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Edited Transcript of ACA.L earnings conference call or presentation 11-Feb-19 12:00pm GMT

Full Year 2018 Acacia Mining PLC Earnings Call

Feb 13, 2019 (Thomson StreetEvents) -- Edited Transcript of Acacia Mining PLC earnings conference call or presentation Monday, February 11, 2019 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Charlie Ritchie

Acacia Mining plc - Head of Legal & Compliance and Company Secretary

* Jaco Maritz

Acacia Mining plc - CFO

* Peter Geleta

Acacia Mining plc - Interim CEO & Executive Director

* Sally Marshak

Acacia Mining plc - General Manager of IR & Communications

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Conference Call Participants

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* Alan Henri Spence

Jefferies LLC, Research Division - Equity Analyst

* Hunter Adam Hillcoat

Investec Bank plc, Research Division - Mining Analyst

* Izak Jan Rossouw

Barclays Bank PLC, Research Division - Director

* James Andrew Keith Bell

RBC Capital Markets, LLC, Research Division - Analyst

* Michael Stoner

Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst

* Tanya M. Jakusconek

Scotiabank Global Banking and Markets, Research Division - Analyst

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Presentation

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Sally Marshak, Acacia Mining plc - General Manager of IR & Communications [1]

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Welcome to Acacia's 2018 Preliminary Results. I'm joined today by Peter Geleta, our CEO; and by Jaco Maritz, our CFO. I'm shortly going to hand over to Peter, followed by Jaco for the run-through of our presentation. And then we will open up for Q&A both for in the room and for those joining us by webcast and call.

Thanks very much. Peter?

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Peter Geleta, Acacia Mining plc - Interim CEO & Executive Director [2]

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Thanks, Sally. Afternoon, everybody.

I'll just click that up. Charlie says I'm going to put that up. So...

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Charlie Ritchie, Acacia Mining plc - Head of Legal & Compliance and Company Secretary [3]

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Read it out.

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Peter Geleta, Acacia Mining plc - Interim CEO & Executive Director [4]

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Okay, we'll move onto the full year results.

So I'm very pleased to report that we successfully stabilized the business during 2018 and delivered a strong operational performance across all our operations.

We ended off production in 2018, substantially ahead of our guidance with 522,000 ounces at an all-in sustaining cost of $905 per ounce, which was also well below the guidance range.

I'm sure you'll agree that given our operating environment and the circumstances we faced -- we were faced with in the last 12 months, is that this is an outstanding achievement by our people. We really stuck to the task and stayed focused on achieving the operational performance.

Higher-than-expected production was due to higher-grade ore from Rama open pit at North Mara, extended mining of the final cut of higher-grade ore at Buzwagi and improved throughput in the recoveries at Buzwagi. We also had favorable performance from our tailings processing at Bulyanhulu.

Full year gold sales of 520,000 ounces was in line with our production. Also, suffice to say that all our gold production came out of [indoor reform] in 2018.

A strong performance on all-in sustaining costs reflects our strong cost discipline as well as higher production and lower capital allocation.

So I'm pleased to report that we were able to return the business to free cash generation in Quarter 2 as well, and then we sustained that through the rest of the year and finished the year with a net cash balance of $88 million. This also reflects the sale of a noncore royalty in Quarter 1 for USD 45 million and after that we made 2 debt payments during the year totaling $28 million.

I'm also going to -- pleased to share with you some of the encouraging provisional outcomes from our Buly optimization study. We expect the full results of the study at the end of Quarter 1.

On a provisional basis, we're looking at a life of mine of 18 years at an average steady state production rate of 300,000 to 350,000 ounces at an all-in sustaining cost of $700 to $750 per ounce and estimate CapEx requirement of $120 million to $140 million plus initial ramp-up costs of around $20 million. This, of course -- the Buly start-up assumes a resolution of disputes with the government and the resumption of concentrate sales.

So moving on to an update on Tanzania.

As you're all aware by now, Barrick and the Tanzanian government continued their discussions during 2008 (sic) [2018] aimed at agreeing and documenting the proposed framework they announced in October 2017. Acacia has continued to provide support to Barrick in its discussions with the government, but we are now in the room.

Barrick announced in June 2018 that we will not be providing a timetable for the completion of these discussions. The point was also reiterated last week at the Mining Indaba by Barrick's new CEO, Mark Bristow. We're being clear as Acacia that what we need is a comprehensive settlement, and any proposal agreed with Barrick and the government would be subject to review by the independent committee of Acacia Board of Directors.

Whilst our preferred option is a resolution in order to protect our business, the international arbitration process, which began in 2017, in respect of Bulyanhulu and Buzwagi mines continued during 2018, and the hearing of the claim is currently scheduled for Quarter 3 2019. We have done this to protect the rights of both business, but our view remains that a negotiated resolution is the preferred outcome for all stakeholders.

In Quarter 4 2018, the operating environment in Tanzania became increasingly challenging with criminal charges by the government being brought against 3 Acacia employees and 1 ex-employee. Three of them are still being held under non-bailable offenses. The charges relate to matters that backdate to historical issues, and no evidence has been presented at this point in time. All these allegations are being defended.

One of the most important things that we set out as a management team is that we need to focus on the things, controlling the things that we can control. And that really is the safety of our people and focus on achieving our operational results. But another important aspect is to continue to demonstrate to Tanzania that we're there for the long term and we're committed to the country.

So really, we continued as a major contributor in Tanzania. It's easy to forget, with all the things that are going on, all the good things that we do in the country. During the year, we paid $127 million in taxes and royalty. We also progressed our Tanzanian localization strategy during the year, spending over $273 million on local suppliers. But at this point in time, 97% of our workforce is Tanzanian nationals, and 17% of our management positions are being held by Tanzanians. We are pleased to see that an independent report released by Ernst & Young during 2018 demonstrated the significant contribution that Acacia continues to make to Tanzania's economy as well as the country's broader social development. We've reduced the number of international employees from in excess of 500 in 2013 to 65 in 2018. This represents an 85% reduction. Over the past few years, we've also been transitioning services and support that was being provided to our operations from outside Tanzania into Tanzania, and that full transition will be completed in 2019. So as I said, we continue to demonstrate our long-term commitment to Tanzania.

We also do this through our strategic investments in our communities. Through our sustainable communities initiatives, we continue to invest in our local communities, in line with the government's Development Vision 2025, making improvements to social infrastructure across multiple sectors, including agriculture, water, sanitation, education, health and road infrastructure. To this end, our initiatives positively impacted over 150,000 people in Tanzania in 2018, while in total, we have contributed over $90 million since 2010.

At Buly in 2019, we continued our $1 million investment in the Bugarama Health Centre. We supported the construction of a surgical theater, general and specialized maternity wards, outpatient department and mortuary facilities. The health center now provides care for nearly 60,000 people living in the 14 villages in the surrounding areas of the mine. Upon completion this year, this facility will be designated as a district facility catering for over 100,000 people in the local area.

Construction also began on a 55-kilometer pipeline to carry water from Lake Victoria to 100,000 residents under the Joint Water Project Partnership in which we're investing around $2.5 million. That Joint Water Project Partnership is with the Government of Tanzania. The pipeline will pass through 14 villages located near the mine and is scheduled to be completed in mid-2019.

At North Mara, we completed upgrade of the Nyamwaga Health Centre at a cost of over $1 million. The center boasts critical medical infrastructure, including a surgical theater, pharmacy and a maternity ward, as well as staff housing and rainwater harvesting tanks. Since its renovation, it can now treat 60% more patients, 800 per month.

Meanwhile, our annual eye screening campaign reached 3,000 patients, and we distributed free spectacles. We also partnered with the Medical Women Association of Tanzania for breast and cervical cancer awareness and screening, reaching over 1,200 women.

While at Buzwagi, the first half of the year saw the development and implementation of a 3-year, $1.1 million agricultural improvement project that could more than double local incomes. That's an important project given the status of the life of mine to ensure we create future livelihood once the mine has closed.

So moving on to our operations.

So really, on a consolidated basis, our performance or production of 522,000 ounces for the year is substantially over our initial 2018 production guidance of 435,000 to 475,000 ounces. We demonstrated continued strong cost performance, achieving an all-in sustaining cost of $905 per ounce, which is all the more impressive given the challenging operating environment and affected, Buly remained on reduced operations throughout the year.

Moving on to North Mara.

Our Total Recordable Injury Frequency Rate of 0.25 in 2018 represented an 11% improvement on 2017. We produced 336,000 ounces at an all-in sustaining cost of $866 per ounce. Production increased by 4%, driven by the 3% higher-grade ore from the Eastern part of the Rama open pit and improved plant recovery rates. Ore tonnes from the underground mine continued to increase and were 20% higher than in 2017 due to the increase in availability of developed mining areas and improved equipment availability.

All-in sustaining costs was $866 per ounce sold, which was 8% higher than the previous year. This was mainly driven by higher maintenance costs. When we started the mine in 2015, we did start it with secondhand equipment, and we've slowly been replacing that equipment. So our maintenance costs for 2018 was slightly higher, but that should start coming off going forward.

In terms of guidance, we're expecting production in 2019 to be around 10% higher than 2018 at approximately 370,000 ounces. The Rama open pit is expected to deliver increased ore volumes at high grades as we gain access to the main ore zone in cut 4, while we expect positive grade reconciliation at the Gokona Underground.

All-in sustaining cost is expected to be approximately 10% lower than in 2018 at around $790 per ounce sold. This is driven -- this is due to -- being driven by the higher production base and lower cash costs, a result of the higher grades in the open pit, offset by an increasing sustaining capital expenditure following the deferral of 2018 capital projects, which are now expected to be completed in 2019.

We continue to target production at North Mara above 300,000 ounces for the next 10 years. So we continue to invest in expansion drilling programs at Gokona, and we've also commenced with a pre-feasibility study for an underground at Rama, and we expect to complete this PFS by midyear.

So drilling is obviously a key focus, infill drilling and expansion drilling, for us at North Mara so that we can realize the full potential of the North Mara underground. Drilling in 2008 was spread across a 1 kilometer of strike extent with potentially economic mineralization along the entire strike extent. You can see from some of those results that we've been achieving they're highly encouraging.

Just looking at Gokona, and you will see all the green portion represents unclassified mineralization. We have drilled enough in there to see that it is extending but not enough yet to move it out of unclassified into resource or reserve. So the big focus in 2019 will be in those areas in the central and the eastern side but also in the western side. And we're looking to spend $7 million in infill and extension drilling at Gokona and $2 million at Rama going forward. So hopefully, we're doing 39,000 meters of extension and infill drilling in 2019. And hopefully, this time next year, we'll be bringing a lot of this into resource and reserve.

Buzwagi. We reported a 50% improvement in safety for the year at Buzwagi with a TRIFR of 0.16. Full year gold production was 145,000 ounces, which was ahead of expectations due to the extended mining of the final cut of the higher-grade ore at the bottom of the pit. That was all supposed to be completed at the end of 2017. But due to excessive rainfall, we had to withdraw from the open pit, and we went back in there in Quarter 3 last year and that helped us in terms of the grade. But aside from the mining in the bottom of the pit, we also had a really good performance in the processing plant with throughput and improved recoveries.

So although production was 46% lower than in 2017, this was due to Buzwagi transitioning primarily to low-grade stockpile processing compared to the processing of run-of-the-mine ore in 2017. Our all-in sustaining costs of $977 per ounce sold was 46% higher than 2017 mainly driven by the transition to processing low-grade stockpiles, which drove higher cash costs. Buzwagi will continue to process stockpiles through 2019 and until mid-2021.

Following completion of the mining of the final cut at the bottom of the pit in Quarter 1 this year, the mill feed will be exclusively from the stockpiles. So production for 2019 is expected to total approximately 115,000 ounces.

As a result of the lower production and release of noncash, high-cost stockpiles of approximately $285 per ounce, all-in sustaining cost is expected to increase to approximately $1,140 per ounce sold for 2019.

Moving on to Bulyanhulu.

The safety performance remained strong at Bulyanhulu with 0 lost-time injuries and a TRIFR of 0.10. Production was 40,000 ounces, which was 77% lower than 2017 due to the decision to place the underground mine on reduced operations and ore production continued to be from the retreatment of tailings in 2018. Gold sales were 42,000 ounces, 3% ahead of the production due to the sale of gold on hand at the end of 2017. We achieved an all-in sustaining cost of $786 per ounce sold, which was 43% lower than 2017. This was driven by the reduced operating and capital spend, partly offset by the lower production base. All-in sustaining cost excludes the reduced operational costs, which totaled $28.9 million for the year.

So in terms of the 2019 plan, we expect Buly to remain on reduced operations and to continue to reprocess tailings through 2019 at a monthly reduced operating cost of approximately $2 million.

Acacia is finalizing an optimization study, which is intended to ensure the underground mining, processing and all supporting operations can be optimized and fit for purpose when underground mining operations at Bulyanhulu is in a position to resume. And this, of course, can only happen upon resolution of the current disputes and the resumption of sales of concentrate. So really, when Buly was placed on reduced operations, it was a tough decision to make, but it was the right decision given the cash burn. We've really used the time, I think, well at Buly to do some of the essential maintenance work in the plant but also, most importantly, to complete this optimization study so that we can really make sure we open it up in optimized fashion.

So the mine will continue with the reprocessing of tailings through 2019 at an annual production rate of approximately 35,000 ounces and all-in sustaining costs of approximately $790 per ounce.

So looking at the Bulyanhulu optimization study.

And I think I mentioned the -- last time out here was many people that have worked at Buly in the past, it's been traditionally an underperforming mine. Many people that have worked in the past have asked, can we close this mine and conduct the study and look at how we best reopen it? Nobody has had that opportunity. We have had that opportunity now, and I think we're using it well.

So these are still provisional outcomes, but we're very encouraged by these outcomes. We're doing some fine-tuning to the cost numbers in the schedule, and we'll look at the end of Quarter 1, presenting that to our board and then announcing it to the market.

So the new Buly will really be focusing on in the Deep West, which will bring a significant reduction in development requirements. With a focus on the Deep West and higher mined -- mining grades, we also expect a reduction in the amount of tonnes required to be mined over the new life of mine. The provisional outcomes of the study support a potential life of mine of 18 years of delivery of an average steady-state production between 300,000 to 350,000 ounces at an all-in sustaining cost between $700 and $750 per ounce. Essentially, we'll be focusing on the higher-margin ounces in the new Bulyanhulu with a significant lower fixed cost base.

In terms of capital requirements, we expect preproduction capital requirements to be in the range of $90 million to $110 million, with subsequent development and rehabilitation costs of a further $30 million. Additional ramp-up costs are expected to total around $20 million, comprising of sustainable communities initiatives and costs related to the existing processing plant, recruitment and freight of supplies. These will -- this cost will be incurred over a 12- to 18-month period until first gold production from resumed underground mining operations. We then expect to take another 18 to 24 months to ramp up to full production from the underground mine to that 300,000 to 350,000 mark. As I said, all current figures are subject to further detailed work on costs and capital estimates, and we hope to have those completed by the end of Quarter 1.

As I said, the final decision to resume underground mining at Buly would be dependent on achieving a comprehensive settlement to our current dispute and to resume with the concentrate sales.

Underground mineral reserves decreased by 1.9 million ounces of contained gold with the underground mineral reserve now amounting to 2.6 million ounces at 10.7 grams per tonne compared to the previously stated 4.5 million ounces at 9.7 grams per tonne.

If you look at that of Buly, you'll see the focus going forward. 70% of our life-of-mine production is going to be coming from the Deep West. So this is already a well-defined resource with adequate drilling that gives us the confidence that we can get the high-grade margins that we're targeting.

Reef 2 comprises 25% of the life of mine and is set to be mined at a later stage in the life of mine. Marginal to sub-economic areas in the deep central and the east have been removed from the plan that was in the original life of mine. Part of the new plan is to have an ongoing targeted drilling program which, based on historical conversion rates, we have now no doubt will enable us to bring more into future reserves and resources.

So essentially, what we're looking at is a much lower-cost mine with higher margins, really supporting our objective to deliver free cash.

And so that really is the operational review. I'll now hand over to Jaco, who will take us through the financial review.

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Jaco Maritz, Acacia Mining plc - CFO [5]

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Thank you, Peter. Good day, everybody. So I'll take you through the financial results for the year.

If we look at -- it was a tough operating environment, and we saw strong operating results from all 3 mines. So revenue was around $664 million for the year. That was $88 million down from 2017, and it was mainly from lower sales that's in line with the changes in the business with Bulyanhulu on reduced operations and Buzwagi transitioning from mining to just processing stockpiles. It was partially offset by $12 an ounce higher gold price during the year.

EBITDA was strong at $226 million. That was 12% down from 2017, and that was mainly from revenue that was partly offset by lower exploration expenditure and other charges.

Adjusted EBITDA was adjusted for the noncore royalty of $45 million. And overall, that was 41% down from 2017. That was mainly, as explained, the revenue.

Then if we look at -- net earnings for the year was $59 million compared to a loss of $707 million in 2017 and with the loss in 2017 relating to the impairment charge of around $850 million for Bulyanhulu. On an adjusted basis, earnings came in at $44 million for the year, and that was adjusted for the gain on the royalty plus the impairment charge on Nyanzaga that we've recorded in the first half of the year.

Then if we look at -- capital expenditure was $93 million for the year, and that was 38% lower than 2017. And again, that was mainly through the changes at Bulyanhulu that has seen significant capital expenditure in the past.

If we look at the balance sheet, so we've seen a good improvement on the balance sheet. We still got concentrate of -- if we sell it today, that's around $240 million sitting in stockpiles. And we've got a VAT receivable of $179 million. But putting that aside, we were able to add around $50 million in cash to the balance sheet over the year. And on a net cash basis, that was $78 million.

If you look at all-in sustaining cost for the year, we saw a good reduction throughout the year. We were at $976 an ounce in Q1, and that moved to $857 an ounce in Q4. That was -- that -- we're expecting that to continue into 2019 with guidance around $860 to $920 an ounce. We are still incurring a fair bit of sustaining capital at North Mara with some of the equipment that we're still investing in. And just to keep in mind, we got around $50 an ounce noncash charge on the stockpile movement in that number.

So we were able to achieve this by looking at optimizing the maintenance programs. We're starting to see that coming down at North Mara, but that program will still continue into the -- up to the second half of this year. And I think that could make a big difference in North Mara's cost profile.

And then we also continue on the supply chain, focusing on renegotiating contracts and getting as many as possible of our commodities on forward price agreements to lock in the price on a medium-term basis.

And then we've seen corporate overhead reductions and G&A savings as well, and that's mainly through the reduction of people and overheads.

And then just from a cash flow point of view, we looked at our exploration portfolio and has done a review. And we've -- we did look at Nyanzaga and the Sarama Tankoro deposit, and we decided to sell those to -- that's in the process of getting closed, both of those transactions.

So if we look at just -- as I said earlier, we moved the net -- sorry, the cash balance from $81 million to $130 million. So with that, we generated $116 million from operations. So strong performances by North Mara and Buzwagi. That was partially offset by the Bulyanhulu reduced operations that -- and so are incurring or burning around $1 million to $1.5 million a month now.

And then we've paid $42 million of corporate tax at North Mara that was offset against the VAT receivable. And then the net of what we'd have in offset was around $12 million of the $60 million outflow in working capital.

In addition to that, we sold the royalty for $45 million inflow, and then we spent $13 million on exploration at -- basically split between Kenya and the West Africa properties.

And then expansion capital, $9 million of that was drilling at North Mara and the rest was a study cost at Bulyanhulu.

And then we repaid $28 million of debt during the year.

So if you look overall, our focus was in stabilizing the business from the end of 2017. So with that, we had to look at the liquidity and the balance sheet. So we started on our net cash point of view, $10 million at the beginning of the year. We then sold the royalty -- a noncore royalty for $45 million. And then if you look at the trend quarter-on-quarter then, we burned $5 million in Q1 and then we turned it around from Q2 -- in all 3 quarters and we generated around $38 million in that period. And that -- and the plan is to continue with that as per our guidance and even with the high gold price that there we can definitely sustain that level of cash flow generation, and we'll look to optimize that even further.

Okay, thanks. Over to Peter just on exploration.

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Peter Geleta, Acacia Mining plc - Interim CEO & Executive Director [6]

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Thanks, Jaco.

So we remain committed to continuing to invest in the exploration portfolio and grow our business in Africa. It would have been easier at this stage just to stop all exploration, but we see very much exploration as part of our growth strategy. Once the situation is normalized, we've made sure we've done a -- as Jaco said, we've done a review of our exploration portfolio across all the countries and have made a few decisions, which I'll talk about now. But essentially, we've got some really, really good ground in West Africa that we need to hold on to, and we're doing enough to consolidate and hold onto that and wait for things to change.

So in 2018, we spent $13 million on discovery in -- outside Tanzania. In light of our cash position, we have cut that back to 10 million for this year, which I think is prudent.

In terms of our brownfields exploration in 2018, this was focused exclusively at North Mara and focused on underground diamond drilling at Gokona. And obviously, that will continue.

In 2018, we commenced the review of the greenfield exploration portfolio, and we took a decision to divest or explore the possibility of bringing in a partner for our license in West Kenya. And we then plan to conduct a further scoping study in 2019. In fact, that scoping study in Kenya is in process, and we hope to have those results by end of Quarter 1. And essentially, it's looking at the 1.2 million-ounce resource that we've got in Liranda and looking at how we can potentially get the most value out of that in terms of extraction, looking at various mining methods. The scoping study we conducted previously was looking at mechanized mining, and we're looking at it more on a conventional-based mining now.

As Jaco said, we took a decision to exit the Nyanzaga project for $10 million and a $15 million capped royalty. We're waiting for final approvals in-country for that to be realized.

We also took a decision to divest our South Houndé joint venture with our partner, Sarama, and we've signed a binding nonconditional -- or conditional agreement to this effect. And this fits our strategy of divesting noncore assets.

Looking ahead in 2019, drilling in Burkina Faso will be a priority for us. We have 3 active JVs and results so far point to the Central Houndé ground as having the best potential to deliver mine.

In Mali, work in 2019 will focus on the Gourbassi extension and will consist of infill soil sampling and geophysical survey with drilling planned for late Quarter 2.

So really, just to reemphasize our outlook for 2019, we expect production for the year to be in the range of 500,000 to 550,000 ounces at an all-in sustaining cost of $860 to $920 per ounce sold and cash costs of $665 to $710. The 2019 plan assumes a continuation of the current operating environment with a 10% increase in production at North Mara to approximately 370,000 ounces, Buly remaining in reduced operations for the year and Buzwagi continuing to process stockpiles.

We expect our capital expenditure in 2019 to total between $75 million and $85 million. This includes capitalized development costs and sustaining capital primarily at North Mara. CapEx at North Mara is expected be notably lower than 2018 due to the lower stripping ratio at Rama.

As I said, we continue to invest in exploration across Africa, mostly the expansion drilling at Gokona and drilling at Rama. And we're focusing on West Africa drilling following a portfolio review and scoping study in Kenya.

So in conclusion, we stabilized the business in 2018 after a very, very traumatic 2017 with the turn of events. And I think we've managed to prove even under very tough operating conditions we managed to pull through and achieve our results in 2018 and get substantially ahead of our guidance. We need to build on that.

Our strong cost discipline needs to continue and -- so that we can get below our all-in sustaining cost guidance range.

And particularly, I think our success for 2018 was turning the cash generation back to a positive situation in Quarter 2 and we've maintained that run rate for Quarter 3 and Quarter 4, and that needs to continue.

So looking ahead for 2019, our priority remains on optimizing our performance at all our sites, keeping our people motivated and controlling the things that we can control. And to that end, it's really -- we need to ensure that we achieve our targets and, importantly, support Barrick in hopefully getting a solution that we can consider as Acacia in 2019. At this point in time, nobody's winning. It is -- all stakeholders are losing with the current situation that's happened to Acacia in-country, but I think we are getting to that point now that all stakeholders realize that they're all losing and that a negotiated solution is the best option going forward.

So that's really the presentation. So we'll open up for any questions.

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Questions and Answers

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James Andrew Keith Bell, RBC Capital Markets, LLC, Research Division - Analyst [1]

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It's James Bell, RBC Capital Markets. First question is really around -- we've seen a change in management, obviously, at Barrick, and Mark Bristow and his team have become involved in negotiations. I just wondered within the frames of what you can comment on, have you noticed any change in terms of Barrick's attitude towards the negotiations or the Tanzanians' willingness to engage and, yes, the engagement of Barrick with you as Acacia?

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Peter Geleta, Acacia Mining plc - Interim CEO & Executive Director [2]

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I mean I've come out publicly here, I think, last year when the announcement was made that I was pretty positive about the change in the leadership after the Randgold-Barrick announcement simply because the new Barrick has leadership that has experience in Africa. So that's got to be a positive in terms of unlocking this dispute. Since the changes that have taken place, they have announced [Vellovian Corp] heading up the negotiations. There has been engagement with the Acacia team on a regular basis. I know that engagement continues. And all signs are -- that we're getting back from Barrick is that negotiations are proceeding in the right direction. I think one of the frustrations for us last year as Acacia was it appeared to us that after June and after Barrick announced that there would be no in-period being put to the negotiations, things seem to have reached a bit of a stalemate. And once the Barrick-Randgold change had been announced and the new Barrick went in and started negotiating, there seems to -- the momentum is back again and it looks a lot more positive. Even from an operating environment perspective as difficult as it is, things seem to be a lot more normal now at the moment given the ongoing discussions. I think the problem is when you have a dispute of this nature where it's so highly sensitive and emotional, if you just stop talks, then it has a real negative impact in-country. But what we've seen with the ongoing discussions is a sort of a -- of positiveness and optimism. So it - from our perspective, it's much better.

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James Andrew Keith Bell, RBC Capital Markets, LLC, Research Division - Analyst [3]

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Okay. And then just one follow-up on that and maybe one on the operations. If -- you've given us a date for when potentially an arbitration hearing would occur. If Barrick were to ask you to delay that for any reason due to the progress in the negotiations, is that something you would consider?

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Peter Geleta, Acacia Mining plc - Interim CEO & Executive Director [4]

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I mean, we would always consider depending on obviously what is presented to us. And that needs to be presented to the independent committee of Acacia for consideration. So when we started with and proceeded with international arbitration, I think it was always with the intention that we wanted to open up a route for dialogue. I don't think anybody sees as their appetite to actually end up in court fighting over things. We'd much rather sort things out through dialogue. So if Barrick are to present us with something, obviously our independent committee would have to look at it objectively, keeping in mind we need to protect our rights and our shareholders' rights.

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James Andrew Keith Bell, RBC Capital Markets, LLC, Research Division - Analyst [5]

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Okay. And then just on Bulyanhulu in terms of the restart, a lot of that higher-grade material in the Deep West is quite far from the shaft infrastructure. I just wondered if there was any capital in that budget put in place, any haulage? Or is there additional underground conveyors or anything to try and cope with that issue?

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Peter Geleta, Acacia Mining plc - Interim CEO & Executive Director [6]

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There is plans to obviously buy new -- some new equipment, long-lead items. As part of the study, there was also a study in the offset on looking at conveyors versus trucking. That is very much part of that final refinement that's taking place in this last quarter. So -- but all indications are what we see in terms of the number of trucks and the actual tonnage, and what we need to get out of the shaft is no problem at this stage. We're looking at 1 million to 1.1 million tonnes to get out of -- to get through the plant, and that's very much in terms of what we've been able to achieve in the past.

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Jaco Maritz, Acacia Mining plc - CFO [7]

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To maybe add to that, there was a trade-off done to a sub-vertical shaft as well, and it's not like that work will go away. So as we do more drilling in the Deep West, that trade-off will continue because the more material you add, the more chances of that being more economical.

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Michael Stoner, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [8]

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Michael Stoner from Berenberg. A couple of questions on North Mara to start. So the sustaining CapEx, you mentioned you deferred some from 2018 into 2019. Can you give us some indication of the quantum there? And is there then a bump of some in '19 into '20?

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Jaco Maritz, Acacia Mining plc - CFO [9]

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So yes, you'll always see that sort of rollover going to the next year. That's just naturally how it goes. We're really focusing on the production-critical ones that we don't have deferral on those. But we're looking around the $35 million -- sort of $35 million sustaining capital for the year.

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Michael Stoner, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [10]

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Okay. And then at Gokona, you mentioned you're expecting positive grade reconciliation. Is that kind of similar to what we saw a few years back with the top cut not capturing the really high-grade zones? Or is there something else going on there?

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Peter Geleta, Acacia Mining plc - Interim CEO & Executive Director [11]

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Yes, I mean, we have consistently had higher grades than the model. We've updated the model now, and we're still expecting a positive reconciliation.

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Jaco Maritz, Acacia Mining plc - CFO [12]

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I mean, we're mining more from the West as well. It comes at a bit of a lower grade. But on a -- we're still around the 7 grams a tonne that we expect for this year.

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Michael Stoner, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [13]

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Okay. And then just on Bulyanhulu, how much of the cost saving is just due to kind of consolidating down the mining areas? So you are ventilating less -- fewer people underground. And how much of that is kind of that infrastructure change that you're talking about?

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Peter Geleta, Acacia Mining plc - Interim CEO & Executive Director [14]

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I think it's a combination of a lot of things. I mean, if you think about Buly, Buly was always seen as a -- because of its grade and the size of its ore body, I think it was always that volume was pushed. People spoke about getting Buly up to 500,000 ounces, and that was sort of the primary driver. And that led to high tonnage coming from various areas in the mine just to get that tonnage up, and it wasn't necessarily the most economical of tonnes. But that also led to obviously more equipment because you're mining all over the place. It -- there were different mining methods, which led to obviously more equipment, more maintenance costs. And it was a very labor-intensive mine. And obviously, as you say, the services that you need to serve all those areas, there will be ventilation base for -- but now, focusing all your production in 1 area obviously reduces your cost base substantially.

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Jaco Maritz, Acacia Mining plc - CFO [15]

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I think the biggest is the development cost. So I think historically, we were like running at $200 an ounce on development. So with less areas that you do, I'll expect that to come down significantly.

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Alan Henri Spence, Jefferies LLC, Research Division - Equity Analyst [16]

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Alan Spence from Jefferies. I had 2 questions. First on reserves. I believe the gold price used was actually increased this year. I'm just wondering, if it was on an apples-on-apples comparison, what that decrease would have been. And on still getting more for the resources ex Bulyanhulu, if you think the 2019 drill program will be sufficient to bring a lot of that lost volume back into resources.

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Jaco Maritz, Acacia Mining plc - CFO [17]

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So just on gold price, so when we did the cut-off price, so there was a $100 an ounce impact or increase in price. But with some of the elements on -- we're using and just our latest estimate on some of the framework sort of discussions with Barrick, we -- some of that cost came in and has offset some of it just as a base estimate, so we'll update it as we go. So there could be opportunity there. But that's our best estimate at this stage. So from a cost versus price, not on a net basis, not much of an impact.

I think North Mara, the drilling program there, if we were in normal situation, would have spent more on drilling. There's definitely a lot of opportunity. I think the key focus for us now is the 2 years in front of us to do sufficient infill but then also look at that just on the east below -- the deeper east just below the golden banana, that's where we see the good results if that's extending. So if that comes through, obviously that can have a positive impact. But we'll have to see as we go through. We're very optimistic.

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Alan Henri Spence, Jefferies LLC, Research Division - Equity Analyst [18]

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And if you could please just remind me on the potential end to the concentrate export ban. Assuming something is put forth to your board, what is the time line, then the shareholders would be able to vote on it? How long does that take?

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Peter Geleta, Acacia Mining plc - Interim CEO & Executive Director [19]

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Maybe Charlie, you can answer that question in terms of if it then -- if there was a proposal put to Acacia and it was put forward for a shareholder vote, the time line. I'm not sure.

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Charlie Ritchie, Acacia Mining plc - Head of Legal & Compliance and Company Secretary [20]

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Realistically, probably 2 to 3 months before you get through the process of assessing, evaluating the proposal. Putting something together, making a recommendation or otherwise to shareholders and getting it in front of shareholders, I mean, 3 months would be a quick process in that context.

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Hunter Adam Hillcoat, Investec Bank plc, Research Division - Mining Analyst [21]

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It's Hunter Hillcoat from Investec. Just looking at your North Mara slide, you've obviously got the unclassified mineralization, and you wrapped some infrastructure around that already. And so you're looking at it a lot more carefully than if it was simply unmineralized mineralization -- unclassified, I should say. Given the drill results you've got thus far, the progress you expect to announce by the middle of the year, are you comfortable that there's the time for an easy transition into sustained production above the 300,000 ounces per annum?

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Peter Geleta, Acacia Mining plc - Interim CEO & Executive Director [22]

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Yes, I mean, I think all indications are -- I think we've taken a, I wouldn't say, a conservative approach to reserves and resources, but I think we've taken a very considered approach. We are looking at drill spacing. We're pretty confident that there's extension there. But it's really about doing the drilling and converting it. But all indications are that it's the...

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Jaco Maritz, Acacia Mining plc - CFO [23]

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Yes, I mean, when we went in the first time, the plan was to mine it. Well, the feasibility was 3 years. So I think the east was set up. There are some constraints on the east that we're working through to try and get the sufficient development and all of that. But the western side was set up for a much bigger mine. So that gives us more flexibility. But there will definitely be some capital. And the more we can drill to understand it, then we can make decisions on some of the infrastructure. But currently, it's just basically development down in the ventilation and the CAF, which is quite a manual process. So if it expands, you can always look at a different way of filling the stopes.

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Peter Geleta, Acacia Mining plc - Interim CEO & Executive Director [24]

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But all things being equal, if the situation was normal and had been normal in 2018, we would have probably done -- spent a hell of a lot more money on drilling, just we've had to be pretty prudent with our [total] spend.

Anything on the lines? Is there anyone -- any calls on the line or...

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Operator [25]

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We have 2 questions on the line. The first comes from Ian Rossouw from Barclays.

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Izak Jan Rossouw, Barclays Bank PLC, Research Division - Director [26]

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Just on the Bulyanhulu optimization study. And Jaco, you were mentioning the development cost should be a lot lower than the historical $200. I was wondering if you maybe can give us just a better idea of what that range could be. And then maybe the same for sustaining CapEx, your expectations going forward.

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Jaco Maritz, Acacia Mining plc - CFO [27]

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Yes, I think on the development, it's sort of -- I would say is sort of $120 an ounce sort of mark. So almost half, sort of 80% of -- $80 an ounce reduction, that's sort of the number we're looking at. On sustaining, so the way we spend, we're spending our -- if you look at Buly, it was always a lot of sustaining capital spend throughout. So with the plan, we're going to try and spend those up front. So you're going to have -- that you can start seeing those benefits, operational efficiencies early in the process. So I think we'll see a lower level. I think towards the end of the quarter, we can give you more specific numbers. But that $100 -- or $90 million to $110 million should cut -- should cover a lot of the critical bigger items up front.

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Izak Jan Rossouw, Barclays Bank PLC, Research Division - Director [28]

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Okay. And just on -- within those CapEx figures you've provided, does that include sort of working capital build as well?

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Jaco Maritz, Acacia Mining plc - CFO [29]

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Yes. So we have that, but you have an offset on your accounts payable more or less to what goes in. So the net impact's not that significant.

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Operator [30]

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We have another question of the line from Tanya Jakusconek from Scotiabank.

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Tanya M. Jakusconek, Scotiabank Global Banking and Markets, Research Division - Analyst [31]

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Just wanted to ask a little bit on Bulyanhulu again. Just trying to understand what mining method you're going to be utilizing in the mine.

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Peter Geleta, Acacia Mining plc - Interim CEO & Executive Director [32]

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We've obviously -- in the study, there's been a lot of trying to understand and looking at various mining methods. And we're really -- we're looking at mechanized. There will be a little bit of CCF that will be done later on in the life of mine. But the majority of the mine will be long haul...

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Charlie Ritchie, Acacia Mining plc - Head of Legal & Compliance and Company Secretary [33]

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Underhand.

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Peter Geleta, Acacia Mining plc - Interim CEO & Executive Director [34]

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Long haul -- sorry?

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Charlie Ritchie, Acacia Mining plc - Head of Legal & Compliance and Company Secretary [35]

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Underhand.

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Peter Geleta, Acacia Mining plc - Interim CEO & Executive Director [36]

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Long-haul underhand. That will be the focus. We've gone through quite a study. People went through quite a process to land on the right method.

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Jaco Maritz, Acacia Mining plc - CFO [37]

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Yes, we had -- we cut it down to 2, and then -- in a shrinkage case, which is sort of de-risking it a bit. So there's more work to be done on the shrinkage case. And potentially, we can look at a test area to see whether we can get better efficiencies there. But we can provide some of the more detail towards the end of the quarter.

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Tanya M. Jakusconek, Scotiabank Global Banking and Markets, Research Division - Analyst [38]

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Okay. So in terms of trying to understand, your all-in sustaining cost is quite low, I appreciate part of the reduction is the lower development costs and lower sustaining capital, which I think the mine was running at about $90 million per annum. Would that be, like, partly cut in half, that sustaining capital? And then I'm just trying to understand, the mining cost per tonne was quite high on the mining side, anywhere between sort of like $150, $180 per tonne. What are we looking there -- in this, and product that -- yes.

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Jaco Maritz, Acacia Mining plc - CFO [39]

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So -- yes. So I think your capital numbers is fair and reasonable. On the direct mining cost, we were running around the -- excluding the capital, it was $100 a tonne in 2016 or $90 to $100. So that's expected to be around the sort of $80 to $85 a tonne direct mining cost. And I think a big part of the unit cost is the grade as well given you've got a lower increase in grade.

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Tanya M. Jakusconek, Scotiabank Global Banking and Markets, Research Division - Analyst [40]

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Yes. Yes. Okay, no, I appreciate that. So $80 to $85 a tonne for mining and then processing in that sort of $20 a tonne. And then do we get the G&A down? Because I'm just trying to understand the size of the workforce. What would that be under this new mine plan? Just trying to get an understanding on the cost per tonne.

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Jaco Maritz, Acacia Mining plc - CFO [41]

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Okay, Tanya. So we -- the processing would be around the $25 to $30 a tonne. Because we got -- the current assumption is 1 million to 1.1 million tonnes a year, which is lower than we expected before given we're now going to focus on better quality materials. So -- and then the G&A would at least come down sort of the 15% to 20% from before.

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Peter Geleta, Acacia Mining plc - Interim CEO & Executive Director [42]

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But really, I mean, Tanya, we're going to be doing all the cost refinement during this quarter to come up with the specifics. So those numbers are pretty preliminary at this stage.

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Tanya M. Jakusconek, Scotiabank Global Banking and Markets, Research Division - Analyst [43]

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Yes, I was just trying to appreciate how -- where we were getting the lower all-in sustaining from a mining perspective and obviously from a capital perspective. So that's very helpful. Maybe just 2 other questions, if I could, just on the corporate G&A. You gave us exploration about $10 million. Just wondering, with all the changes and reductions that's happened, what is a sustainable corporate G&A run rate for you now?

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Jaco Maritz, Acacia Mining plc - CFO [44]

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I'd say it's around the sort of $18 million to $20 million level. And that excludes the legal dispute cost that we sort of given guidance around the $18 million to $22 million. But that's on the basis that everything continues, so we'll assess it as we go through the year and then just update.

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Tanya M. Jakusconek, Scotiabank Global Banking and Markets, Research Division - Analyst [45]

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Okay. And then maybe just on Barrick and the meetings that -- with Willem coming in and moving those forward and we are all looking forward to having this resolved. But maybe you can kind of give us some idea because I think previously, Barrick was meeting once a month or so to discuss it. How many meetings have we had?

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Peter Geleta, Acacia Mining plc - Interim CEO & Executive Director [46]

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It's -- Tanya, we're not involved in those discussions, as you know. We're not sure when people go in and having the discussions. But all indications are that the Barrick guys are seeing this as a priority, and all indications are that there's regular meetings taking place. It appears to be more frequently than we've seen in the past.

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Operator [47]

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We have no further questions on the line.

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Peter Geleta, Acacia Mining plc - Interim CEO & Executive Director [48]

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Okay.

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Jaco Maritz, Acacia Mining plc - CFO [49]

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Okay. Thank you, everybody.

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Peter Geleta, Acacia Mining plc - Interim CEO & Executive Director [50]

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Well, thank you very much, everybody.