategy in the camp to look at what we can do. So the mill has got a nameplate capacity and the mine will have a nameplate capacity, I guess. So part of the works that we -- that are undergoing right now is about balancing the 2 out in the short, medium and longer term. And that could look at other opportunities in the camp as well.

Mark Cruise

And that's right. Sorry, Mark here, just to jump in. I mean, and that's where the Restis of the world may come in or whatever else. But if we do have excess capacity, depending on stress in the mine at Caribou, et cetera, et cetera, you feel that excess capacity. So yes, those studies are ongoing and just trying to find that optimum, what our comfort zone, that our Cinderella zone where it's just, it's right.

Pierre Vaillancourt

And so the next quarter or two, what is the mining rate that you're at while -- as you continue the upgrade, the rehabilitation there?

Bryant Schwengler

Well, the mine rate that we'll see for -- through the end of year, obviously, it will sit in the low 2,000 tonne a day range, I guess, to be averaged over the month. So I would say it'd be sitting in the lower half of the 2,000 tonnes per day range as we go forward. And then as we announce the 2019 budget plan, we'll be able to detail more about what does that look like for next year. But certainly, what -- again, what we're doing this year is we're taking the step back to increase our development fronts and get ourselves much better set up for the future. So a quarter 4 impact in what we're looking at right now is not representative of what we're going to see long term from the operation.

Mark Cruise

Just Mark here, I mean, that revised guidance takes in that lower throughput rate, just to be clear so there's no confusion.

Bryant Schwengler

Absolutely, yes.

Operator

Our next question comes from Orest Wowkodaw with Scotiabank.

Orest Wowkodaw

Just wanted to touch on the balance sheet, the cash and the free cash flow. Should we anticipate that in Q4 your cash balance could actually decline further outside of commodity pricing just because we -- there will be a big buildup of receivables related to the inventory with the sales catch-up here? And might be the cash actually gets -- won't get flushed out until the first quarter most likely?

Gerbrand Heerden

Orest, Gerbrand here. I think obviously, forward-looking statements are difficult to make but at the current rate it looks positive. So where we're standing today, we're not -- we won't be moving back unless there's a massive downstream in the price for the rest of the quarter. So given prices stay where it is at the moment and the train for the first month of quarter 4, with the sales looking pretty good, the answer is -- should be no.

Orest Wowkodaw

And is that because you've shipped a lot of that inventory stockpile early in Q4, so you expect to get paid by the end of Q4?

Gerbrand Heerden

Plus-minus, like we said. So obviously, different offtake then for the different mines. Maybe one thing that we also need to make, and I think it was mentioned in the MD&A if you go through it carefully, is that we've also obviously drawn down a bit more as at the end of quarter 3 on the refinance facility to basically pay down finance leases, which is a bit more expensive, just the responsible management of cash and cost. And that down payment is actually -- so the drawdown happened in the quarter and early in quarter 4 we've actually settled those leases already. So plus-minus $10 million swing there on cash that you will see between cash and reduction of debt.

Operator

Your next question comes from David Kay [ph], private investor.

Unidentified Analyst

I have a few questions for you. First one, Mark, can you comment on the geopolitical risks to Trevali in both Peru and Burkina Faso?

Mark Cruise

Yes, sure. Start on Peru at the moment. So taking off of Peru, well, none geopolitically in that normal, normal Peruvian, I guess, politics are ongoing. Clearly, the President has obviously stepped down because of the ongoing Brazilian corruption issues, the Vice President is running the country, seems to be running well. No more, well, issues have been brought up that way. Next presidential elections are until 2021. Peru, things always get frothy around then anyway, gets a bit excitable, but always kind of seems to chug its way through. So from a geopolitical perspective, Peru is pretty stable or one of the more stable Latin American countries, so we don't see any -- just normal, normal business there, no risks really at all. Moving to Burkina, clearly, security risk. It's in the news, it's well advertised there. In general, it is the north and the eastern borders of the country, so the Mali and Niger borders. And really, we are located towards the place being south, southwest of Ouagadougou. So there's never has been any incidence in our area, although we do maintain a very active watching brief with the various embassies and our kind of network in-country. But certainly, monitor the situation, has never impacted operations prior to this and has no impact this year, but we do continue to monitor it closely. So that's kind of where we are at the moment.

Unidentified Analyst

Okay. Second question, have you considered listing on a U.S. stock exchange for more exposure to U.S. investors?

Mark Cruise

I'll hand that one to Steve.

Steve Stakiw

Hi, David. No, that question actually has come up. So no, it's something we've looked at. Really don't see the hard rationale to undertake that at this time in terms of additional reporting and financial filing requirements to take that on. Certainly, it's something that we'll continue to monitor and obviously advise the board on going forward. If you look from a volume perspective in terms of the exchanges that we're listed on, obviously, the TSX is our main listing and the bulk of our volume is there. Outside of that on our secondary exchanges, both on the U.S. OTCQX and on the Peruvian Stock Exchange, on the Lima Stock Exchange, the BVL, we trade equal volumes. But it's a fairly small percentage. Really in terms of additional shareholder base that could be garnered in the U.S., from an institutional perspective, the institutional investor market in the U.S. is quite capable of investing on the TSX, so we don't see a lot expanse of potential shareholders on that front. It is something we'll monitor but it's currently not in the plans.

Unidentified Analyst

Okay. Third question, what price for zinc does Trevali need to get a positive return on the bottom line?

Mark Cruise

Yes, I'll hand to Gerbrand.

Gerbrand Heerden

David, that's -- if we talk to kind of metal, it's just fluctuating from a cost -- all-in cost, sustaining cost point of view round about $2,000. We're obviously aiming for below that, but you can work with -- as a rough number with that in your -- at the back of your mind.

Unidentified Analyst

$2,000 a metric tonne?

Gerbrand Heerden

Metal tonnes, yes.

Unidentified Analyst

So that's about, what, $0.95 in market terms?

Gerbrand Heerden

It's about -- yes. What is it? About $0.90 per pound.

Unidentified Analyst

$0.90 per tonne.

Mark Cruise

Per pound.

Gerbrand Heerden

Per pound, and $3,000 per metric tonne.

Unidentified Analyst

Pardon me, yes, so $0.90 per pound, and it's currently $1.15, so you're about $0.25 margin.

Gerbrand Heerden

That is correct. Given the lack of retail, pricing needs to be taken into account, that's important.

Unidentified Analyst

All right. Okay. Fourth question, do you see possibly Glencore increasing their shares in Trevali, given a -- $1.20 for 200 million shares in 2017 and today, the share price -- well, right now it's $0.47. So they're looking at a loss of $146 million -- paper loss anyway. So do you see them increasing their share?

Mark Cruise

Mark here, David. I mean, certainly -- I mean, obviously, that's a question best addressed to Glencore. They are locked up or they were locked up for 3 years as part of that agreement. But -- so really is a question, I mean, I can't answer that one. And certainly, what I will say is, Glencore tends to view their investments more long-term time frames in general. So they will take a longer-term view of the business and the opportunities that they see the business driving. And they certainly don't tend to look at things, in my experience, on a quarter-to-quarter basis, which is kind of tough with mining opportunities anyway. So like I said, they're currently locked up after the fact as part of the sales agreement. And they do historically, based on my experience, tend to take a longer-term view of the business.

Unidentified Analyst

And when are they at liberty to sell those 200 million shares? In 2019 or 2018 -- or 2019 or 2020?

Mark Cruise

I'm sorry, I'm just thinking here due to the -- it will be 2020, I believe, it was a 3-year lockup.

Unidentified Analyst

Three year lockup. Okay.

Mark Cruise

Yes, three year lockup.

Unidentified Analyst

Yes, March, April of 2020, roughly?

Mark Cruise

Yes, I mean, what I would say is, and that's a fair point and I -- if you look at historically when they take long-term investments in other industries, they have never sold. They've really taken 10-, 15-year positions and if anything else, they've kind of ultimately probably increased their positions over time, and if you look at what's out there publicly. And so certainly, like I said, they're -- not that it's a rounding error, clearly. But we are significant zinc exposure for them. And we are investing in the mines. We are increasing efficiencies. And obviously, they buy the product offers and they like our product. So it kind of helps them. So it is a longer-term relationship with them. Obviously, they'll do what they need to do. And obviously, clearly that's their decision. But I don't lose sleep over them going out their position. Put it this way, we're not drop-dead days or whatever when the shares come free trading, so to speak.

Unidentified Analyst

Okay. I was looking at -- yes, can you explain the current disconnect between the rapidly declining LME zinc inventories and the current price for the metal. Like normally when demand is strong and supply is dwindling, the commodity price goes up. That's economics 101. So I'm kind of curious as to what's going on here?

Alexander Terentiew

Hi, David. It's Alex here. So yes, I mean as you noted, the inventories continue to go down, 10-year low. You've got 5, 6 days of consumption out there. But I think -- everybody is really scratching their head, but I think it's a factor of 2 things. First, we do have macro uncertainly. We are seeing other exchange-traded metals also trading below what price expectations were just a few months ago. But the second thing I think is this confusion or uncertainty again on expectations for 2019. We are seeing or there is mine supply growing, although I'd suggest is not as fast as what people have thought. But there also just seems to be a general assumption that this concentrate will directly flow through to the refined metal market and prices will stay weak. But I think that there is some risk to that. I wouldn't be surprised to see some of these third-party consultants -- independent consultants come up with downward revisions to refined metal supply growth forecast the next few months. The world right now seems to be relying quite heavily on China to increase refined metal output next year on the order of about 900,000 tonnes. And we need that because there is very limited supply inventories out there. But you may be aware, environmental restrictions in China continue to impact both mine supply and reflect mine supply. And year-to-date in China, for example, refined output was down 3%. So I find it hard to see how China is going to really crank up production to that extent next year. But that -- I think that is definitely a source of confusion or uncertainty out there right now.

Unidentified Analyst

Right. Do have like a projection for zinc prices for 2019? Like do you see it going up or staying the same or...

Mark Cruise

Mark here. I mean, listen, we're frustrated as well. I mean, based on fundamentals, it should be higher, but it's not. So I mean, clearly, whatever I say is going to be wrong. But if you at the fundamentals, I mean zinc should be trading $200 to $300, $400 higher per tonne than it is now. If you look at any other given zinc cycle or rally. So what I will say, probably -- I mean, listen, we can manage the upside. That's a good problem to have. What I will say is turning for us, it seems comfortable trading in the current range. So call it 2 5 to 2 7. So maybe hopefully, it looks like it's established the base here, whether we agree or disagree. But I mean it looks like based on -- for whatever reason, it doesn't seem to hit a base at this level. And certainly, as you've seen and if you look at the other zinc producers out there, that when it gets a bit lower than that, no one's making any money, so it will correct itself pretty quickly in general. So like I said, I would like personally. But what I personally think, clearly, it doesn't make any difference. But if you'd like to think it should pop soon or basically at some point there'll be a tipping point.

So I mean you can't keep drawing down supplies and the price can't refuse to react. It can only do that for so long. But nonetheless, arguably, it should have done that before now and it hasn't. So I mean I don't know, it's kind of all you can say to that is it's a bit of a -- it is a conundrum, it is a head scratcher and believe me, yes, if you ask any of the producers, that I think everyone is scratching their heads, because it doesn't make any sense based on fundamentals. Even if you talk to the smelters, concs are still kind of harder to get, all the rest of it. The smelters can be constraining the production -- metal production because they can't get feed, but yet the price is stubbornly refusing to budge. And what I mean there Dave, so one of the guys -- I just want to correct myself, sorry, so basically the Glencore, one of the guys pulled out the details for me. So it was a 2-year lockup. So I sort of told 3, it was a 2-year lock-up, which basically expires in August next year, but it was a 3-year standstill. So that was August 2020. So they are the 2 key dates on the Glencore paper. Sorry, just to correct that one.

Unidentified Analyst

Okay. Do you think the trade wars with Trump and everything, is that having an effect on the zinc price?

Mark Cruise

I'll hand that over to Alex. He kind of looks at more of the macro stuff.

Alexander Terentiew

I think just from a broader market perspective, I mean, we're seeing copper is not down as much as zinc right now, but the price of copper went from, call it, $3.20,$3.25 or so back in June down to current price around $2.80. And I think it's part of the whole -- the same story. I think you can say that a few months ago, the market was very bullish on copper and it's much more so than they were on zinc, and copper has been hit not as hard as us, as I said, but pretty hard as well. So -- and I think that's really just the overriding factor there.

Unidentified Analyst

So do you feel though that the trade wars are having an impact on the metals market?

Alexander Terentiew

Yes.

Mark Cruise

Absolutely, yes.

Unidentified Analyst

Last question -- no, I don't have any more question.

Mark Cruise

Well, no, thanks. We really appreciate taking the time to listen to the call and ask the questions. But if there's anything more, please do pick up the phone and then myself, Steve or Alex will certainly answer them if you have any more.

Operator

This concludes today's conference call. You may now disconnect.