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Alamos Gold Inc
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Good morning. I would now like to turn the meeting over to Mr. Jamie Porter, Chief Financial Officer. Please go ahead.
Thank you, operator, and thanks, everyone, for attending Alamos' First Quarter 2018 Conference Call. In addition to myself, we have on the line today both John McCluskey, President and CEO; and Peter MacPhail, Vice President, Chief Operating Officer. I would like to remind everyone that our presentation will be followed by a Q&A session. On this call, we will be making forward-looking statements. Please refer to the disclaimer of forward-looking statements in our news release and MD&A as well as the risk factors set out in our annual information form. All forward-looking statements on this call are qualified by these cautionary statements. There can be no assurance that our forward-looking statements, even though considered reasonable by management and based on information on hand, will prove to be accurate. Future results and events could differ materially. Technical information in this presentation has been reviewed and approved by Chris Bostwick, our Vice President of Technical Services and a qualified person. Also, please bear in mind that all of the dollar amounts mentioned in this conference call are in U.S. dollars, unless otherwise noted. With that, I'll turn it over to John to provide you with an overview.
Thank you, Jamie, and welcome everyone to the conference call. We had an excellent start to the year, producing a record 129,000 ounces of gold at all-in sustaining costs of $935 per ounce. This marked our fourth consecutive quarter of record production and was driven by strong performances at our Mulatos and Island Gold mines, with both exceeding expectations in the quarter. Mulatos delivered one of its strongest quarters in years with production increasing to 46,000 ounces, while Island Gold set a new record with production of 28,100 ounces in its first full quarter under our ownership. Given the stronger-than-expected start at both operations, we've increased our 2018 production guidance to a range of 490,000 to 530,000 ounces of gold. We expect to produce approximately 125,000 ounces in the second quarter at slightly higher all-in sustaining costs, followed by higher production, lower costs and lower capital spending in the second half of the year. This will be driven by stronger results from Young-Davidson, with production back-end weighted and the completion of the expansion at Island Gold to 1,100 tonnes per day. Island Gold continues to impress and exceed expectations on all fronts. The mill expansion is advancing and on track to be completed by the end of the third quarter. We expect this to drive significant production growth in the fourth quarter and into 2019. We continue to demonstrate improving financial performance, with cash flow from operations in the first quarter of $63 million, the highest level in years. We also generated $24 million of mine-site free cash flow and $7 million of company-wide free cash flow, both up sharply from a year ago. We expect to build upon this success with strong free cash flow growth from our operations in the second half of 2018 and over the next several years. We remain debt-free and closed the quarter with $232 million, up from 31 -- up $31 million from the end of the year, reflecting positive free cash flow growth and monetization of our equity stakes in AuRico Metals and Corex Gold. We realized a gain of $14 million on these investments and total proceeds of $25 million. We have a large exploration budget of $35 million planned for this year, with the primary focus being Island Gold, where we continue to have success, having declared an 18% increase in reserves and an 11% increase in grades at year-end. We continue to encounter encouraging results and expect to have an update on our exploration activity out later this month. In Turkey, a snap election was announced in April with parliamentary and presidential elections to be held on June 24, 2018. This was 1.5 years earlier than expected, with the elections originally scheduled to occur in November 2019. As a result, we do not expect to receive the GSM permit for Kirazli until after the election, which will delay construction activities planned for this year. Accordingly, we have reduced the 2018 capital budget for Kirazli to $25 million, which reflects spending we can complete prior to receiving the GSM permit. This will be focused on completing the road, powerline and water reservoir construction. We will provide an updated capital budget for Kirazli once the GSM permit has been received, allowing for the ramp up of full-scale construction activities. After those comments, I'd like to turn the call back to our CFO, Jamie Porter, who will talk about the company's financial performance.
Thank you, John. This was our first full quarter including results from Island Gold, and we saw an immediate positive impact on our financial results, both on an aggregate and on a per-share basis. Along with record production, we generated record revenues and our highest cash flow from operations since 2012. As John noted, we're demonstrating improving financial performance, and we expect this trend to continue over the next several years. We sold 130,000 ounces of gold in the first quarter, an average realized price of $1,331 per ounce, for record revenues of $373 million. Consolidated total cash costs were $789 per ounce, 5% lower than the first quarter of 2017. Consistent with our guidance, total cash costs were higher in the first quarter and expected to trend lower through the year to average $740 per ounce for the full year. All-in sustaining costs were $935 per ounce, slightly below full year guidance and 8% lower than in the first quarter of 2017. All-in sustaining costs are expected to increase in the second quarter, reflecting higher budget sustaining capital and then trend lower in the second half of the year. Operating cash flow before changes to noncash working capital was $63 million, up from $34 million a year ago and the highest level since 2012. Cash flow per share of $0.16 was also up sharply from $0.12 a year ago. Our operations were, once again, free cash flow-positive, with mine-site free cash flow of $24 million coming in well ahead of budget. The bulk of that came from Island Gold and Mulatos, with both operations performing above expectations. Company-wide, Alamos generated $7 million of free cash flow in the first quarter. Our adjusted net earnings were $12 million or $0.03 per share in the first quarter, up from a loss of $5 million or $0.02 per share a year ago. Our reported earnings of $0.6 million were impacted by unrealized foreign exchange losses of $11 million and other one-time items totaling less than $1 million. Amortization expense was $42.1 million in the quarter, or $324 per ounce, up from a year ago, reflecting the inclusion of Island Gold, which carries a higher amortization per ounce charged. As noted last quarter, we expect our amortization to average approximately $340 per ounce moving forward. Corporate G&A expense in the quarter was $4.4 million, consistent with guidance and remaining among the lowest in our peer group. Capital spending over the quarter totaled $52 million, of which $11 million was sustaining capital and $41 million was growth. Consistent with our guidance, we expect capital spending at our operating mines to increase in the second quarter and then decline in the second half of the year. We remain debt-free and further strengthened our balance sheet with cash and cash equivalents increasing to $232 million at the end of the first quarter, up from $201 million at the end of December. The increase came through positive free cash flow as well as the liquidation of our equity positions in AuRico Metals and Corex Gold, which generated proceeds of $25 million and a gain of $14 million, which was recorded directly in retained earnings. We possess one of the strongest balance sheets in our peer group, and combined with increasing cash flow from our operations, we are well positioned to fund our pipeline of growth projects and deliver strong free cash flow growth over the next several years. At this point, I'll turn the call over to Alamos' COO, Peter MacPhail, to provide an overview of our operations.
Thank you, Jamie. Young-Davidson produced 41,000 ounces in the first quarter, with a total cash cost of $824 per ounce, and mine-site all-in sustaining costs of $994 per ounce. Production was in line with the first quarter of 2017, though down from the fourth quarter, reflecting lower underground mining rates in grades. Our paste backfilling sequence limited mining rates to 6,500 tonnes a day during the quarter and grades of 2.35 grams per tonne were slightly below budget due to the constraint that's placed on stope sequencing. As guided, production was somewhat back-end weighted this year. We're expecting stronger mining rates and higher grades as well as lower capital spending as we move through the year. Island Gold produced a record 28,100 ounces of gold in the quarter and total cash cost of $553 per ounce and mine-site all-in sustaining costs of $633 per ounce. The mine continued to outperform on all fronts. This was driven by higher mine grade of 11 grams per tonne, reflecting both mine sequencing and some positive grade reconciliation. Given the stronger start to the year, we have increased Island's full year production guidance to between 95,000 and 105,000 ounces of gold. We expect production to come up somewhat in the second and third quarters as grades return to budgeted levels of between 8.3 and 8.9 grams per tonne. We also expect mine-site all-in sustaining cost to increase, reflecting higher sustaining capital. The expansion at Island is on track to be completed by the end of the third quarter, driving strong production and free cash flow growth into the fourth quarter and into 2019. Mulatos also exceeded expectations in the quarter, with production up 46,000 ounces, a total cash cost of $786 per ounce and mine-site all-in sustaining costs of $842 per ounce. This marked the highest quarterly production since 2013, with the operation benefiting from strong grades and recoveries. We've also found additional ore at San Carlos, extending the mine life by another quarter. We now expect high-grade mill production to continue to the second quarter. Given the strong start to the year and additional production at San Carlos, we have increased our 2018 production guidance for Mulatos to between 155,000 and 165,000 ounces. Accordingly, we expect production for Mulatos to decrease somewhat in the second half of the year following the end of production from San Carlos. El Chanate performed as expected with production of 13,800 ounces at mine-site all-in sustaining costs averaging $1,191 per ounce. We continue to expect mining activities to cease mid-year, though the operation will benefit from ongoing production at decreasing rates into the second half of 2018 and beyond due to residual leaching. As production at El Chanate tapers off, this will be replaced by higher-margin production growth from Island Gold. We had a strong start to the year at both Island and Mulatos, with both operations exceeding our expectations. We are pleased to have increased our production guidance and look forward to reporting strong production and cash flow through 2018. With that, I'll turn the call back to John.
Thank you, Peter. That concludes the formal part of our presentation. I'd like to turn the call back to the operator, who will open the lines for your questions. Operator?
[Operator Instructions] The first question is from Kevin Chiu from CIBC.
I had a few questions. Maybe we'll start with Island Gold. Obviously, an impressive quarter with a grade of 11 grams per tonne. And I know you said that you expect the grades to come back to the planned levels. But the mine has shown a remarkable ability to exceed expectations on several occasions. Could you talk a little bit about the grade potential or the positive grade reconciliation at the mine, and perhaps some of the mine flexibility that you see there?
Yes. Cosmos, it's Peter. Yes, the -- I'll talk a couple of things. One is the grade reconciliation, it has been positive. It was positive in 2017 to the tune of about 10%, and we continue to see that sort of trend. That's good news. As far as the grade we see going forward for the rest of the year, I mean, our reserve grade is now 10.2 grams, and it will average that over time, obviously. But there's sequencing involved here, and we have more constraints with a mine like Island, for instance, which is a longitude and retreat. So you start at the far end of the deposit and retreat towards the center. Grade tends to be better in the center than it is on the extremities. So you will go through periods of lower grade material and then higher grade material, and that's just the design of the mine and that's the way it will perform. And we will see fluctuations on a quarterly basis.
All right. Okay, well, I mean, I guess it's always good to get it when you get it.
Yes. I mean, the good news is it continues to positively perform against the model.
Absolutely. And maybe just moving over to Mulatos. With the strong Q1 and San Carlos also being extended to mid-year this year, would you characterize your guidance as a bit on the conservative side?
No. I wouldn't say so. I think we're comfortable with that guidance. We did see higher recoveries. Some of that was, I would say, deferred production from Q4 as ounces get stacked later in Q4 and then we recover them in Q1. So that won't continue. I think we're pretty comfortable with our guidance level at Mulatos.
Yes. The only thing -- it's Jamie. The only thing I'd add there is our cost guidance at Mulatos might prove to be a bit conservative. I think our all-in sustaining cost guidance for the year is $900. We came in at $842 in the first quarter. So if we continue to have strong production and are able to hit the top end of that guidance range, you'd expect our cost to be down closer to $850.
Okay. And then maybe just the last question on Kirazli and just Turkey in general. Does the outcome of the snap election have any bearing on the GSM permit? Or is it just more of an administrative issue that's holding back the permit?
This is John speaking. I would characterize it as more administrative. Effectively, when an election is called, pretty much every governor across the country gets a notice from the Ministry of the Interior asking them to postpone any permit approvals; certainly, something of the magnitude of Kirazli would fall within that directive. So at this point, that's the way I would characterize it. It's very difficult to say if some strange outcome were to happen from the election, whether that would have any bearing. That would be a guess more than anything. My expectation is that soon after the election is finished, I'm expecting that everything will be set back in motion again, and we'll be, say, at the front of the line, if you want, in terms of getting this final permit for the project. Keep in mind that every other permit that we require for Kirazli is in hand. We're really only expecting this -- we're waiting on this last one. And I don't expect -- certainly from -- I'm in Turkey now as I speak. And this -- from all the feedback I've had over the last week, I wouldn't anticipate any unusual outcome for this election, and I'm fully expecting the permit to come shortly after the dust clears.
The next question is from Rahul Paul from Canaccord Genuity.
A question on the growth pipeline at Mulatos. So you -- La Yaqui is now in production and it's doing quite well. So La Yaqui Grande, you've indicated that you expect to commence construction and preshipping by the end of 2019, with first production for 2021, and it's in your reserve at this point. When do you expect to provide us with a little more color on the economics there, perhaps a study looking at what the capital would be, just the precert requirements, the production profile and that sort of thing.
Rahul, it's Jamie here. So we'll be submitting -- as you know, we'll be putting on the EIA for Cerro Pelon mid-year and for La Yaqui Grande towards the end of the year. I think once we have those approved, which would be 6 months after submission, we'd love to update the market with summary economics. We're not doing a full-blown feasibility study or anything else on these projects. It's internal. We'll take the same approach as we took on La Yaqui Phase I. But Cerro Pelon is scheduled to come in first, and it's a high-return, modest capital, and Yaqui Grande should look the same. So in terms of the overall production profile of Mulatos, our objective is to stay in around this 150,000 to 160,000-ounce level over the remaining reserve life of 8 years. But we'll benefit as our costs are coming down. With the royalty coming off next year and bringing power to site, we expect our margins to improve on that future production.
And then one question on Turkey. Are there any -- are you aware of any changes being proposed as it pertains to the investment incentive certificate that projects such as Kirazli may be entitled to?
No. We're not aware of any changes. In fact, we remain in pretty close contact with our advisers, and we're in the process of applying for those -- for that investment credit certificate. So no, there's nothing recent that I'm aware of.
Okay. And that typically is awarded after the final permit is given to you?
Typically, that is the case. There is an opportunity to have that awarded prior to receipt of the GSM, and we're working on that currently.
The next question is from David Medilek from Macquarie.
I have 3 questions. Firstly, just expanding on Kevin's question regarding Island Gold and the positive grade reconciliation. Was it a particular area that was driving the positive reconciliations, such as a third or a fourth mining horizon in 1Q?
No. It was actually -- it was kind of equally positive, whether it was stoping or development ore, and spread throughout the operation.
Right, right. And secondly, again, on Island. Part of the high grade was said to be related to mining sequence. Has there been any significant modification to the mine plan near term versus the plan that was inherited from Richmont?
No. We're pretty much following that PEA plan that would have been published about a year ago.
Okay, got it. And lastly, on Young-Davidson. Regarding the paste backfilling sequence limiting mining rates, could you expand on this and how its impact is being mitigated going forward?
Sure. So at Young-Davidson, our mining is transverse long haul stoping. What we need to do is pace still the primary stopes before we can mine the secondary stopes. In Q4, we got a bit behind on our pace fill. We had some plugged pipelines and whatnot. And that -- we've caught it back up through Q1 and -- to where we are now. And yes, so we're caught back up, and we don't see that limiting us going forward.
The next question is from Dan Rollins from RBC Capital Markets.
John, since you're in Turkey, I was just wondering if you could provide a little bit more color on the GSM permit. Obviously, you've been expecting it for quite a while. And when you released guidance, it did seem like the company was pretty hopeful that the permits would come this year. Obviously, the election has potentially pushed that out. But how much -- what is your level of confidence on getting it post this election versus beginning of the year? And what really is the key delay here?
I still remain very confident. If we weren't as confident as we are, we'd be hard-pressed to explain why we're continuing with the construction of the reservoir and the pipeline and -- pardon me, power line and road construction. It's quite a lot of activity we have here. It's about 150 people combined working on those various projects. So I would say that our confidence remains very high. We were expecting the permit this spring. And up until I heard about the election being called, really, I don't mind saying that the indications given to me by politicians that are sort of directly involved in this is that the GSM was coming. And then essentially, everything was postponed with the call of the election in, I think it was on April 20. So a bit unfortunate for us. I mean, we were really expecting the permit this spring. The governor last fall had given us the go-ahead to -- and actually assisted us to some extent in getting the work going that we're doing now. We virtually finished all the tree clearing that was required. Certainly, everything that we could do prior to the GSM permit being received. Getting permits for the road and power line, for example, those required some local permits being approved, and all of that happened with a fairly smooth process. So we've been effectively working on this project since the fall of last year. So it was just a natural assumption that this spring, as we're getting certainly towards the end of the tree-clearing exercise, the GSM permit was going to be issued. But the timing for that was the spring, and we were getting towards the later part of the spring, and unfortunately then, the election was called. That's essentially what happened. The people that I've talked to while I'm here, including the governor, have indicated to me that we can expect the permit after the election. And we continue to take them at their word, and that's what we're expecting.
Okay. And then if you were to get the permit, say at the end of this year, is there a period where you can start construction in Turkey? I know the winters can be a little bit muddy and difficult from ground conditions. But are you able to construct all year round? Or if you got it by the end of the year, would you need to wait until the spring to finally start?
Really, that comes down to mobilization, Dan, and it will depend very much on when precisely the GSM comes. If it comes earlier in the year, in other words, just post the election, we can get mobilization under way. But clearly, we can't get into the heart of the construction, the airport and so forth, until we see good weather in front of us. And so I'd say the bulk of the work, the bulk of the expenditure, that means, would be postponed until probably March of next year. But we would be able to get a fair amount of work completed between, say, if it were to come sometime in July, August, between that period of time and the end of the year. There's a fair amount of work that can be done year-round. And in this region, you can have very mild winters, which means you could effectively work throughout the year. But there's no guarantee of that. So what we've done for the time being is we have -- we reset at the budget to effectively pay for all the work that we're currently doing. And some of that work, including the construction of the reservoir, that will run right into about November. That's being done in the first public-private partnership that DSI water authority has ever done. And so as far as permitting and so forth is concerned, DSI took care of all of that and there's nothing holding any of that work back. It will just come down to a question of what we think is best at the time the GSM is ultimately granted and how we can ultimately sequence that work to work around the weather conditions.
Jamie, at the beginning of the call, you discussed the strong balance sheet. Obviously, you're in control of some of your spending, but also starting in late '19, YD will start to kick out some strong free cash flow, Island will be kicking out free cash flow. You're paying at about $8 million a dollar -- $8 million a year in dividend. Obviously, you're still in growth phase. But any thoughts about potentially increasing the dividend to increase the yield to make the stock more attractive to generous investors?
Dan, yes, I think there's absolutely going to be scope to do that. As you point out, our production -- as the Chanate production comes off, it's higher cost, but it's also high cash flow. Since we stopped mining, we're really only paying for our processing costs. So we're going to stay in around 500,000 for the next couple of years, but what's a greater proportion of production from Island Gold, which is higher margins. Our cash flow is going to increase. I think there's absolutely scope to increase our dividend along the way while still retaining the balance sheet strength we need to be able to build out our development pipeline.
The next question is from Lawson Winder from Bank of America.
Just a couple from me. So first off, on YD. Just -- maybe just flesh out a little bit what gives you confidence that you will ultimately meet the current production guidance? I mean, is it something like were you able to get ahead on some the lateral development in Q1, or was there just a lot of conservatism originally built into the guidance?
YD. You're talking about YD?
Exactly, yes.
We've done it before. We've done some 7,200 tonnes a day before, and we expect to do it -- to be able to continue to do it. So we have great confidence we'll be able to do that.
Lawson, the only other point to make is if you look at our production this quarter relative to Q1 of last year, we did better, marginally better, but we had 200,000 ounces of production last year. So if you go back and track YD's history, first quarter performance is always the lowest, picks up in Q2, and has very strong third and fourth quarters. So we expect the same kind of seasonality this year, and we're confident we'll hit that 200,000 ounce mark again.
Okay. That's fair. And then just maybe on Lynn Lake, maybe you could just update us on the timeline on that. So were you intending to provide any sort of economic update before the permits were received? And if not, can you just remind us when the permits might be received that are needed to start construction?
Lawson, we are in that permitting process now, and it's a nebulous 2-year process, that every time we talk about, it seems to be a 2-year process. But it's -- we're in that process now. But as far as economics are concerned, the feasibility study is out there. We continue to work on improvements to that, and we expect to improve on that, those feasibility numbers, over the course of the year, I would say.
And then could you be providing some sort of update at the end of this year? Or are you just going to wait until you have the permits before you update us all on what you're thinking?
We probably will update once we get through that process, before the permits are...
Okay. That's very helpful. And then just one last one for me. You guys, I think in the past, you disclosed the unit cost mining per tonne at YD. I don't see it in the current one. Maybe I'm just missing it. But I mean, if it's not there, are you able to provide what that was?
Lawson, Jamie. Yes, we can. I think when we looked at -- as the company grows, we have more operating mines that makes less sense to go into as much detail at each of our operations. And when we put in the table for Island, we noted that wasn't something they disclosed previously. So we took it out. We came in around $50 cast, underground mining cost, which worked out to USD 40 -- USD 44, I think, for the quarter. So we'd expect that to go down certainly through the remainder of the year. Our budget was, I think, for 2018, is to come in around that CAD 44 level.
Part of what drove the cost a bit higher in the quarter was catching up on pastefill, frankly. I mean, pastefill is a significant part of our underground mining cost, and we placed record amount pastefill in the first quarter. I guess that's another reason why we have confidence we're back on track, Lawson. We got ourselves well set up now.
[Operator Instructions] The next question is from Kerry Smith from Haywood Securities.
Peter, just on the optimizations that you referenced on Island, when would you have the results for that available for us to look at?
Normally, it's going to be towards the end of the year, Kerry. I think we're -- what we're doing now is we're spending a fair bit of money on drilling. We've got big a exploration program going on there right now. We're trying to get ahead of this thing, see where it's taking us. That all plays into it. So right now, frankly, we're focusing on the drilling, and we'll be updating you guys later this month on that.
Okay, okay. And just on the positive grade reconciliation that you talked about at Island in Q1, was that around 10% then, which is what the average was in 2017? Or was it better or worse than that?
No. It's been around that range.
Okay. And then if John's still on the line. John, just remind me, I believe the governor is appointed in Çanakkale. Can you remind me, does he have an actual term or when -- and when would his term end?
Well, he's appointed for a term, but it's very -- it doesn't seem to necessarily follow that a governor always serves for his full term limit, and sometimes, he's reappointed for another period. I've seen, what, 4 different governors in the 8 years or so that we've been here. So that's a difficult one to pin down. This particular governor, he is -- he seems to be very well placed there. And I would expect that if the AKP party was to win the election, as they're anticipated to do, that this governor would still be there. In fact, regardless of who wins the elections, he still might be there for a period of time until -- if another party were to win, they wouldn't just immediately replace all the governors. That's not quite the way it works. And by the way, the governor of the province, he works with everybody. There's a lot of power in the hands of the mayors in Turkey. And in some of the cities, in fact Çanakkale itself, the principal city of the province, is an opposition mayor. So there are some opposition mayors and some mayors that are aligned with the party, and he has to work across party lines. So he's really -- he really tries to be apolitical as far as that's concerned. And that's his role. They try to appoint somebody who can effectively work both sides of the political aisle and maintain good relations and effectively get all the things done that are required, if you want. The federal government, more or less, sets policies, and then those policies are implemented region by region. And it's up to the governor to make sure that, that all happens.
Okay. Okay, that's helpful. And Peter, maybe just one last question on the underground mining rates at YD. Your guidance had kind of been over 7,000 tonnes a day. I believe that at 10,000 tonnes a day, you'd have to run at 7,200 tonne a day for the last 9 months of the year, given what Q1 was. So has April been at that rate? Or how confident are you in that, that you can sustain 7,200 tonne a day?
Yes, I guess, I'd go back to -- I mean, last year, if you looked at our trend, we started at, in fact, lower ounces than we're at right now in the first quarter and came in at 200,000 ounces. We're trending in the right direction in April. We'll wait and see where the quarter ends up. And we're doing better in April as I would say we did in Q1.
Okay. The reason I asked is last year -- I mean, Q4 was good. You averaged 7,200 tonne a day. But the other -- the first 9 months of last year probably averaged 6,400 tonne a day. Obviously, the mine's more advanced now. But anyhow, I just was curious how...
Yes, no. We sometimes take a step up -- 2 steps up and 1 step back. It's been kind of a sawtooth kind of climb to these levels, if you look back through the history.
The next question is from Mike Parkin from National Bank.
Just a couple quick questions. With San Carlos now extended into the middle of the year, is it fair to kind of assume similar grade and throughput to Q1? Or would that be a bit aggressive?
It's starting to come off a little bit. We still have a mill -- stockpile in front of the mill, but the mine is not mining at the same rates as it was as it kind of gets harder and harder. It dribbles off, the mine will -- but the grades will be there. The mining rate comes off a bit. The stockpile kind of carries us through.
Okay. And then with Young-Davidson, you put in a pebble crusher there, if I recall, in October. How is that running? Is that able to keep the mill? I mean, is it giving you any troubles? Or did it commission easily?
I think through the winter, it was a little bit challenged. We basically commissioned it in the middle of winter. It was a little bit challenging to make it run in January. But it's running very well now. I think, for the last couple of months we've been -- it's been running at virtually the same availability as the overall mill is. And it is definitely helping us to keep our tonnes up well above what the underground mine is giving us. And as the underground mine gives us more tonnes, it will be that much higher. We've got a stockpile of scats in front of us that we can -- those scats have been piled up there over the years when we didn't have a pebble crusher. So now that it's there, we can feed those back through, and we've started that process.
The next question is from Anita Soni from Crédit Suisse.
Just a question with regards to grade. I think Mark Parkin asked it mostly. But at YD, how do you see grades evolving over the course of the year?
Yes. I mean, we have guided and we have -- I know we only gave you annual guidance. But we guided that things would be back-end loaded at YD, and our grades were scheduled lower in Q1, and they came in lower in Q1.
And do you still expect -- I think, to see that, is it a 2.65 average over the course of the year?
Yes. That's our budget grade for the overall year, and yes.
All right. And I'm sorry, I missed the first part of the call, but I'm not sure if you addressed this. But in the -- for Kirazli, do you expect that 2020 will still be a full year's worth of production?
Sorry. 2020 for full year production?
Yes.
No, no. With the GSM later this year, that would likely push the majority of the construction activities to spring of 2019, which, assuming a 12- to 18-month build, pushes production into the latter half of 2020.
Okay, so we're looking at sort of 50% or less the full year run rate in 2020 at this point, right?
I think that's right.
There are no further questions at this time. This concludes this morning's call. If you have any further questions that have not been answered, please feel free to contact Mr. Scott Parsons at (416) 368-9932, extension 5439. The conference has now ended. Please disconnect your lines at this time, and thank you for your participation.