Mark Sander - President, CEO and Director

Thank you very much. Good morning everyone and thanks for joining this conference call.

I am actually delighted to be able to close out 2017 and relate to you how we’re set up to really move forward and have an opportunity to deliver on our strategy and our commitment to add shareholder value. As you know, 2017 was a challenging year for us due to the inundation event at Cerro Bayo in June, which resulted in placing the operation on care and maintenance while we study how to safely reopen the mine and get the seven permits needed to mine the remaining life of mine plan.

Having said that, it’s really, really rewarding for me to be able to tell you how Bjorkdal picked up slack. They had an extraordinary fourth quarter producing about 22,000 ounces just in the quarter and a cash cost of $617 an ounce.

That is actually better than the typical annual performance we had in mine -- annualized performance. And we believe we can sustain in the range of 60,000 ounces at up for $700 of cash cost per ounce going forward.

We did have a boost from positive grade reconciliations at the Bjorkdal. This really is due to the fact that we tuned up our block model to predict grades accurately in the 1 to 2.5 to 3 gram range, where 90% of our ore is and we ran at some high grade pods that we knew about, and there were much higher grades than we thought in our block model, and that is because we chosen not to invest in detailed drilling those beyond what's needed for grade control and effective mining of those.

And so we're left with some upsides price. But that will recur from time-to-time and we are confident that we be eliminated or substantially eliminated the possibility of downsize surprises.

At Björkdal, I would point out also that we've got a [indiscernible], our GM, who is ending his first nine months of being the GM, and he has rejuvenated operational team and they are already in a position that I would call now of self-generating mine. The turnaround for the first years of ownership was really driven by the corporate perspective.

And it's absolutely clear now that they generating their own future, which is quite personally rewarding for me and the management, team to see what happening. At Costerfield, I produced in line with previous quarters and years.

We all said for the last year, that we have expected lower grades from the mine. And in fact we've realized that, but nonetheless the management team has reduced the run rate, annualized run rate of operating cost by about $6 million so that the cash cost per gold equivalent ounce at $707 an ounce for the third quarter was really respectable.

And that’s a testament to the local management team, and Melanie McCarthy, who is actually ending up here first year now as GM. As Costerfield as you know, we added Brunswick to the reserves that was announced earlier this week.

So actually both sites, Björkdal and Costerfield have replaced production of last year. And at Costerfield the development of Brunswick, from which we should expect ore, first ore in the second quarter is pretty much on track.

That has been done by contractor and it should be largely completed by Q4, the very short and sweet intensive capital development things. At Costerfield, we also have the next ore body.

We'll be hoping an ore body emerging our drilling. There is a targets zone underneath the old Kendall and Costerfield deep lines just like all our exploration targets like Cuffley and N-lode.

The targets for us are underneath historic mines that were mined 100 years ago. And the old Costerfield mine itself was the biggest producer in the previous centuries.

And we're tightening good intercepts on below that as we speak. Now, we have high ores for extending the mine life again.

As a company, what that means is that our financial results were, you can read it. And we generated in the fourth quarter revenue of $38 million and EBITDA of just over $40 million and a consolidated net loss of $23.4 million.

We did take for the full year rates down on our carrying value of Cerro Bayo to reflect the emerging timing we expect for gain to permit to restart and execute the complete life of mine. As previously guided, we’re not expecting to restart in 2018 and do expect to restart somewhere in 2019, and for conservative in financial purposes, we have impaired the value assuming at a first quarter of 2020 restart.

The full year results of $20 million in cash outflow is actually heavily weighted by one-time items including net repayment borrowings of $14 million, this increase in recollection deposit at on 70.5, which we expect to get back, and the cost of search and rescue and redundancy and going on to care and maintenance at Cerro Bayo. Those totaled about $44 million for the year and we do not really expect those to recur, so.

And certainly the cash flow from the fabulous fourth quarter of Björkdal is still coming in as the concentrates of process and we get to pay by the customers. Going forward in 2018, we are working intently on putting ourselves really for the next acquisition.

We have put a self registration in place that will help us support a major acquisition and we indeed have $25 million left undrawn on the revolver of that Sanjay put in place with HSBC in Q3 and we have $16 million in cash as of the end of the year. We have seen interesting targets out there and remained very optimistic that we will be able to find something and build our relationship with HSBC and other banks and investors.

We will be in a position with the self registration to be able to move quickly to find the right month. At our operations, we anticipate another good year at Björkdal that guidance fit the 758,000 to 63,000 or 4,000 ounces and that all depends on the great performance of our block models in the high grade zones.

We have been able to sustain the high rates of production of the highest quality A ore from open pit and underground. And actually the management attention on site is turning to low hanging cost reduction fruit.

And our focus on rate control and uping the volume of high grade ore and they did lose tight a bit on some of the challenges they can overcome in the cost arena. And there are several projects underway that should impact significant over the next few quarters.

In exploration, we'll spend around $3 million and $3.5 million in exploration there. We're just getting underway now as the site comes out of the deep cold winter.

And there will be results to report as we go forward. At Costerfield, we planned to obviously stay on track with development in Brunswick.

And it might have some efficiently at low cost as possible through the rest of the Cuffley and Augusta lodes that existing in the reserves. As I said before, the main upside there is this emerging ore body and under the old Costerfield mine.

We have released those results in our previous Investor presentations and in the press releases. And we will continue to communicate on those going forward.

We do have a program to shade and exit our non-core assets. We've got four of those decided to go.

We've completed agreements with two of them. We are in final stages of negotiating the definitive agreement with the third.

And we have been entertaining potential bidders for the fourth. So that program is well underway, and now forward to adding the, they have slow from those to this year's results.

At this point, I'd like to get back to you with my optimism. And my thanks to our staff for really weathering a challenging year and setting ourselves up for a return to a strong value generating profile going forward.

At this time, I'll entertain any questions that you maybe have.

Mark, I was quite impressed with your little speech there, being a shareholder here for while I am pretty underwater on the stock, but I just wanted to more dwell on what the future is. Like I realized that the inundation at the Cerro Bayo was very dramatic thing and not something that someone could even predict or dissipate.

But going on, I just wanted to know what would have to happen in the future? What would you like to see to turn the Company into profitability along the lines of the commodity increasing or just what things would you like to see happen?

Mostly I would like to see our staff keep delivering on the operating plants that we have and making progress on the permitting to restart Cerro Bayo and then really uncovering the next value adding acquisition. So those are really the three things.

And just another question I ask sort of follow-up like, I’m sitting here with my shares and I really believe in the management, I really have faith in you to turn this around, and I’m just sitting here wondering. Why -- if you have any reasons, why I should hold my shares or why some -- like a new investor would want to buy or purchase the stock now as compared to some others company?

So, I would point out a couple of things. One, is I don’t know if you get any of the, I mean, I say this any of the investor, analyst reports from the brokers, but from our analysis and theirs, we are strongly undervalued.

Our current share price is in market cap is much lower than our life of mine plan suggest. And we believe we are strongly oversold, I would say any CEO in this position would say that.

But I think the main impediment on the share price is that, it’s been three years since we have done our last distressed asset acquisition and, yes, we have delivered on a turnaround at Bjorkdal. It took about its a little bit longer than we expect, but not much.

And it’s time to put fund our strategies, get into a new asset for really cost to which is relatively straight forward to add value by applying good technical and management practice, and we have seriously looked ahead four or five in the last six months, eight months nothing has come right for us yet. Again, we promised to the shareholders that whatever we do to that will make sense from an accretive position, and a position that we are confident we can generate 3 to 5 times the entry price and increased value over the following 3 years to 5 years from an acquisition.

So we have to be patient. We're not going to grow with value less production.

It's all about increasing value. And if you trust us, to make those kinds of investment decisions, and by all means, you should invest in us.

And certainly, there are, I own fair amount of shares myself and that the board does as well. And I think it's a good time.

So that's a good time out of our cycle to go forward with us.

Well, I see it was greatly undervalue too. And I looking at the price you think, you're about to go bankrupt.

But if you're looking to buy some other property, like that's totally, that's something I like to hear. Because if your company can, is thinking of doing that, they can't be, they have to be in good financial shape.

And that's why I'm sticking in there but…

Here is one example of kind of a strategy. And that is there are a number of single mine companies out there.

And they all have $4 million to $5 million worth of corporate overhead. We have proven with the addition of Björkdal.

And we can have a mine too hard company for no increase in overhead. Actually the $4 million to $5 million we've already spent.

So there is an immediate $4 million to $5 million a year cash flow gain by combining or absorbing another single mine company, which works out to a net present value of $25 million to $30 million. It is available almost instantly with an acquisition of in this case single mine company.

So it's not our only source of targets, but the simple back to the end of all consideration in this case consolidation really is quite exciting and it's just the matter of finding the management team of the single mine company that is ready to combine with us.

That sounds very good. Just one more question.

I just -- with regards to dividends. Is there any plan to reinstate the dividend at a later when things possibly turnaround?

Our long standing strategy is to return cash back to shareholders whatever possible. The condition of our revolver is that we need the consent of HSBC to do that.

And whether we can demonstrate to them the cash flows to support dividends, I'm confident that they do that consent. And of any rate, the revolver has a 2019-2020 maturity and, so certainly strategically yes, timing was and early aligned on what we actually do.

You’ll obviously see it first in strongly positive cash flows and then willing to get to pays.

Okay. Well, thanks all for getting up early and then coming to join us, and I really look forward to being the Toronto-based investors at PDAC, and as many of you have grade and make appointments to see at the upcoming Investor conferences.

Hope, we have lot to talk about, and if you have any further questions, please drop us an email then we can answer them or get back to you by phone. So, thank you very much and unless there is something else that you got in mind and I'll sign up.