Allied Gold - Q2 2024
August 8, 2024
Transcript
Operator (participant)
Thank you all for joining us this morning. Before I turn the call over, I need to advise that certain statements made during this call today may contain forward-looking information, and actual results differ from the conclusions or projections in that forward-looking information, which include, but are not limited to, statements with respect to the estimation of mineral reserve resources, the timing and amount of estimated future production, cost of production, capital expenditures, future metal prices, and the cost and timing of the development of new projects. For a complete discussion of the risks, uncertainties, and factors which may lead to actual financial results and performance being different from the estimates contained in this forward-looking statements, please refer to Allied Gold's press release issued yesterday, announcing second quarter 2024 results, as well as the management's discussion and analysis for the same period and other regulatory filings in Canada.
I would like to remind everyone that this conference call is being recorded and will be available for replay later on today. Replay information and the presentation slides accompanying this conference call and webcast are available on Allied Gold webcast at alliedgold.com. I will now turn the call over to Peter Marrone, Chairman and CEO. Please go ahead.
Peter Marrone (Chairman and CEO)
Thank you very much, and thank you to everyone for participating on our call this morning. With me are the following executives of the company, Jason LeBlanc, Greg Winch, Daniel Racine, and Gwenaëlle Guillen. I'd like to introduce Johann Stolz. Johann is our Senior Vice President of Operations. Operations have been reporting to him. He is working with Basie, and he has assumed the role of operations, management, and oversight. While Basie could not be with us here in person due to his travel plans, he is on the line. But he wanted me to say that we have considerable bench strength, including with Johann, and while Basie has worked on improving our plants, Johann, as a mining engineer, along with Basie, has been focused on improving our mine plans, mine optimization, and management.
We improved production in the second quarter. The second quarter production of just over 88,000 ounces. That's 2.5% higher than the comparative period. It is consistent with our guidance and what we said at the beginning of the year, which is an expectation of first half to second half of the year of 45%-55%. As Jason will note, we are positioned to be in guidance, in the guidance range for the year. But let me also comment that this production level is not truly representative of the true production platform of our mines. It does not reflect the full potential of Diba, plus the other higher grade oxide areas at Sadiola.
As we began processing those ores late in the second quarter, nor does it reflect the CDI complex, where we mined far more ounces that are now in stockpile than we processed, as we sorted out temporary power situations in the country. We were processing at partial capacity in Côte d'Ivoire, given load shedding, until backup generators were installed, which are now in place, in the company. And we advanced stripping at Bonikro to get to higher-grade ores, and all in all, our mines showed that the total production capacity was closer to 100,000 ounces, which really sets us up nicely for the second half of the year. Our costs improved, so cost of sales, cash costs, and all-in sustaining costs, sequentially decreased since the fourth quarter of last year and the first quarter of this year, all as we anticipated and as we guided.
Diesel generation at Côte d'Ivoire for the partial periods when there is load shedding is for backup only as thermal generators defaulted in the second quarter in the country come back online. We don't see that as a cost pressure, given increasing production and low levels of reliance on that backup power. Operating cash flows increased, so operating cash flows before income taxes paid and movements in working capital were strong inflows of just under $57 million in the second quarter and significantly higher than the first quarter and comparative period, the comparative period last year. Some of these issues in the second quarter did result in a buildup of working capital. Jason will speak more to that. Mostly, that is in stockpiled and inventory buildup, which reverses in the third quarter and the fourth quarter this year.
We had a strong second quarter gold, realized gold price of just over $2,300. Now, gold price is just about $120 higher than that, and again, that positions us comfortably for where we expect to be in the second half of the year, starting in this quarter, with a stronger second half, beginning in this quarter, higher gold prices, that will allow us to get to higher levels of cash flow as we had anticipated. We're investing in the future, so we have additional oxide ore feeds at Sadiola. Diba proves its potential in the second quarter, and we have many other sources of oxide feed at Sadiola that we're now continuing to advance and to mine.
We discussed investing in self-reliance and operational flexibility. We created self-reliance with better mine plans, better performance management, and evaluation of mine contractors, and that backup power at the Côte d'Ivoire complex. We already have this backup at Sadiola, and we plan for it at Kurmuk. We want to be on the grid, but we don't want to be overly reliant on it, and we should always have backup power available to us. We've progressed our exploration and growth projects. Kurmuk advanced exploration points to growth in resources and mine life, and Greg will speak more to that. We began executing on a financing plan during the quarter. So let me deal a little bit with the financing plan and the financing strategy of the company.
The streaming deal with Triple Flag finances the Côte d'Ivoire complex, remembering that we have a $16 billion per year exploration budget. So we can repurpose that $16 billion per year as a result of this, transaction that brings that money into our treasury. We can repurpose the cash flows that would otherwise be allocated to that exploration program. We are advancing plans to modify the Agbaou plant so that it can take on more fresh ore rather than only oxides. We can process that fresh ore. That will also allow us to be able to bring into inventory more ounces. We're advancing on our plans to develop Oumé and to optimize the plant at Bonikro as well.
This is at an attractive cost of capital based on reserves, and even with a meaningful increase in mine life and overall production, the cost of capital is still very competitive, and indeed, I would say that it is modest. But this is part of a broader financing plan for the company. We are well advanced on a package of stream and prepay on, on Kurmuk. We are bringing forward what we previously had said, that we would do a prepay in the first quarter of next year. That will fully finance the project. I am asked the question, why are we pursuing this approach? And I want to make sure that this is clear. This is a should have, it is not a must-have, but the cost of capital is modest.
The transactions allow us to capture the optionality of the mines and projects that are best captured when they're actually in production. We de-risk the projects, certainly on the financing side, and by taking these actions, we can repurpose our cash flows. As an example, we can now look forward bringing forward the Sadiola expansion and other uses for our cash flow. With that, ladies and gentlemen, let me pass the call now to Johann on our operations.
Johannes Stoltz (SVP of Operations)
Thank you, Peter, and good morning to everybody on the call. During the quarter, the company produced just north of 88,000 ounces and sold 84,611 ounces. Our total cost of sales, cash cost, and all sustainable costs looked at $1,547, $1,355, and $1,498, respectively. If you look at the quarter by operation, Sadiola ended up strongly with an increase of 13%, year-on-year increase in production, and closed off the quarter on 51,784 ounces versus 45,799 in the same period last year.
Initiatives undertaken at Sadiola was the implementation of crushing and screening that provided the ability to mill higher volumes with an increased grade fed from stockpiles as well as oxide supplies. Diba. The Diba ore was exposed late in June, and we did an industrial scale test at the Sadiola plant to confirm the optimized processing parameters. This test was yielded better than expected results in higher grade, and we've also managed to expose a significant portion of the ore body after waste stripping. Current stockpile levels sits at 74,000 tons of oxide grade, higher than 1.9 grams a ton, and a total stockpile of oxides and 175,000 tons available for processing at the Sadiola plant, post the approvals.
If we go to the Bonikro, as Peter mentioned earlier, was impacted by power interruptions, but that has been re-resolved with the generator capacity being installed successfully for both Agbaou and Bonikro. The production at Bonikro have seen an increased rate of 10% quarter-on-quarter, and we've managed to advance the pushback five waste stripping for to access higher grades later in the year for processing. If we look at the Agbaou production for the quarter, was stable and many of the pits has been matured and waste stripping done done completely, and that exposed higher grades for processing and stable outlook for the rest of the year. The Agbaou has also, in the outlook, seen the successful execution of South Sat 3, that will enable us to access higher grades as well as the maturity of West Pit Seven.
I will now hand over to Greg Winch, our Chief of Geology. Thanks, Greg.
Greg Winch (Chief Geologist)
Thanks, Johann. Good afternoon, good evening. I'll speak briefly on the company's efforts around increasing,
the resource and reserve base and future production opportunities through engineering has always been a strength of Allied and continues to be, that we continue to grow resource and reserve bases at all the operations and new operations. That remains the focus of what we do. A very healthy exploration budget, and that's now backed up with a world-class construction team that's at Kurmuk. And on the back of all the positive operational outcomes that are improving quarter-over-quarter, we continue to explore, we continue to add resource and reserve bases, and we continue to engineer solutions that we can leverage off those and increase production to the company. So just briefly, I'll run through the projects.
Sadiola, you know, we've from the day of acquisition, we have continued to drill and increase the resource base there, both in oxide and in transition, all but has been focused on oxide. That continues to be the case. During the last quarter, we've discovery of two new oxides, resources that previously weren't identified. So, you know, what it speaks to is not only the world-class nature of Sadiola as a mine, as a deposit and a project, but also the large mineralizing system in that 330 square kilometers of mining license that represents. It continues to generate good resources and reserves. On the back of that, we've been doing a lot of engineering work.
Later in 2026, we'll move into a phased expansion, whereby we'll be able to treat process more hard rock than historically that project has. This will be a phased expansion, as we move through to 2029, whereby we'll be able to crush more fresh rock, then we'll be able to process more, then we're moving towards how we're finally gonna achieve much better recoveries through engineering. And we've had some really promising results from metallurgical test work during the quarter, that show the true potential of that ore body and our ability to extract the maximum amount of gold from that ore body, which is a world-class gold deposit. So that, those phased expansions will continue through 2029. The first one is phase one.
That's well advanced in detail engineering and procurement. And they'll be starting work on that late next year. And that gives the flexibility of the operation to be able to treat predominantly hard rocks, but also be able to increase the production through adding oxide ore. At Kurmuk, and the exploration continues to be successful. We keep adding resources every year, quarter on, every quarter and quarter. Construction started. We're well advanced during the quarter and the first half of 2024, construction teams on site, EPC and contract has been awarded. The construction camp's well underway to being occupied and built. Importantly, the construction water dam was completed for the wet season, which is, you know, a big step for Kurmuk. The company's been involved in that project for seven or eight years, and we've started construction.
Construction team's on site. They've identified good local contractors, as well as a good choice of international contractors that are willing to come and work on the project. So it's exciting time to be at Kurmuk. In addition to that, we continue to explore on the mining license and around the mining license. You know, it's our view that, you know, the Kurmuk project sits within a mineral province, a gold mineral province, that will continue to provide additional resources and reserves to the project, to the point where we'd like to get the reserve base up to 5 million ounces gold. That's the aim.
That's what, the board's asked us to do, and I think for our experience there over the last decade, that's, that's eminently achievable and possibly better. So, you know, we continue to deliver those. We'd like to receive Kurmuk, you know, Kurmuk will be producing 290,000 ounces of gold per annum for the first 5 years, and, over 240,000 ounces of gold per annum over the life of mine. You know, we, we'd want to extend that mine life to 15 years to get in excess of 250,000 ounces of gold a year. I think we're well on the path to do that. We are, we are drilling gold with all drill rigs and, to continue to support construction.
For Côte d'Ivoire, briefly, you know, it is a large focus of our exploration. We've got 8 drill rigs working there at any one time, working up at Oumé, drilling around Bonikro and Hiré. Once again, we continue to increase the resource and reserve base, and we stay in front of the mine production, and improve the optionality going forward. Peter mentioned briefly before about changes to the Agbaou milling circuit, potentially, or Bonikro, and, you know, the renewed resource and reserve budgets support that. So we continue to focus on that, and the engineering around being able to optimize the results of this drilling. So, that's the general overview of what we're doing outside of operations and, where we're taking going forward.
I'll pass over to Jason, who can give us a report on the financials.
Jason LeBlanc (CFO)
Yeah. Thanks, Greg, and good morning, everyone. For the quarter, we generated revenue of over $195 million and a gross profit, excluding depreciation and amortization, of $77.7 million. The attributable net earnings for the quarter were $8.3 million. However, after adjusting for non-cash and non-recurring items, adjusted earnings for the quarter were $15.9 million or $0.06 per share. Operating cash flows before cash tax and working capital for the quarter increased significantly to $56.9 million, compared with the prior year quarter of $23 million. This was due to higher sales volumes and realized gold prices, added to lower cost of sales per ounce. Operating cash flow was negatively impacted by working capital outflows during the quarter, but was largely caused by one-off events that will reverse in coming quarters.
We had a large stockpile build at Sadiola, as mining started later in the quarter at Diba, although we didn't process that material. And over at Kurmuk, where mining continued uninterrupted throughout the quarter, despite constrained processing rates because of power interruptions. At quarter end, cash and cash equivalents were $78 million after spending $43.5 million on exploration, sustaining capital, and development CapEx in the quarter. As recently announced, we entered into a new streaming transaction with Triple Flag, which brings $53 million into treasury. Our unit costs are expected to continue trending downward over the remainder of the year, in line with plan from higher production, and consequently, expect strong cash flow generation for the balance of the year. Our ability to generate increased cash flows and profits is supported by our 2024 guidance.
As previously disclosed, production is expected to be weighted to the second half of the year, with quarter-over-quarter variances due to mine sequencing and accessing higher grades as per the mine sequence, along with the implementation of operational improvements. Production is expected to increase sequentially in the third and fourth quarters, which aligns with our guidance of 375,000-405,000 ounces for 2024 at mine site AISC of about $1,400 per ounce. For the year, production is expected to be weighted approximately 45% in the first half and 55% in the second half of the year. In terms of investments, we plan to allocate $32 million to exploration activities and another $30 million to sustaining capital, not including deferred stripping of $25 million, which is accounted for in AISC.
We've also allocated approximately $200 million for expansionary CapEx, primarily for Kurmuk. Cost improvements are expected to come from better performance at Sadiola and Agbaou, with Bonikro in the middle of a stripping phase to access higher-grade ore during the guidance period, which will cause higher AISC now, but result in lower costs from lower stripping in future years, starting in late 2025 and into 2026. Expansionary capital is being directed towards advancing the Kurmuk project, which is expected to result in significant increase in production and profitability starting in 2026. And lastly, spending on exploration is focused on several strategic objectives, including increasing oxide ore inventory, particularly at Sadiola, extending mine life in Kurmuk, and expanding mineral inventory at Kurmuk. And with that, I'll now pass the call over to our Chief Sustainability Officer, Gwenaëlle.
Gwenaëlle Guillen (Chief Sustainability Officer)
Thank you, Jason, and good morning. All our operational improvements on growth are grounded in our ongoing commitment to sustainability and the communities where we operate. The company did not report any significant environmental incident for the three and six months ending June 30, 2024, and we remain focused on ensuring the health and safety of our employees. Year to date, we are on track to achieve our 2024 sustainability public target. In the second quarter, the company published its 2023 sustainability report, highlighting key sustainability achievements. The report details the activities undertaken by Allied Gold during '23 and outlines the company's plan for 2024 and beyond.
We also implemented new sustainability policies, which introduce commitment around the governance of our sustainability performance, specifically promoting a strong sustainability culture across the company, fostering leadership and accountability for the company's sustainability efforts, and establishing sustainability objectives and target. These efforts underscore Allied Gold's commitment to responsible mining, and I will pass now the call back to Peter Marrone.
Peter Marrone (Chairman and CEO)
Gwenaëlle, thank you very much. So to conclude the presentation, at least the formal part, in terms of upcoming milestones, we expect to have an update on exploration and resources in November. That would include on Kurmuk, as Greg mentioned, Oumé, north of Bonikro, our plan for Agbaou, that is broader than exploration, but the plan going forward for what we do with the plant and how that is expected to increase inventory, and of course, more oxide ounces at Sadiola, as Greg mentioned. Our third quarter financial and operating results are scheduled to be released on November the eighth. We will update the financing plan of the company to demonstrate that Kurmuk is fully financed. We are well advanced for the completion of that financing. We will update the plans on how we accelerate the expansion at Sadiola.
And finally, as part of our plan for increased liquidity, we will begin trading in the over-the-counter market in the United States, commencing this month under the symbol AAUCF. My apologies, there's one more thing. We will plan a site visit at Kurmuk, sometime in November. And with that, ladies and gentlemen, let me open up the call to questions.
Operator (participant)
Thank you. Yes, we will now take questions from the telephone lines. If you have a question, please press star one on your device's keypad. You also can cancel your question at any time by pressing star two.... So please press star one at this time, if you have a question. There will be a brief pause while the participants register. We thank you for your patience. The first question is from Don DeMarco, National Bank Financial. Please go ahead. Your line is open.
Don DeMarco (Director of Equity Research Analyst)
Thank you, operator, and good morning, Peter and team. So Peter, congratulations on the stream proceeds at the Côte d'Ivoire assets. It's great to see the benefits of liquidity. Previous messaging had mentioned Sadiola as a candidate for a small stream. I didn't see it in the press release, but is this off the table for the time being? I see you also mentioned that you expect to be fully funded at current gold prices.
Peter Marrone (Chairman and CEO)
Don, thank you for the question. With the financing at Côte d'Ivoire and the financing that is pending for completion at Kurmuk, we believe that the expansion, the phased expansion of Sadiola can be funded and possibly even brought forward with cash flows. So it is, we describe it as the repurposing of cash flows, and that's really the point here. So we don't have to go down the path of a further financing at Sadiola. We believe the cash flows can allow us to advance the expansion of that operation. But bear with us, we're not at that point yet, but it does appear to us that we should be able to advance that project. We're aiming for at least a year, possibly more than that, but we're just working through our cash flow models at this point.
Don DeMarco (Director of Equity Research Analyst)
Okay. Thank you. That's encouraging. Then on to Agbaou. I see in Q2, the costs are still elevated. I mean, recall that Q4, Q1 may have been impacted by a change in contractor. It seems that Q2, the grid outages weighed a bit, but is there anything else that contributed to the cost differential that we're seeing between Agbaou and Bonikro?
Peter Marrone (Chairman and CEO)
That's it. Go ahead.
Daniel Racine (COO)
Yeah, Don, I think it's primarily the ounces produced. If you look at it, that it's just your, kind of, your unit effect is gonna be a big, big driver there. And then you got some lingering effects from what you mentioned, you know, the results in late last year in Q1, trickling into Q2 a little bit, dealing with a lot of stuff with the power outages.
Don DeMarco (Director of Equity Research Analyst)
Okay, so Agbaou.
Peter Marrone (Chairman and CEO)
Yes.
Don DeMarco (Director of Equity Research Analyst)
Go ahead.
Peter Marrone (Chairman and CEO)
I was just going to say, to be perfectly transparent, Agbaou and Sadiola and Bonikro performed as expected. Bonikro, even with the weakness resulting from power, Agbaou underperformed. And so Johann has put plans in place to improve that performance. In the end, the bottom line, however, is that we do believe that we have to increase the inventory of ounces, mostly in fresh ore. We have to make modifications to that plant so that we can capture some of the ounces in the ground that are there, but it will come at, from the fresh ore rather than the oxides. But even on the short, on a short-term basis, we should expect an improvement to production in the third quarter and fourth quarter and into next year, and that means that the unit costs will come down.
Don DeMarco (Director of Equity Research Analyst)
Okay, good to hear. Then just final question at Sadiola. So we see that Diba is advancing. Can you confirm that you expect processing and actual production from Diba in Q3? I see that there were some final approvals needed on processing.
Peter Marrone (Chairman and CEO)
We expect that to be the case. We are going through an approval process. Sometimes these approval processes take longer than we anticipate. We do expect that we'll be processing more of that ore in this quarter. We should mention, I think we've said this in our MD&A, that we already have a stockpile at Diba that has a significant number of ounces. We estimate more than 6,500 ounces that can be processed very quickly, literally over the course of a week, at Sadiola. But what we've done is we've said, "Let's not be overly reliant only on Diba.
Let's not be overly reliant on what is outside of our control, or at least mostly outside of our control, which is approvals." We do have other areas at Sadiola that have higher grade and is oxide. And as we've taken those from exploration to more exploration, we're now at the point of the development of those and then bringing those ores into the plant. And that's the message that we're trying to communicate, which is that... And we tried to say that earlier this year as well, including with our guidance, that while Diba is a significant contributor, it is not the only contributor to the improvement of operations at Sadiola.
Don DeMarco (Director of Equity Research Analyst)
Okay, good to know. Okay, well, that's all for me. Good luck with Q3. Thank you.
Operator (participant)
Thank you. The next question is from Anita Soni from CIBC World Markets. Please go ahead. Your line is open.
Anita Soni (Analyst)
Good morning, Peter, everyone. Just, Don actually asked most of the questions I was gonna ask, but, just another follow-up. Could you give any color on the negotiations with the Malian government? I know you guys are grandfathered in, but any color you could give would be appreciated.
Peter Marrone (Chairman and CEO)
So, Anita, what we said in our MD&A is what I think is a very accurate description of where we are. We are grandfathered, but the 2023 mining code has now been decreed. Part of the approval process, if it was not apparent before for Diba, goes to compliance with the 2023 mining law. It is likely that we would have to comply with the 2023 mining law on tolling that ore. But that's part of the discussion that's taking place with the government. So while we are grandfathered, as we said in our disclosure, we're also sensitive to context and to the state of discussions that we and all the other mining companies are having in the country.
We're actively engaged in those discussions, and we expect that the result of that will be some modification to our existing convention, some adoption of what's in the 2023 mining code, but we're still at the discussion phase at this point.
Justin Chan (Director of Mining Equity Research)
Okay, thank you. That's it for my questions.
Operator (participant)
Thank you. Once again, please press star one on the device's keypad if you have a question. The next question is from Carey MacRury, from Canaccord Genuity. Please go ahead. Your line is open.
Carey MacRury (Equity Research Analyst)
Good morning, Peter and the team. Just a question on Kurmuk. I think the guidance for the CapEx is like $155 million, I believe. You've only spent, I think, $18 million to date. So how do we think about the, you know, the CapEx ramping up there? Should we still be assuming you'll spend the balance this year, or is part of that gonna go into next year?
Peter Marrone (Chairman and CEO)
Let me weigh in, and then I'll pass it to Jason, if he has any supplemental comments. My expectation at this point is that we're likely going to be light on capital for this year, but we're still aiming toward the capital that we indicated at the beginning of the year in our guidance. But our experience over the course of many decades of working on these projects is that what we've guided as the CapEx is likely going to be slightly less, and some of that will move into 2025. Jason, I don't know if you would add anything to that.
Jason LeBlanc (CFO)
Yeah, I mean, Peter, just a little bit more precision for, you know, Q3, Q4 at Kurmuk. You know, I think I'd bookend between $40 million and $60 million per quarter at Kurmuk. I think, while on topic of expansionary, just to point out, I mentioned we guided about $200 million for the year, so that's still a number we'll leave out there, despite having spent what we disclosed $14 million in Côte d'Ivoire during Q2. So that was an unbudgeted expansionary expenditure to put in place those generators. So we were able to accommodate that and still stick within our overall guidance for the year.
Carey MacRury (Equity Research Analyst)
Okay, great. The working capital was pretty negative this quarter, and I think last quarter, and I know you have commentary that it should normalize going forward, but is there any other sort of big moving parts on working capital we should expect for the back half of the year?
Jason LeBlanc (CFO)
No, no, nothing, nothing carryover, like I say, it's gonna reverse into Q3, Q4 as those inventories or stockpiles primarily get released.
Carey MacRury (Equity Research Analyst)
Okay. That's it for me. Thanks.
Peter Marrone (Chairman and CEO)
And Carey, that's an important point. So most of that working capital in the quarter was stockpile and inventory buildup. And on the stockpile side, which accounts for the majority of that working capital, those ores are now ready to be processed. And the reason why they were not processed, as an example of Bonikro, is because of the power situation in the quarter. That's now rectified. And so we're beginning to process that through the plant, and so we will reverse that working capital increase in the quarter, and we'll begin to get the benefit of that production and that cash flow coming in the third quarter.
Carey MacRury (Equity Research Analyst)
Thanks. Good to hear. Thanks, Peter.
Operator (participant)
Thank you. The next question is from Justin Chan, from SCP Resource Finance. Please go ahead. Your line is open.
Justin Chan (Director of Mining Equity Research)
Thanks, Peter and team, for hosting the call. Maybe just a further follow-up on working cap. Maybe just first on the ore stockpiles. Are they... Is it fair to, I guess, for the modeling, because we don't have mine grade, is it fair to assume that there are similar grades to what you processed or what you plan to process, or is there some grade differential just as we run those stockpiles through? And on the Diba ore, is that, is the processing of those stockpiles still pending on the permit?
Peter Marrone (Chairman and CEO)
We missed the last part, Justin, because the phone went a little bit bad. Let's come back to that. But on the first part, the grade is comparable in the stockpiles, but as you can anticipate, we're gonna try to process some of the higher grades first, so that we can catch up on the reversal of working capital and the increase in cash flow. Your second question, though, the line went bad a little bit. What was the second question?
Justin Chan (Director of Mining Equity Research)
Sorry, so the second question was just regarding the stockpile ore from Diba. Are those ounces and the processing of them contingent on approval?
Peter Marrone (Chairman and CEO)
Yes. So we want to get that approval first before we process those ounces, and we're very much in active discussions with the government at this point on advancing that and doing it quickly.
Justin Chan (Director of Mining Equity Research)
Okay, gotcha. Thanks. And maybe just a couple more on working cap. Sorry to zoom in on this issue, but I was wondering, a few other companies reported increased the A/R receivable buildup in Mali or Burkina this quarter. Was that also a component of the working capital flows in the quarter?
Jason LeBlanc (CFO)
Yeah, definitely. I think number one is what we mentioned with stockpile, and we did have different production sales, so finished goods. I think next in order of magnitude would probably be the AT receivable increase, call it order of magnitude, $5 million.
Justin Chan (Director of Mining Equity Research)
Okay, gotcha. And I guess looking forward, can you offset that with tax payables or I guess what is your expectation on VAT in the second half?
Jason LeBlanc (CFO)
Yeah, that's the way it works, as we pay cash taxes, then it's indirectly offset that with the VAT receivable.
Justin Chan (Director of Mining Equity Research)
Okay, got you. So it's probably best to model that kind of working capital outflows is not the case in the second half.
Jason LeBlanc (CFO)
No, I do. We, I think we may have said it earlier in the call, but no, we expect kind of a flat to slightly positive inflow over the balance of the year, if you look at it that way.
Justin Chan (Director of Mining Equity Research)
Okay, got you. And then just one more is, as payables have come down quite a lot from what's fair to say an elevated level at the end of the year, do you think they're now at a level that you're happy with, or I guess do you expect payables to come down more or stay the same?
Jason LeBlanc (CFO)
No, flat. Flat. It's been, it's been, you know, the better part of, you know, three going on into our fourth quarter of just normalizing, everything as we've gone through the RTO process. So I'd say they're normalized now.
Justin Chan (Director of Mining Equity Research)
I see. Okay, thanks. And then just maybe on, just kind of a longer-term question in Côte d'Ivoire. So, you know, I think, I think previously you talked about kind of integrating the two operations together as one operation. You've got the, the power in now. Is that still, is that still your expectation? And I guess in the long run, what do you think is a, you know, what's an aspirational long-term AISC or production profile for Côte d'Ivoire?
Peter Marrone (Chairman and CEO)
Yeah, so 2 really good questions. On the first question, the technical detail and then the practicality. The technical detail is Agbaou and Bonikro, because they were owned by 2 separate companies, have 2 separate conventions and 2 separate fiscal regimes. And so from the technical, legal point of view, they would not integrate. But from a practical point of view, administration, management, that is in progress, and so we're treating it as a complex, as we mentioned before. What's the intermediate term plan for those operations? Well, intermediate, including into next year, late this year, next year at Bonikro, is with the stripping done, we expect to get into higher grade. We expect production to increase, and we expect that the costs will come down pretty dramatically.
As we provided in our outlook, the cost declined to well below $1,200 per ounce from this year's more than $1,600 per ounce. But more holistically, in terms of the complex, we stand by what we said. We've said strategically, we want to be at 10 years of mine life at least 180,000-200,000 ounces per year between the two mines in the complex. And we want to take that word strategic out, and we want to do that within the interim, so the intermediate period of time. So how do we do that? Well, Bonikro seems to have an extended mine life as a result of the contributions coming from Oumé.
We're actually investigating the merits of expanding that plant so that it can actually process more and give us more ounces of production, more than that, roughly 100,000 ounces that we're getting today. Agbaou, we're now very close to being convinced that we need to make plant modifications on the front end that will allow it to be able to take on fresh ore. There is a large inventory of fresh ore. Some of that is near to surface, but underground. We're investigating how we evaluate, how we deal with those mine plans, both for near to surface, but also access to underground, and making modifications to that plant so that it can take on more of that fresh ore.
Where we have as a plan then for Agbaou is to get to 100,000 to 110,000 ounces per year. Bonikro, at least 100,000 ounces per year. There's our 200,000 ounces per year, and we will give more guidance on that, on what we intend to do, as, as I mentioned, on the conclusion of the formal part of the presentation, before the end of this year, and then we'll continue to advance that into next year.
Justin Chan (Director of Mining Equity Research)
Gotcha. And I know that you haven't made a formal decision on this, but, in a broader sense, like, what do you think is an appropriate timeline for that investment into Agbaou's processing circuit? Is that kind of like a potentially next year or is that, you know, longer term?
Peter Marrone (Chairman and CEO)
I don't know that it's next year. I'd say that we will have completed the studies for that, including the development of mine plans, at least preliminarily by next year. But Agbaou has, in terms of oxides, 2.5 years-3 years of mine life. So we would expect that before the expiry of that, we would expect to have completed the implementation of those changes to the plant, and a mine plan for how we access some of those, some of that fresh ore. So we should expect that within the next couple of years, Agbaou will be an entirely different mine with an entirely different plant.
Justin Chan (Director of Mining Equity Research)
Okay, gotcha.
Peter Marrone (Chairman and CEO)
Let me say, Justin, that was the reason, one of the primary reasons... This was not part of our mine plan, right? This was not part of the guidance that we provided, part of the outlook that we provided. So one of the reasons for the should have versus must have on the financing that we completed with Triple Flag is that it allows us to advance. We're spending $60 million a year on exploration. We strongly believe, we see that there are more ounces there. We should be spending money on the modifications to the Agbaou plant, possibly expanding the Bonikro plant. It would be foolish for us to say, let's wait to do that until we've done everything else.
That was the purpose of this financing, which is it allows us to advance the plans on Bonikro and Agbaou so that we can take, as I said, that word strategic out. Where we want to be with this is not 180,000 ounces-200,000 ounces per year, but a number that is higher than that. Bonikro should be able to do more than that with modifications to its plant, more than 100,000 ounces per year. And with Agbaou, at 100,000-110,000 ounces, we want to be able to come back in the next couple of years and say that that goal of 200,000 ounces is now a higher goal. We know the inventory is there. We know that there, there are these modifications that could be made to the plant.
Now we're checking all the boxes on how we go through, concept and internal study to full feasibility study, third-party review, and then engineering.
Justin Chan (Director of Mining Equity Research)
Understood. That makes a lot of sense, and I appreciate both the timeline and kind of how it fits in to your financing and the other moves you've made. Thanks very much. I'll free up the line.
Operator (participant)
Thank you. There are no further questions registered at this time. I will turn the call back to Peter Marrone.
Peter Marrone (Chairman and CEO)
So ladies and gentlemen, thank you very much for making the time for us this morning. We hope that this was informative and gives you a better sense of what we've done in the quarter and what to expect for the rest of the year, and then into the intermediate and longer term. We are advancing our initiatives for advancement and enhancement of our mines and development of our projects, and of course, the discovery of new ounces, as Greg mentioned. So with that, we look forward to our conference call on November the eighth for our third quarter, our third quarter report. Thank you very much.
Operator (participant)
Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.
