West African Resources Limited (WAF) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. The time for commencement of the meeting has now passed, and I advise that a quorum is present. I therefore call the meeting to order and declare the meeting open for business. My name is Richard Hyde. And in accordance with the constitution of the company, as Chairman of the Board of Directors of West African Resources Limited, I will occupy the Chair for this meeting. In opening the meeting, I'd like to welcome you all, and thank you for attending. The purpose of today's meeting is to deal with the formal business as set out in the notice of meeting. This year's meeting is being conducted with the assistance of an audio web link and a phone link as we follow the need for social distancing. It is crucial to slow the effect of COVID-19. We are disappointed to not be meeting with shareholders personally, but I look forward to meeting shareholders in person next year. The opportunity to ask questions has been made available to shareholders via e-mail. And those wishing to verbally interact with the Boards, and you can do so via the phone link. For any unanswered questions, which are not substantially covered in today's meeting, we will endeavor to answer them in due course via e-mail. Before the formal beginning of the meeting, I would like to introduce you to my fellow directors. For those of you who are not familiar with the other members of the Board, I would like to introduce them to you. Firstly, Mr. Lyndon Hopkins, he's Executive Director and Chief Operating Officer; Mr. Rod Leonard, who is a non-Executive Director; Mr. Nigel Spicer, who is a non-Executive Director; Mr. Simon Storm is a non-Executive Director and Company Secretary, and he will be retiring at the end of this meeting; and lastly, Mr. Mark Connelly who is a non-Executive Director and will also be retiring at the end of this meeting. I'll take this point to thank both Simon and Mark for their commitment to the company over a number of years and helping with the process, guiding us through to becoming a significant gold producer in West Africa. I'd also like to mention our newly appointed directors: Ms. Libby Mounsey and Mr. Stewart Findlay who were formally appointed as non-executive directors early today, and they're also in attendance. I'd also like to welcome Mr. Padraig O'Donoghue, our CFO; and Mr. Matt Wilcox, our Chief Development Officer. The auditors, HLB Mann Judd, are also in attendance and represented by Mr. Brad McVeigh. Welcome, Brad. I advise 156 valid proxies have been received, representing a total of 434,134,795 shares. The proxy votes are to be cast in the manner for each of the resolutions as shown on the screen. So I advise that the notice of meeting and explanatory memorandum for the Annual General Meeting were mailed to all registered members in time to provide sufficient notice for the meeting. If there are no objections and to expedite proceedings, I propose that the notice of Annual General Meeting is taken as read. Are there any objections? In the absence of objections, we will take the notice of Annual General Meeting as read. The previous Annual General Meeting was held on the 31st of May 2019. I now propose that the minutes of this meeting, which have been signed, be taken as read, signed as a correct record. Are there any objections? No? In the absence of objections, we will take the minutes of the previous Annual General Meeting as read. Thank you. Ladies and gentlemen, let me explain how the meeting is to be conducted. Questions or discussions should be restricted to matters relating directly to the resolutions put before you. The voting, I remind those present or in line that only shareholders, proxy holders or corporate representatives may speak to the motions or vote. I ask that you direct all questions via the dial-in facility and state your name, or in the case of a proxy representative, the name of the shareholder you represent. In relation to the items on the agenda, voting on each of the resolutions will be by way of poll. For this purpose, I appoint Ms. Erica Besma to act as returning officer. I will also appoint a representative from HLB Mann Judd, the company's auditors, to act as scrutineer. If you registered for a poll form, in accordance with the instructions lodged on the 21st of May 2020 on the ASX, a separate personalized poll form must be completed for each shareholder. Voting for multiple shareholders cannot be combined into 1 form. We will vote on each of the resolution set out on the voting card or poll form in the order in which they appear. Each resolution will be read, and shareholders will have an opportunity to ask questions in relation to the resolution being considered if they have not already submitted their questions in accordance with the instructions in the Notice of Meeting or as specified in the ASX announcement on the 21st of May 2020. When the discussion on each resolution is completed, the resolution will be put, and I'll ask shareholders to vote for or against the relevant resolution by marking their voting cards accordingly. We will then move to the next resolution. When voting on all of the resolutions is complete in, the personalized poll form must be completed and returned to the company on the e-mail address provided within half an hour after the meeting closes today. When the voting has been collated, the results will be declared on each resolution and released on the announcements platform of the ASX. I will now commence with the remaining business as set out in the notice to this meeting. One, annual accounts for the financial year ended 31st of December 2019. It's with pleasure that I table the 2019 annual report, including the director's report, statements of financial position, comprehensive income, changes in equity and cash flow and the auditor's report. I also wish to state for the record that the annual accounts were dispatched or made available to shareholders within the statutory time for shareholders to review the documents in advance of today's meeting. Are there any questions on these accounts? Or are there questions for the auditors relating to the conduct of their audit? No? If there are no questions in relation to the annual accounts, I will now proceed on the basis that the meeting has received the accounts and move on to the resolutions to be put before shareholders today. With respect to each resolution, I refer shareholders to the relevant section of the explanatory memorandum attached to the Notice of Meeting. I will not provide any further commentary on each resolution. However, if any shareholder requires further explanation, please do not hesitate to ask at the time we consider each resolution. Resolution 1 is the adoption of the remuneration report. The proposed nonbinding resolution is that for the purposes of Section 250R(2) of the Corporations Act and for all other purposes, the company adopts remuneration report as set out in the Director's Report and the annual report for the financial year ended 31st of December 2019. The proxies that we have received on this resolution are shown on the screen. Where reported as proxy, I, as the Chairman, will vote undirected proxies in favor of this resolution. Do any shareholders wish to ask any questions or make any comments on the resolution? I confirm we have received no written questions on this resolution. I confirm this item will be resolved by poll in accordance with the procedures I previously outlined. Please now fill in your voting card. [Voting]

Resolution 2, election of Mr. Rod Leonard as a director. The proposed ordinary resolution is that for the purpose of clause 12.17 of the company's constitution, ASX Listing Rule 14.4 and for all other purposes, Mr. Rod Lennar, a director who was appointed as an additional director on the 6th of September 2019, retires, and being eligible, is elected as a director. The proxies that we have received in this resolution are shown on the screen. Do any shareholders wish to ask any questions or make any comments on the resolution? I can confirm, we have received no written questions on this resolution. I confirm this item will be resolved by poll in accordance with the procedures I've previously outlined. Please now fill in your voting card. [Voting]

Resolution 3, election of Mr. Nigel Spicer as director. The proposed ordinary resolution is that for the purpose of clause 12.17 of the company's constitution, ASX Listing Rule 14.4 and for all other purposes, Mr. Nigel Spicer, a director who was appointed as an additional director on the 6th of September 2019, retires, and being eligible, is elected as a director. The proxies that we've received on this resolution are shown on the screen. Do any shareholders wish to ask any questions or make any comments on the resolution? I can confirm that we have received no written questions on this resolution. I confirm this item, which will be resolved by a poll in accordance with the procedures I previously outlined. Please now fill in your voting card. [Voting]

Resolution for election of Mr. Lyndon Hopkins as a director. The proposed ordinary resolution is that for the purpose of clause 12.17 of the company's constitution, ASX Listing Rule 14.4 and for all other purposes, Mr. Lyndon Hopkins, a director who was appointed as an additional director on the 6th of September 2019, retires, and being eligible, is elected as a director. The proxies that we have received in this resolution are shown on the screen. Do any shareholders wish to ask any questions or make any comments on the resolution? I confirm we have received no written questions on this resolution. I confirm this item will be resolved by a poll in accordance with the procedures I previously outlined. Please now fill in your voting card. [Voting]

Resolution 5, issue of options in lieu of director fees for Mr. Rod Leonard. The proposed ordinary resolution is that for the purposes of Listing Rule 10.14, and for other purposes, approval is given for the company to issue options to Director Rod Leonard or his nominee under the company's incentive option and performance rights plan in lieu of directors fees to December 31, 2022, as detailed in the explanatory memorandum. The proxies that we have received on this resolution are shown on the screen. Do any shareholders wish to ask any questions or make any comments on the resolution? I confirm we have received no written questions on this resolution. I confirm this item will be resolved by a poll in accordance with the procedures I previously outlined. Please now fill in your voting card. [Voting]

Resolution 6, issue of options in lieu of director's fees for Mr. Nigel Spicer. The proposed ordinary resolution is that for purposes of Listing Rule 10.14, and for all other purposes, approval is given for the company to issue options to Director Nigel Spicer or his nominee under the company's incentive option and performance right plan in lieu of director's fees to December 31, 2022, as detailed in the explanatory memorandum. The proxies that we have received on this resolution are shown on the screen. Do any shareholders wish to ask any questions or make any comments on the resolution? I confirm we have received no written questions on this resolution. I confirm this item will be resolved by a poll in accordance with the procedures I previously outlined. Please now fill in your voting card. [Voting]

Resolution 7, issue of options in lieu of director's fees for Mr. Simon Storm. The proposed ordinary resolution is that for purposes of Listing Rule 10.14, and for all other purposes, approval is given for the company to issue options to Director Simon Storm or his nominee under the company's incentive option and performance right plan in lieu of director's fees to December 31, 2022, as detailed in the explanatory memorandum. The proxies that we have received on this resolution are shown on the screen. Do any shareholders wish to ask any questions or make any comments on the resolution? I can confirm we have received no written questions on this resolution. I confirm this item will be resolved by poll in accordance with the procedures I previously outlined. Please now fill in your voting card. [Voting]

Resolution 8, issue of options in lieu of director's fees for Mr. Mark Connelly. The proposed ordinary resolution is that for purposes of Listing Rule 10.14 and for all other purposes, approval is given for the company to issue options to Director Mark Connelly or his nominee under the company's incentive option and performance rights plan in lieu of director's fees to December 31, 2022, as detailed in the explanatory memorandum. The proxies that we have received on this resolution are shown on the screen. Do any shareholders wish to ask any questions or make any comments on the resolution? I confirm we have received no written questions on this resolution. I confirm this item will be resolved by a poll in accordance with the procedures I previously outlined. Please now fill in your voting card. [Voting]

Okay. Resolution 9, issue options to Director Mr. Richard Hyde. The proposed ordinary resolution is that for purposes of Listing Rules 10.14 and for all other purposes, approval is given by the company to issue 1,339,711 options to Richard Hyde, the director of the company or his nominee, under the company's incentive option and performance rights plan as detailed in the explanatory memorandum. The proxies that we received in this resolution are shown on the screen. Do any shareholders wish to ask any questions or make any comments on the resolution? I confirm we have received no written questions on this resolution. I confirm the item will be resolved by a poll in accordance with the procedures I previously outlined. Please now fill in your voting card. [Voting]

Resolution 10, issue of options to Director Mr. Lyndon Hopkins. The proposed ordinary resolution is that for the purposes of ASX Listing Rules 10.14 and for all other purposes, approval is given for the company to issue 861,243 options to Mr. Lyndon Hopkins, a director of the company or his nominee under the company's incentive option and performance rights plan as detailed in the explanatory memorandum. The proxies that we have received on this resolution are shown on the screen. Do any shareholders wish to ask any questions or make any comments on the resolution? I confirm we have received no written questions on this resolution. I confirm this item will be resolved by a poll in accordance with the procedures I have previously outlined. Please now fill in your voting cards. [Voting]

Resolution 11, increase in non-executive director remuneration. The proposed ordinary resolution is and in accordance with ASX Listing Rule 10.17 and clause 14 of the company's constitution, the total aggregate annual remuneration payable to non-executive directors of the company be increased by $400,000 per annum, from $500,000 per annum to a maximum of $900,000 per annum. The proxies that we have received on this resolution are shown on screen. Do any shareholders wish to ask any questions or make any comments on the resolution? I confirm we have received no written questions on this resolution. I confirm this item will be resolved by a poll in accordance with the procedures I previously outlined. Please now fill in your voting card. [Voting]

Resolution 12, approval of potential entitlements to Mr. Richard Hyde, Chief Executive Officer and Executive Chairman. The proposed ordinary resolution is that for purposes of sections 200B and 200E of the Corporations Act, Listing Rule 10.19 and for all other purposes, shareholders approve the entitlements described in the explanatory memorandum accompanying this notice, which may become payable to the company's Chief Executive Officer and Executive Chairman, Mr. Richard Hyde, under these terms of his executive service agreement with the company. The proxies that we have received on this resolution are shown on the screen. Do any shareholders wish to ask any questions or make any comments on the resolution? I confirm we have received no written questions on this resolution. I confirm this item will be resolved by a poll in accordance with the procedures I previously outlined. Please now fill in your voting card. [Voting]

Resolution 13, approval of potential entitlements to Mr. Lyndon Hopkins, Chief Operating Officer. The proposed ordinary resolution is that for purposes of sections 200B and 200E of the Corporations Act, Listing Rule 10.19, and for all other purposes, shareholders approve the entitlements described in the explanatory memorandum accompanying this notice, which may become payable to the company's Chief Operating Officer and Executive Director, Mr. Lyndon Hopkins, under the terms of his executive service agreement with the company. The proxies that we have received with this -- on this resolution are shown on screen. Do any shareholders wish to ask any questions or make any comments on this resolution? I can confirm we have received no written questions on this resolution. I confirm this item will be resolved by a poll in accordance with the procedures I previously outlined. Please now fill in your voting card. [Voting]

Resolution 14, approval of potential entitlements to Mr. Padraig O'Donoghue, Chief Financial Officer. The proposed ordinary resolution is that for purposes of sections 200B and 200E of the Corporations Act, Listing Rule 10.19 and for all other purposes, shareholders approve the entitlements described in the explanatory memorandum accompanying this notice, which may become payable to the company's Chief Financial Officer, Mr. Padraig O'Donoghue, under the terms of his executive service agreement with the company. The proxies that we have received on this resolution are shown on the screen. Do any shareholders wish to ask any questions or make any comments on the resolution? I confirm we have received no written questions on this resolution. I confirm this item will be resolved by a poll in accordance with the procedures I previously outlined. Please now fill in your voting card. [Voting]

Resolution 15, approval of potential entitlement to Mr. Matthew Wilcox, Chief Development Officer. Proposed ordinary resolution is that for purposes of sections 200B and 200E of the Corporations Act, Listing Rule 10.19 and for all other purposes, shareholders approve the entitlements described in the explanatory memorandum accompanying this notice, which may become payable under company's -- may become payable to the company's Chief Development Officer, Mr. Matthew Wilcox, under the terms of his executive service agreement with the company. The proxies that we've received in this resolution are shown on screen. Do any shareholders wish to ask any questions or make any further -- any comments on the resolution? I confirm we have received no written questions on this resolution. I confirm this item will be resolved by a poll in accordance with the procedures I previously outlined. Please now fill in your voting card. [Voting]

The results of the poll will be announced later on the ASX. I wish to move to close the meeting now that there being no further business lawfully brought forward to the meeting. I would like to thank all shareholders and visitors for their attendance, virtually or otherwise and formally declare the meeting closed. Look, what I'll do now is I'll run through a quick presentation. And then we do have a number of questions that have been asked and anyone who's online, you're encouraged to put any questions to the team who's here at West HQ. Obviously, the last -- since the last meeting, it's been a very busy period for the company. We've delivered on our promises to all shareholders. I -- you can see the screen there, there's just some forward-looking statements, so I'd encourage shareholders to read that in more detail if you got any concerns. But just moving on to the next slide. We are now West Africa's and the ASX's latest gold producer, pouring gold earlier this year in March, some 10 weeks ahead of schedule and about $20 million under budget. We're still in ramp-up phase. So currently, we're processing oxide open pit ore, and we're processing development ore from underground when we get parcels of it. And we're currently on track to drop that first stope in September quarter of 2020, so not far away. And that's when we should really see the grade of feed to the plant pick up and see our production increase. One of the things I have been -- because we were so early with the build, I've been just advising investors to expect a target of 300,000 ounces from July 1, which was in our original feasibility study, middle of 2019. And that first full year production is expected to be around 300,000 ounces at around USD 500 an ounce. We're targeting 5 years of production, over 200,000 ounces at less than $600 an ounce, and all of that production is unhedged. So we've got full exposure to the current gold price. And when we did our study, we ran our open pits at USD 1,200 an ounce, and we ran the economics of USD 1,300 an ounce. And obviously, the numbers were compelling at USD 1,300 an ounce, and they're even more compelling at USD 1,700 an ounce. We've got about 3 million ounces in resources that's growing. One of the things we want to do over the next 12 months is get back into drilling and adding more resources, something we haven't done for a few years, given we've been so focused on building the project, and also building out our reserves. So currently, we're about 1.7 million ounces of reserves from the study, and we'll start drilling it in M1 South again in the next week or 2. Now that the restrictions in Burkina have been lifted. So that's a going to target reserve sitting beneath the current mine plan at M1 South and the underground, and we're going to try and add 3 or 4 years mine life and get that -- the total reserves over 2 million ounces for Sanbrado. And then lastly, we haven't been idle. We've been working on a very accretive acquisition for the company. So we've got an agreement to acquire the Toega deposit from B2Gold, at least within striking distance of the project. It's over 1 million ounces at 2 grams in a 1 large open pit with further upside potential. And we'll start work on that later this quarter and look to bring that into the production schedule by the end of the year. Just quickly on the capital structure. We've got 871 million shares on issue. We've got cash at the end of April of about $41 million and gold at the end of April of about USD 23 million. They are U.S. dollar terms. We're fully drawn on our debt facility with Taurus. And that gives the current share price of around $0.76, gives us a market cap of about AUD 660 million. So historically, Burkina has been a very good place to invest for gold companies. There's been over 14 mines produced in 14 -- built in 14 years. And production last year, for Burkina alone was over 1.6 million ounces. So from that perspective, it's been a good place to invest. It's been challenging in recent times. The north and east of Burkina have seen some unrest due to terrorist activity. And there has been a lot of involvement from foreign governments, [ especially ] the Burkina government to deal with this, which is really positive. And today, we haven't seen any sort of activity affecting mines operations in the south and central part of Burkina, which is where we're situated. Burkina has got an updated mining code, which our projects are under, and we've got our mining convention, which is our stability agreement with the government, which is for the life of that project. And those sort of key points are highlighted on the slide. Moving on to Slide 7. The Board and management, so obviously, today is a happy and sad day. We've got Stormy and Mark Connelly stepping down after 10 and 40 years each. I'm happy that we've got Libby and Stewart coming on board, which is great. The senior management team, no changes there. Another happy photo here is we've delivered the project ahead of schedule, under budget, we're ramping up at the moment. And notwithstanding the challenges that we faced, not just coronavirus more recently, but headwinds over the last 4 or 5 years, I think it's a full credit to our team, well done to us. Just high level metrics on the project. Obviously, for those people who don't really understand [ what we do, ] who don't know the company, we've got conventional operation using contracts open-pit underground mining. We're targeting over 200,000 ounces of production over the first 5 years of the project. We expect we'll bump that up with adding ore material from underground and more ore underground once we get the drilling going again. And with the addition of Toega, we can really see this project being more than 10 years at more than 200,000 ounces per annum, as we've finished all that hard work that needs to be done. And that makes this project stand out in Burkina and also stand out for any emerging [ junior ] mine, which is what we are. So what it does do for us, it gives us a platform to build a company, it gives a lot of cash flow. And so we have a goal of becoming a mid-tier producer and adding further operations to the company, and we've retained the key parts, the key elements of our build team in Matt and his team. That's what we're focused on doing. Key driver of the project is -- at Sanbrado is the M1 South deposit. And you can see on that slide where we've actually done development. We're currently -- I think we finished the 2120 level. We're coming back up to continue development above that. It's a very short strike length, thick high-grade plunging shoot, which we've drilled, and we've just finished grade control drilling, and so the grade control result is spectacular. And we expect that first [ doping ] panel to be fed into the mill in later on in Q3 this year in the September quarter. And that's when we expect to see the ounces really tick up in production and the project to really start generating significant cash flow. The deepest hole we've drilled is DD228. And that was in 2018 leading up to our equity placement in December 2018 when we've got results. And given what we've been focused on for the last 2 years, we haven't really done any exploration or look to extend the mine life further. So there is a drop-off in production currently based on reserves, but that's a function of drilling, and we'll be remedying that through this year and next year. We're going to put the drill rigs back to work and look to add real value on M1 South and other parts of the project. We're targeting an extension of 3 or 4 years on M1 South. So what we want to see is a full 10-year mine plan for the underground, a 10-year mine plan for open pits. So you can see our first gold shipment on this slide. Over 400 kilos of gold was shipped for our first shipment and collective effort from the team, everyone's pitched in. It's been challenging times dealing with coronavirus, commissioning underground operation, an open-pit operation at a processing plant, all in the first and sort of early part of this quarter. So we'd like to pay thanks to all of our team on that. More happy snaps from site. So obviously, the executive team were on site for the first gold pour. And with the sort of imminent closure of borders, we did manage to get there, support the team and make it home before border is closed. I'll talk a bit further about the effect of coronavirus on the operation a bit later on, but there have been some significant challenges that our site team has risen to me. The underground operation is ramping up well. So we're still producing some development ore occasionally, not a huge amount. Significant amount of work has gone into that and credit to our mining contractor there as well. [indiscernible] who have been very supportive. And we've managed to just recently rotate our second crew of [indiscernible] employees on a site, which will have us running 2 shifts again in the near future. And that will keep us on track for development and stope -- processing stopes later this -- next quarter. We're very committed to our environmental and social commitments at West African resources. We've worked really closely with our stakeholders. We've pretty much 100% completed on compensation. We're about 99% complete on the actual relocation of people who are affected by the project. And I can report that we've got a very positive relationship with our local stakeholders. All of the work that we're doing is -- we're bringing all our work up to IFC Performance Standards, and I've said this before, but you can look at the work that we've done in Burkina Faso and on-site and it's as good or better than what you'd see in Australia or in first-world countries. So I mean, Burkina is a developing country, and we are committed to bringing the standards that we would think is acceptable in Australia to Burkina Faso. Again, our team on site. They've done a fantastic job. In kind of clockwise from top left here, we've got our underground team. We've got our CSR team on site. The ramp-up of the construction, our construction team with contractors in those last 2 slides. So I think we peaked at nearly 1,500 people on site during the peak of the build. We're back down to sort of around about 600 people on site. In fact, we had a bit less than that during the last few months due to us closing site and pulling things back to a scale and trying to keep things operating during coronavirus. So I think what is going to be a change, a huge step change for the company is to really bullet proof for production for 10 years at Sanbrado, and this is what the acquisition of Toega does for us. Within about 14 kilometers of trucking distance, 1 million ounces at 1 -- sorry, 2.1 grams per tonne. Yes. So we'd expect to complete study work on this and end up having a feed grade of around about 2 grams, which will displace some of the lower-grade open pit ore eventually on -- from the -- in deposits or from M5 and the other deposits on Sanbrado. And what that ultimately will do is basically -- it should have our longer-term production up closer over 200,000 ounces per annum. And that makes Sanbrado combined with Toega a really significant gold producer in Burkina, possibly in the top 2, with Toega being -- with Sanbrado being #2. We will start work on Toega during the wet season, so we will start collecting some data. We expect to start drilling Toega again later this year. And there's plenty of upside on the exploration permit that we've acquired or we'll be acquiring. And we will look to add more value to the project through drilling. So as I was alluding to, our production profile is front-ended, and this wasn't an accident, this was engineered by our team, bringing forward the underground production to make this as robust as possible. And you can see in year 4, when production does drop off, so I think before that, we'll be able to bring Toega ore into that schedule. And with the additional underground ore from M1 South that we expect to add from the next drilling program, we should see that blue line maintain at over 200,000 ounces per annum. That will be our goal. Just on a production update. We're ramping up to full production. May is tracking quite well. And we'll have an update for May not long after the end of the month. But so far, there's no material impacts from COVID. Like I said before, our team has worked really, really hard to counteract the challenges that we've been throwing. And we've been in continuous operation since early March. We have been processing open pit oxide ore and some underground development ore when it's available. So roughly about 5,000 tonnes of underground development ore per month and the rest of it's being oxide open pit ore. We've pretty much worked through a lot of the historic artisanal workings now, and we're into a nicely residual material at M5. And there was significant artisanal activity at M1 South, and we're still seeing the effect of that, which we kind of had expected. Production for March was about 200,000 ounces -- sorry, 200,000 tonnes, that's 1.3 grams for about 92% plant recovery. So Australia at the gates, our team's done a fantastic job ramping up. Production for April is about 240,000 tonnes at 1.3 for about 91% plant recovery. And we're expecting to see higher grade open pit ore coming in from early September quarter from M5. And as I have mentioned previously, we expect to see stoping ore coming in from M1 South during the third quarter, September quarter this year. Just to give you an idea of how the operation is going. So I just sort of present some 2-month cash and CapEx summary. It is very early. But what it does demonstrate is that we were immediately cash-generative -- cash positive in -- after the first month of ore operations. So during April, we generated about just over USD 7 million in cash, while we also -- we're still incurring capital costs from the build and also from developing the underground mine. So the mine development CapEx is predominantly from the underground, which is a great achievement. And May is tracking quite well as well, and we'll have an update out after the end of month. The near-term catalyst for us, unfortunately, we missed starting drilling due to COVID, but I can report that we are mobilizing a deep directional diamond rig at the moment. And that will start drilling early next -- in June, targeting the extensions of M1 South. We've got -- we've removed a lot of [indiscernible], but we've finished our build, and we finished commissioning. We're obviously in ore development for the underground at the moment. And we expect to declare commercial production after end of the quarter, the current quarter. So things are going quite well. We expect to have stoping all coming in, in Q3 and start work at Toega again in Q3. And we'll let things run for the rest of the Q3 before we look to provide guidance on the market and see how things settle down. So by the end of the year, we'd expect to have -- I'll be updating resources and reserves and providing guidance for '21. Look, thanks for your attendance today and for listening in. We'll turn over and see if any questions that have been put through the phone line.

[Operator Instructions]

Okay. No questions. We have received some via e-mail. So I'll just move on. So one of our shareholders has asked the question, when are we likely to look to return funds to shareholders either through dividends? And the question is sort of, these projects' robust at $1,300 gold, and we are generating excess cash flow or we should be at $1,700, it would be an opportunity to aggressively pay down debt or to grow the company and return cash to shareholders. So look, in response to that, our first focus will be to pay down debt. And once we've got debt under control, obviously, we've got excess cash, we'll be looking to deploy that best way possible, which may be to pay dividends. Certainly, I'm a shareholder, and I think most shareholders would like to see dividend, but also, we do have a goal of building a multi-mine company in Africa. So we'll make that decision on the best use of those or the best use of cash when we get to that point. But primarily, our focus will be to build cash for the rest of 2020 and then pay down debt with our lenders, Taurus. Okay. The second question is, can we provide an assessment of the sovereign risk in Burkina Faso? Is it likely that mining companies will be required to contribute more royalties given the dire economic circumstances being experienced worldwide? The answer to this is that we have a stability agreement with the government of Burkina Faso. Our mining convention is set out under the 2015 Mining Code. The slide that I referred to during the presentation, it's quite clear what the requirements are from a tax and royalty perspective. So we would not expect the government to be changing that. That's our binding agreement with them. And during the build of our project, they meddle the requirements for us, giving us a tax relief on imports and VAT during the construction. And look, we fully plan to meet our requirements to the government and paying our taxes going forward and royalties and dividends when it's appropriate. So Burkina Faso is a established mining jurisdiction with over 14 mines, having been built in the last 14 years, and there's probably more than 10 in operations. So some of those mines have had the natural end of their lives. And we would expect that given that such a -- well, sort of it's a jurisdiction that's got a lot of operating mines, and we wouldn't expect the mining code to be -- we'd require a change in mining code, and that's already been set in place with our [indiscernible] agreement with the government. Okay. There'll be no further questions. We'll close the meeting, and thank everyone for their attendance. Thank you.

Thank you. That does conclude the conference for today. Thank you for participating. You may now disconnect.