SASKATOON Oct 19, 2015 (Thomson StreetEvents) -- Edited Transcript of Claude Resources Inc earnings conference call or presentation Thursday, August 13, 2015 at 3:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Marc Lepage Claude Resources Inc. - Manager of IR * Brian Skanderbeg Claude Resources Inc. - President and CEO * Rick Johnson Claude Resources Inc. - CFO ================================================================================ Conference Call Participants ================================================================================ * Derek Macpherson M Partners - Analyst * Joe Mazumdar Canaccord Genuity - Analyst * Mario Rodriguez - Private Investor * Raja Guram - Private Investor ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good morning. My name is Stephanie and I will be your conference operator today. At this time I would like to welcome everyone to the Claude Resources Incorporated second-quarter 2015 earnings conference call. (Operator Instructions). Marc Lepage, Manager of Investor Relations, you may begin your conference. -------------------------------------------------------------------------------- Marc Lepage, Claude Resources Inc. - Manager of IR [2] -------------------------------------------------------------------------------- Thanks, Stephanie. Good morning and thank you for joining us on our second-quarter 2015 earnings call. We would like to welcome all analysts, current and prospective shareholders and the media. On the conference call today we have Brian Skanderbeg, President and CEO, and Rick Johnson, CFO. During today's call the Company may use forward-looking statements which are based upon current expectations and involve risks and uncertainties. For further information regarding forward-looking statements, please refer to our cautionary note located on page 2 in today's presentation. Please note that today's presentation is located on the home page of our website within the corporate presentation icon on the left-hand side. Also you can download and view our second-quarter 2015 management's discussion and analysis and financial statements located under the investor's page under financial reporting. I will now turn the call over to Brian Skanderbeg, President and CEO. -------------------------------------------------------------------------------- Brian Skanderbeg, Claude Resources Inc. - President and CEO [3] -------------------------------------------------------------------------------- Thank you, Marc. Hello everyone and thank you for joining us as we review our second-quarter operating and financial results, discuss our outlook for the remainder of 2015, and at the end answer any questions that you may have. Before we begin the formal presentation, I would like to take the opportunity to acknowledge our operations team for an excellent second quarter and for their ongoing focus towards safe production. In addition, I would like to acknowledge the dedicated staff that remained on site during our recent evacuation due to local forest fires. Their dedication and tireless commitment to ensure safety in employees, the facilities and to facilitate a timely return back to normal operations was tremendous. Thank you for your efforts and keep up the great work. I will now start the presentation on slide three with the second-quarter highlights. The second quarter continued to build on the Company's trend of strong operating and financial performance. During the quarter we achieved record net earnings of CAD10.2 million or CAD0.05 per share. This was an improvement of CAD7 million, CAD6.9 million or a 208% improvement versus the second quarter in 2014. Along with the strong earnings we continued to see solid operating results with gold production of 20,619 ounces which was a 10% increase versus the second quarter of 2014. We continued to mine higher-margin ounces in the second quarter as mill head grades increased 15% to 8.88 grams per tonne. As expected, our total cash cost per ounce decreased to CAD623 or $507 US, a 17% decrease from the second quarter in 2014 and our all-in sustaining cost per ounce decreased to CAD954 or $776 US representing a 10% decrease from last year's second quarter, both well below our 2015 guidance. Our strong operating and financial performance strengthened our financial position as we increased cash and bullion to CAD20.9 million which now exceeds our long-term debt of CAD20.8 million. Moving on to slide four, the first six months of 2014 have certainly been record-breaking for Claude. We achieved record earnings of CAD15.4 million or CAD0.08 per share, a CAD17.2 million improvement during the same period of 2014. The main factors driving record earnings have been record production and mining higher grades. For the first six months of 2015, we had record gold production of 41,686 ounces, nearly a 40% increase versus the first half of 2014. Grades have been very strong averaging 9.49 grams per tonne, a 40% improvement over the same period of 2014. And our peer-leading cost performance year to date continues to improve. Year-over-year, our total cash cost per ounce decreased 23% to CAD647 Canadian, $524 US and our all-in sustaining costs decreased 18% to CAD1146 or $928 US per ounce. Based on our record production, we have increased our annual gold production guidance and lowered our cost guidance for 2015. Our annual gold production guidance has increased to 68,000 to 72,000 ounces. Cash cost per ounce to range from CAD730 to CAD800 or $580 US to $635 US and our all-in sustaining cost per ounce to range from CAD1100 to CAD1200 or $875 US to $950 US. Our expected fully-loaded costs in 2015 are well below today's gold price and this reflects our ability to continue to generate material free cash flow. I will now turn the call over to Rick Johnson, CFO, to discuss the financials. -------------------------------------------------------------------------------- Rick Johnson, Claude Resources Inc. - CFO [4] -------------------------------------------------------------------------------- Thanks, Brian. Before I begin on slide five with the financial highlights, please note that all figures presented in the table are in Canadian dollars unless otherwise stated. Gold revenues generated during the second quarter of CAD29.7 million was 20% higher than the CAD24.7 million reported in the comparable period of 2014. Year to date, gold revenue of CAD55.9 million increased 39% from the first half of 2014, a reflection of a 33% increase in gold sales volume and a 5% increase in Canadian dollar gold prices realized. Net earnings for the quarter were CAD10.2 million or CAD0.05 per share, a significant improvement from the second quarter of 2014's net earnings of CAD3.3 million or CAD0.02 per share. Year to date, net earnings of CAD15.4 million or CAD0.08 per share were a CAD17.2 million improvement over the net loss of CAD1.8 million or CAD0.01 per share reported during the first half of 2014. The improvement in financial performance period over period and year to date was due to increased ounces produced and sold along with higher realized Canadian dollar gold prices. Cash flow from operations before net changes in non-cash operating working capital of CAD15.6 million or CAD0.08 per share was up from the CAD9.9 million or CAD0.05 per share reported in the second quarter of 2014. Year to date cash flow from operations of CAD24.9 million were CAD0.13 per share, more than double the CAD11.6 million or CAD0.06 per share reported during the first half of 2014. Our strong operating performance, mining higher grades and the successful utilization of the Alimak mining method decreased both total cash costs and all-in sustaining costs per ounce. Total cash cost per ounce decreased by 17% to CAD623 or $507 US per ounce for the quarter and by 23% to CAD647 or $524 US per ounce for the first six months of 2015. All-in sustaining cost per ounce of gold decreased 10% to CAD954 or $776 US per ounce during the quarter and by 18% to CAD1146 or $928 US for the first six months of 2015. Now on to slide six. In 2015, we remained focused on improving the strength of our balance sheet with further debt reduction and increasing our cash on hand. As you can see, we have made significant progress over the past year of lowering our total debt to CAD20.8 million, CAD31.7 million a year ago. Our total debt servicing cost in 2015 will be about CAD5.6 million consisting of CAD2 million in interest costs and CAD3.6 million in principal payments. The strong operating performance year to date has allowed us to reduce long-term debt and to increase our cash and bullion position to CAD20.9 million. This compares to the CAD5.6 million we were drawn on our line of credit last year at this time. As Brian has noted previously, at the end of the second quarter our cash and bullion amount exceeds our long-term debt of CAD20.8 million. At quarter end our working capital position was CAD33.9 million, an improvement over the CAD23.7 million in working capital we had at the end of the second quarter in 2014. With continued strong operating performance and our ability to generate free cash flow, we expect our cash balance to increase for the balance of the year. Brian will now discuss our operating performance. -------------------------------------------------------------------------------- Brian Skanderbeg, Claude Resources Inc. - President and CEO [5] -------------------------------------------------------------------------------- Thanks, Rick. We will now move on to page 7 of the presentation to discuss in further detail our operating performance. We continued to see strong operating results in the second quarter and are now on pace to set a new annual production record. Second-quarter gold production of 20,619 ounces was 10% higher than the same period of 2014, a products of higher ore grades averaging 8.88 grams gold per tonne and strong recovery rates of 96.5%. Year to date total gold production of 41,686 ounces was a new six-month production record. The 39% increase in gold production and grade year-over-year is driven by positive reconciliation in grade and ounces versus our mine plan at both the L62 and Santoy Gap deposits and the replacement of the lower grade Santoy 8 ore with higher grade Santoy Gap ore. If we look back at the last four quarters, we produced 74,500 ounces of gold. Our ability to achieve consistent results demonstrates that our production profile is sustainable. Moving on to slide eight, Santoy Gap deposit has been a key contributor in mining higher grade ore and increasing scope availability to increase margin and decrease our production risk. During the first six months of 2015, the Santoy gas deposit has increased overall head grades at the Santoy mine complex by 86% and combined with the 47% increase in mill throughput, has improved gold ounces produced by 177%. This demonstrates the high-grade nature and significance to our future production profile. Since we started mining in Santoy Gap in May of 2014, it has produced approximately 125,000 tonnes and 8.44 grams per tonne for a total of 33,695 ounces. Throughout this time, development and production rates have been well ahead of pre-feasibility schedule and grades have been reconciling above reserve on ounces. For the remainder of the year, plans are to move from one mining front to three driving increased production in stope availability while reducing production risk. Santoy Gap production is expected to account for approximately 60% of overall production in 2015 and will play an even larger role in 2016 and beyond. By the end of 2015, we expect to have approximately three years of production developed at Santoy Gap. During the second quarter, we have continued to work on infrastructure upgrades to increase production profile to 600 to 700 tonnes per day in 2016 and one of the advantages that we have is that our capital requirements to fund the upgrades in production growth are minimal and we can fund this organic growth via internal cash flow. Moving on to slide nine, the Alimak mining method along with the L62 deposit continued to be a key driver in our production in cost performance. One of the most important aspects of the Alimak mining technique is that it has significantly decreased our development intensity in time to produce making it a far more productive mining method. Also we have continued to achieve better than budgeted dilution rates from effective ground support techniques, the decrease in development capital required, better than budgeted dilution rates at positive reconciliation in grade have contributed to an 18% reduction in our all-in sustaining costs from 2014. In 2015, the Seabee Mine is expected to make up approximately 40% of annual production tonnage. To date, the Alimak mining method was done primarily by a contractor while Claude simultaneously trained its own personnel. Training has advanced very well and on June 30, we elected to bring the Alimak mining technique in-house. And during the second quarter, we initiated development at Alimak (inaudible) on certain of the Seabee [blends]. Now on to slide 10. There is significant exploration potential to find more gold in the underexplored 19,950 hectare land package at Seabee. We feel the best opportunity to find more gold is within or in close proximity to our current mining infrastructure. At the Santoy Mine Complex, we have an excellent opportunity to grow resources as most of the mineral reserve and resources are above the 500 meter level. In 2013, we had two exploration holes to test at the depth extension and these were among the highest gram meter products in the camp's history. Now in the second half of 2015, we will have, we will follow up on one of these holes, hole 692. This program is budgeted to be 6000 meters and will begin near the end of the third quarter once we have established the hanging wall drill chamber. We are confident that the system continues to depth and confident that the drilling results will translate into a larger resource of longer mine life at the Santoy Mine Complex. On slide 15, the 2015 underground exploration at the Seabee Mine are outlined in red. Drilling at the Seabee Mine will consist of 10,000 meters of exploration targeting seven high-priority underground near mine targets. These near mine targets are analogous structures and down plunge extensions to the Seabee and L62 deposits. There has been limited drilling in these areas and we believe that targets are highly prospective for all L62 style lenses. Results from the Seabee Gold Mine underground exploration are expected in the third and fourth quarters while results from the Santoy Mine Complex are expected later in the year. In addition to the two exploration programs, we will also complete approximately 55,000 meters of underground and infield definition drilling at the Seabee and Santoy Mine Complex to expand current reserves and resources. It is important to note that we are able to conduct all of the drilling ourselves as we own five drill rigs and we will complete the underground drill program for approximately CAD1.3 million or CAD20 per meter. Our ability to drill at a very low cost is a competitive advantage and translates to a very low discovery cost per ounce. Now on to slide 12, I would like to reiterate that our 2015 outlook and operating strategy remains focused on grade, cost controls, productivity improvements and ramping up production at Santoy Gas. With the strong start to the year, we have increased our annual production guidance to 68,000 to 72,000 ounces from our original guidance of 60,000 to 65,000 ounces and with the increase in production guidance, our ability to remain on budget, unit cash cost and all-in sustaining costs are now expected to be 6% lower than original guidance. Our cash costs are now expected to be CAD730 to CAD800, $580 US to $635 US and our all-in sustaining cost to be CAD1100 to CAD1200 or $875 US to $950 US clearly well below current gold prices. Our revised outlook for 2015 demonstrates that we have the potential to set new production records, increase margins and lower unit costs to strengthen our balance sheet. By achieving the midpoint of production guidance remaining on budget with our costs and realizing similar gold prices for the remainder of the year, we expect to yield annual free cash flow margins of approximately 15% of revenues. Our cost structure and free cash flow yields position the Company as leaders in our sector and we are confident that it will continue to generate shareholder value. That concludes our presentation for today and we would be happy to entertain any questions that you may have. Thank you. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions). Derek Macpherson, M Partners. -------------------------------------------------------------------------------- Derek Macpherson, M Partners - Analyst [2] -------------------------------------------------------------------------------- Good morning, guys. I just had a follow-up question on the reconciliation and you mentioned it -- a grade reconciliation which you guys mentioned briefly. You guys talked about it being positive for the first half of the year. Do you guys have an idea of what percent better it was, the improvement based on reconciliation versus being in higher grade areas? -------------------------------------------------------------------------------- Brian Skanderbeg, Claude Resources Inc. - President and CEO [3] -------------------------------------------------------------------------------- It is Brian here, Derek. It is variable by deposit certainly and I do believe that the bulk of our positive reconciliation is being led by the L62 lens. In those areas we're probably seeing about a 15% positive reconciliation versus our reserves on grade and ounces. At Santoy Gap, it is probably in that sort of 5% to 10% range on a positive reconciliation basis for ounces. Those are the two big drivers for it and I do think it is encouraging that we see both deposits yielding that reconciliation. Based on my understanding of the geology and the grade continuity, when we are in high grade sectors and cycles we are definitely more likely to see positive reconciliation on grades. -------------------------------------------------------------------------------- Derek Macpherson, M Partners - Analyst [4] -------------------------------------------------------------------------------- And I guess then does that mean that you think that this -- that that positive reconciliation is repeatable? Is that something we should be expecting going forward especially for the Santoy Gap as it makes up a bigger chunk of the production going forward? -------------------------------------------------------------------------------- Brian Skanderbeg, Claude Resources Inc. - President and CEO [5] -------------------------------------------------------------------------------- I am optimistic we have upside in our grade at Santoy Gap and it is still early stage. Our reconciliation and our reserves are completed on an annual basis and we will update our reserves at year end and build in the dataset to update based on stoping and the DMS data. So we will see it at year-end. I am optimistic there is still good upside in the grade at Santoy Gap and -- yes. -------------------------------------------------------------------------------- Derek Macpherson, M Partners - Analyst [6] -------------------------------------------------------------------------------- Okay. Then just with the L62 and the Alimak method, how much of that improved grade -- was a chunk of that improved reconciliation from a lack of dilution -- or lower than expected dilution as well? Or do positive reconciliation is just what you would expect -- was just from sort of the grades being higher than expected? -------------------------------------------------------------------------------- Brian Skanderbeg, Claude Resources Inc. - President and CEO [7] -------------------------------------------------------------------------------- Both factors will drive that, Derek. Reduced dilution would have been one of the contributors to the improved grade but we have also seen some reasonable tonnage come out of the L62 versus the reserve. So I do believe it is [prop] associated as well as dilution related. -------------------------------------------------------------------------------- Derek Macpherson, M Partners - Analyst [8] -------------------------------------------------------------------------------- Okay. What you have learned from in the L62 as far as the lower dilution, do you expect to be able to apply that to other areas in Seabee as you sort of -- the same idea when you update your reserves and as you plan those new Alimak areas? -------------------------------------------------------------------------------- Brian Skanderbeg, Claude Resources Inc. - President and CEO [9] -------------------------------------------------------------------------------- Yes, we made assumptions when we took on Alimak mining on the dilution. We made an assumption that we took 0.8 meters of hanging wall and 0.8 meters of point footwall dilution that drives our Alimak reserves. We are observing between 0.4 and 0.5 meters of hanging wall and footwall dilution and that is the number we will use on our reserves going forward. -------------------------------------------------------------------------------- Derek Macpherson, M Partners - Analyst [10] -------------------------------------------------------------------------------- All right. That is all for me. Thanks, guys. -------------------------------------------------------------------------------- Operator [11] -------------------------------------------------------------------------------- Michael (inaudible) -------------------------------------------------------------------------------- Unidentified Participant [12] -------------------------------------------------------------------------------- My name is Mike. So I have two questions regarding -- the first one what is the reason that all-in sustained costs per ounce still goes lower when mill had a grade decrease from around the 10 grams per tonne at the first of the quarter to around 9 grams per tonne in the second quarter? The second one is the total share outstanding in the second quarter looked like an increase over 2 million than first quarter. Are you able to tell me what kind of reason is there? Is it the stock or something else? -------------------------------------------------------------------------------- Brian Skanderbeg, Claude Resources Inc. - President and CEO [13] -------------------------------------------------------------------------------- In terms of your first question on the reduction of all-in sustaining costs quarter over quarter, all-in sustaining costs are -- include both operating and capital as well as other components of the Company's expenditure profile. So when you look at the first quarter, we mined 10.2 grams per tonne and we mined about 20,000 ounces produced. During the second quarter, we mined and produced a relatively similar amount and the biggest driver of reduction in our all-in sustaining costs quarter over quarter was decreased capital intensity. We spent less money on capital during the second quarter and that resulted in a decrease to our all-in sustaining cost quarter over quarter. So that is the biggest driver of reduction. It is not just grade or ounces produced that drive our all-in sustaining costs. It is development intensity, G&A and it is exploration, there's a lot of other dollars that go into all-in sustaining and the biggest reduction we saw was in capital quarter over quarter. Your second question was on total shares outstanding. Rick? -------------------------------------------------------------------------------- Rick Johnson, Claude Resources Inc. - CFO [14] -------------------------------------------------------------------------------- Total shares at the end of the second quarter of this year, the weighted averages was 194 million last year it was 185 million. The driver -- it is our employee share purchase plan. It is the plan that we allow our employees to participate in the ownership of the Company and that drove the biggest increase. -------------------------------------------------------------------------------- Unidentified Participant [15] -------------------------------------------------------------------------------- Okay, I appreciate it. That is it. -------------------------------------------------------------------------------- Operator [16] -------------------------------------------------------------------------------- Joe Mazumdar, Cancaccord Genuity. -------------------------------------------------------------------------------- Joe Mazumdar, Canaccord Genuity - Analyst [17] -------------------------------------------------------------------------------- Thank you, operator. Just a few questions, guys. Metallurgical recoveries like at 96.5% in Q2 2015 versus what we were modeling was about 95.7 million originally. How sustainable is that and is there any relationship to the increase like throughput coming from Santoy Gap in terms of ore sources on the plant? -------------------------------------------------------------------------------- Brian Skanderbeg, Claude Resources Inc. - President and CEO [18] -------------------------------------------------------------------------------- The recovery of the 96.5 are very strong and in my mind they are driven by two things. The higher our grades go and the higher we mine, we typically have very static tails grades so we have mined 9.5 grams year to date, 8.9 in the second quarter and our tails grade stayed pretty steady at 0.3 grams per tonne on the tail solids. So even in a high grade cycle, we are able to maintain a static tails grades and that is driving the better recoveries. Whether it relates specifically to Santoy Gap or the L62, you know I am optimistic that Santoy Gap will have a higher gravity percentage extracted from it versus the Seabee ore body. That would lend itself to stronger recoveries as well. A secondary point is Santoy Gap is a lower sulfide system so we will see as it goes forward. But I think the biggest driver of the increased recoveries are actually higher grades in general and the static tails grade. At a 7 to 7.5 reserve grade, I am comfortable with that sort of 96% plus or minus recovery rate. -------------------------------------------------------------------------------- Joe Mazumdar, Canaccord Genuity - Analyst [19] -------------------------------------------------------------------------------- Another question would be on the comment you talked about infrastructure upgrades to get Santoy Gap up to 500 tonnes per day and then eventually to 600 to 700 in 2016. You commented that is minimal. What would you put that in a range if you could bracket it if it is possible? -------------------------------------------------------------------------------- Brian Skanderbeg, Claude Resources Inc. - President and CEO [20] -------------------------------------------------------------------------------- The biggest thing we are moving forward with out at Gap is getting the development in place and the availability. That is the biggest one we are pushing that down. Those are in our development capital. Power infrastructure, ventilation are ongoing. One of the steps we have to take towards next year is the paste backfill plant and we are looking at the alternatives and the scale of that plant that were recovered that we will need. That plant is likely 1 million to 1.5 million. We will use cemented waste fill as a backfill in Santoy Gap for the long hole stoping. And we will start using that in Q2 of next year. It is really critical for Claude because we are mining such wide veins. We have systems at parts of Gap that are 30 meters wide and those are the areas that we want to optimize recovery on and so the infrastructure upgrade, the biggest component that will be a one-time hit is the backfill plant and the capital associated with that CAD1 million to CAD1.5 million. The remainder of the infrastructure would be all in our sustaining and our development requirements and expenditures as we have done this year, Joe. -------------------------------------------------------------------------------- Joe Mazumdar, Canaccord Genuity - Analyst [21] -------------------------------------------------------------------------------- Okay, thanks. Just last question is I noticed in your objectives, corporate outlook, you are still directing that at cost containment. You have done a lot of cost containment over the last two years. I guess the question is how much is there left to squeeze and where would you actually -- where are you focused in on? -------------------------------------------------------------------------------- Brian Skanderbeg, Claude Resources Inc. - President and CEO [22] -------------------------------------------------------------------------------- We are always looking for cost opportunities and if it is CAD50,000 or CAD100,000, we will go find them. Our biggest opportunity is probably our maintenance system. Maintenance costs the Company CAD10 million a year. Half of that is labor and half of that is parts and consumables. So if you look at an operating cost plus development of CAD70 million at site, CAD10 million of that is maintenance, you are looking at a range of around 15% of our costs. Probably one of our biggest opportunities is in the maintenance budget looking at our fleet optimization and how our maintenance systems work to drive availability and utilization of our fleet to improve that side of things. I don't see a lot of other big wins and that is the area we will be focused on for next year is looking at equipment and maintenance growth opportunity. -------------------------------------------------------------------------------- Joe Mazumdar, Canaccord Genuity - Analyst [23] -------------------------------------------------------------------------------- Last question is like you have increased the land package to 19,950 hectares but obviously a lot of the 60,000 to 65,000 meters you are drilling is around infrastructure. How do you quantify the upside in this land package, is that a medium-term objective, long-term, how do you do that? -------------------------------------------------------------------------------- Brian Skanderbeg, Claude Resources Inc. - President and CEO [24] -------------------------------------------------------------------------------- We will start with that next year too though. As we have addressed some of the risk in our balance sheet and we are more comfortable with putting some exploration dollars back into some programs next year in 2016 that aren't immediately next to infrastructure and we will look at some targets in the Santoy region that aren't say within a kilometer. And I think we are going to start realizing some of that exploration upside in blue sky next year as we have put ourselves with a stronger balance sheet in a position to be able to spend some dollars on exploration and recommit further dollars to the near mine environment, I do believe that the near mine environment of both Seabee and Santoy is the most prospective area and we will focus our meterage on those. To a lesser extent, we will start next year with some of the regional programs again. -------------------------------------------------------------------------------- Joe Mazumdar, Canaccord Genuity - Analyst [25] -------------------------------------------------------------------------------- Minor follow-up. Do you consider everything in your land package truckable to the Seabee plant? -------------------------------------------------------------------------------- Brian Skanderbeg, Claude Resources Inc. - President and CEO [26] -------------------------------------------------------------------------------- We would. I mean if you look at our truck distance from Santoy Gap, 15 kilometers, the ground we stake north of Santoy would be about a 20 kilometer haul if you had to haul from back there. The land package north of Seabee is within 10 kilometers so I would certainly consider everything within our land package truckable. -------------------------------------------------------------------------------- Joe Mazumdar, Canaccord Genuity - Analyst [27] -------------------------------------------------------------------------------- Thank you very much, gentlemen. I appreciate it. -------------------------------------------------------------------------------- Operator [28] -------------------------------------------------------------------------------- [Mario Rodriguez], a private investor. -------------------------------------------------------------------------------- Mario Rodriguez, - Private Investor [29] -------------------------------------------------------------------------------- Hello, Brian and Rick. It is good to speak to you guys. Congratulations again on the pretty good quarter. You guys keep rolling it so that is fantastic. I have a question regarding the refinancing of the debt. I remember Rick had talked a little bit about that last quarter and it hasn't been mentioned. So if you guys give us some color or update us on if you are actually refinancing or just paying off completely off the debt? -------------------------------------------------------------------------------- Brian Skanderbeg, Claude Resources Inc. - President and CEO [30] -------------------------------------------------------------------------------- When we look at our current debt, we carry approximately CAD21 million of long-term debt with Canadian Western Bank and the yield on that debt is 10%. I'm sorry with Crown Capital. And as we derisk the Company and our balance sheet, we do feel that 10% is quite an expensive debt coupon for the company to carry. We are currently very active on exploring opportunities to replace that debt. It is one of our corporate priorities for this year is to look at alternatives to lower our debt for net costs and if we can move the coupon down, I think it is to the benefit of all so it is something the Company is aggressively pursuing at present. -------------------------------------------------------------------------------- Mario Rodriguez, - Private Investor [31] -------------------------------------------------------------------------------- Thank you, Brian. You guys said pretty much the same thing three months ago. Is there any actual refinancing in the channel, is it going to happen soon? Is that something that we could consider? -------------------------------------------------------------------------------- Brian Skanderbeg, Claude Resources Inc. - President and CEO [32] -------------------------------------------------------------------------------- Certainly it is something we consider and we are active on. There is a few hurdles you have to jump through and typical debt process is in the due diligence required around those are easily three to six months. So when you look at the timeframe to turn this around, that is the typical timeframe to move things through and there is a lot of due diligence and legalities to move through the hurdles of it. But I am quite optimistic that we will be successful at finding some alternatives. -------------------------------------------------------------------------------- Rick Johnson, Claude Resources Inc. - CFO [33] -------------------------------------------------------------------------------- (multiple speakers) the debt, on our fully loaded cost, it is about CAD80 an ounce that it cost on this so it is something that we have to -- as Brian said -- we have to look at reducing our costs and the focus for me as well and the Company is to actually reduce our debt. So there's two things that we are looking at. -------------------------------------------------------------------------------- Mario Rodriguez, - Private Investor [34] -------------------------------------------------------------------------------- I know you guys are and I am glad to hear it in more precise terms. That is it for me. Thank you. -------------------------------------------------------------------------------- Operator [35] -------------------------------------------------------------------------------- (Operator Instructions). [Raja Guram], a stockholder. -------------------------------------------------------------------------------- Raja Guram, - Private Investor [36] -------------------------------------------------------------------------------- Thank you, operator. I'm calling basically to congratulate the management for the tremendous job and each quarter it has been improving beyond expectations basically. Every time it is surprising in a positive way and I hope this kind of performance will continue. The reason I called is actually to appreciate the management efforts. But also I wanted to touch base what is the long-term plans management may be contemplating regarding plant capacity improvement, exploration, other sites we have other properties elsewhere, any ideas or know of anything management is thinking at this time or waiting for the gold price to settle down and assure the direction of the gold price direction weighting. I just want to touch base that and seek your views on that. Thank you. I have no more questions. -------------------------------------------------------------------------------- Brian Skanderbeg, Claude Resources Inc. - President and CEO [37] -------------------------------------------------------------------------------- Thank you for that question, it really revolves around the Company's long-term strategy. And when you look at Claude, we set about three years ago to change our cost profile and address the risk in the Company and over the last several years, we have done a very good job at building a balance sheet that was quite a risk and putting together a production profile that generates material free cash flow. We will continue to build that free cash flow and balance sheet. That has given Claude the opportunity now to start looking at other alternatives, both organic growth opportunities and infrastructure upgrades at Seabee where we have several opportunities to look at our mill. One would be several million dollars to add 20% of throughput so we are looking at infrastructure upgrades that could expand Seabee. We would need to support that via exploration and resource and reserves growth but I do think that is a good medium- to long-term goal and it is one we are actively pursuing is resource and reserve growth and the infrastructure upgrades that we could do at Seabee to improve production even further than we've moved it at present. Combined with that, we continue to look at opportunities. And as we have built a balance sheet that has some strength and rebuilt the shareholder base, we have the optionality to start looking at strategic alternatives of other producers and the M&A landscape. So it is one thing that we are active in and we are reviewing opportunities of how Claude can move forward and take the next step not just at Seabee but looking at other alternatives to grow our production profile. Those are our medium- to long-term strategic goals of the Company. I do view Claude in the medium- to long-term as being a multi-asset company and I would certainly like to see that and it is options we are reviewing and we have been active on this for several years moving it alongside of our strategy of improved operating performance. -------------------------------------------------------------------------------- Operator [38] -------------------------------------------------------------------------------- Mario Rodriguez, a private investor. -------------------------------------------------------------------------------- Mario Rodriguez, - Private Investor [39] -------------------------------------------------------------------------------- Hello again, gentlemen. I got back in the queue. Thank you for taking (technical difficulty). Just wondering how is your hedge book looking? -------------------------------------------------------------------------------- Rick Johnson, Claude Resources Inc. - CFO [40] -------------------------------------------------------------------------------- At the end of June, it was 6000 ounces. The average price was CAD14.44. We expect that level to stay about the same, we just within discussions at our Board meetings we would want to look to protect one or two months max of our production. -------------------------------------------------------------------------------- Mario Rodriguez, - Private Investor [41] -------------------------------------------------------------------------------- Right. So (technical difficulty) price basically? -------------------------------------------------------------------------------- Brian Skanderbeg, Claude Resources Inc. - President and CEO [42] -------------------------------------------------------------------------------- The book is flat at present. -------------------------------------------------------------------------------- Mario Rodriguez, - Private Investor [43] -------------------------------------------------------------------------------- Okay. Fantastic. I will get back into the queue begin. Thank you. -------------------------------------------------------------------------------- Operator [44] -------------------------------------------------------------------------------- There are no further questions at this time. -------------------------------------------------------------------------------- Brian Skanderbeg, Claude Resources Inc. - President and CEO [45] -------------------------------------------------------------------------------- Again, I would like to thank everyone for taking the time to be on the call today and I look forward to staying in touch with you all. Have a great day. -------------------------------------------------------------------------------- Operator [46] -------------------------------------------------------------------------------- Thank you. This concludes today's conference call. You may now disconnect.
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