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Golden Star Resources Ltd (NYSEMKT:GSS)
Q3 2020 Earnings Call
Oct 29, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen, and welcome to the Golden Star Resources 3rd Quarter 2020 Results Conference Call. At this time, all lines are in a listen-only mode. Following the presentation we will conduct a question-and-answer session. Operator instructions I'd now like to turn the conference over to Michael Stoner. Please go ahead.

Michael Stoner -- Investor Relations

Thank you for joining us for our Q3 2020 results call. Please note the disclaimer on forward-looking statements, which will be on the presentation on the website. If you need to go through this presentation later. I'm joined on the call by Andrew Wray, our CEO, Graham Crew, our COO, Paul Thompson, our CFO, and Peter Spora, EVP Growth and Exploration. And with that, I will hand over to Andrew to take us forward on slide four, please.

Andrew Wray -- President and Chief Executive Officer

Thanks very much. Michael. And hello to everybody. And the third quarter was an exceptionally busy time in the business with the major achievements to really reposition Golden Star. We as promised completed the sale of Prestea for September at the end of the quarter. Within that there was a major intercompany loan reorganization, and amendment to the Royal Gold streaming agreement as well, post the end of the quarter, we announced a restructuring of Macquarie facility, and as announced in the Q3 results. We put in place a $50 million ATM facility, which will look at using really on a discretionary basis potentially for additional growth capital.

So all of that radically changes the financial position of the company, and that enables us a significant step-up in investment in growth as we go now to the end of the year and into 2021. We know the scale and potential of Wassa, and I think with that investments, and with the PEI that we're currently busy working on. I think we'll start to more clearly lay that future path to growth out, and this will also enable us now with the improved financial position to make a proper consistent commitment to exploration, given the land package that we have on a highly prospective belt.

Can we move on to slide five,Michael on slide five, you can see, notwithstanding that level of activity in the business Wassa continued to deliver on an operational level the mining rate there was close to 5,000 tons a day, and the team compensated with the ore tonnes, some lower grades during the quarter which Graham speak to a little bit more. The production again over 40,000 ounces, and fully in line with expectations and with our increased guidance, unit cost were well controlled. Again within guidance, and we added cash to the balance sheet at the end of the quarter. Even allowing for around 10 million of cash burn of group Prestea, as well as a five million principal repayment during the quarter of the Macquarie facility.

And remember that still in the environment, which is impacted by COVID-19, which we saw had some impacts on the business, albeit, we continue to manage that in terms of case numbers and haven't seen any active cases Wassa really since early September. Moving on to slide six, just to remind the Bogoso-Prestea, which I referred to which was completed as planned, liabilities that asset taken on by FTR the acquirer, we'll be 30 million of cash payments to us between next year, and then in 2023. And we have the upside potentially should the sulfide material there be developed. On slide seven, we've set out there the updated guidance to reflect that sale. And in essence, that's really Wassa unchanged plus Prestea year-to-date is a small reduction in capital some deferred capitals and capital efficiencies that we've brought capital down, I think it's worth bearing in mind that within the Wassa, ISC number, which as I said, is the same range.

It was at the start of the year, there's around an additional $30 an ounce of costs between the higher gold price and impact on royalties versus budget and the stockpile material that in the current gold price environment, we've been putting through the plant. But, notwithstanding that will still be within guidance. Moving on to slide eight, and a reminder of our ESG performance, I was actually out in country last week and the week before for the first time in several months, and it was encouraging to see actually through the pandemic and the way everyone is dealt with that I think a lot of the relationships have been enhanced with our stakeholders in Ghana. I sense there 99% of the workforce and actually for most if not all of Q3, that was 100% is all out of the country. But, as I said, the delivery continued almost uninterrupted.

With that, I'll hand over to Graham to provide a bit more detail on Wassa.

Graham Crew -- Chief Operating Officer

Thanks, Andrew. Moving across to slide 10. Yes, I think it is worth noting that the site team, has done a tremendous job over the quarter, managing of the COVID controls were put in place we're really seen the productivity continued to improve from there. And I guess it's worth, also noting that, that 4,960 tonnes per day over Q3, is without any sort of upgrade investment in underground haulage fleet.

So, continuing to improve that. That of course results that by some by the grade being lower than certainly our expectations. Some of that was just due to how we had to reschedule things over the quarter. As mentioned earlier, we will sort of jump operators. So we didn't push that decline and some of the capital development is hard. So there is a bit, a little bit more of for development within that which obviously bring some of the grade down. Also pleasing the the stockpiles processing the recovery remains stable and consistent. So the plants performing really well, and of course the production.

We've had a bit of a step-up overall this year, partly driven by the stockpile, but also by the productivity from underground, which has been pleasing to see. Moving over to slide 11, really the unit cost side really just vanishing from those higher volumes, both from on the ground and a little bit from the stockpiles and the all-in sustaining cost has been restated as is covered off in the financials previously. On to slide 12, probably the most pleasing aspect over the quarter. Andrew mentioned, that we were down there, last week and the week before the paste plant, and time always on site in March, it was basically a concrete pad. That was at 98% completion at the end of the quarter or waiting on a little bit of commissioning now, but the sensibly that's ready to go and we're busy now with the underground infrastructure reticulation etc. ready for a test out n November.

So, that's been really pleasing to see that the quality of that build, all through COVID. And then the electrical upgrades, one point, we weren't sure the way we would get to get the electrical upgrade completed. We were looking at bringing some engineers from overseas into Ghana. In the end we completed that upgrade all with with local contractors, and consultants to be able to complete that which was also very pleasing. And then, the gentle upgrade, which is now on track to complete hopefully part way through this quarter, should help us stabilize the power and it gives us a slightly lower cost, the great, so, so all of those projects. It's just extremely pleasing to see how they have progressed over the quarter.

And with that, I'll hand over to Paul, to talk about the financial results.

Paul Thomson -- Chief Financial Officer

Thank you, Graham. So, as Andrew and Graham have alluded to Q3 is characterized as a quarter of significant change. So we did Prestea sale, the balance sheet, reposition and then following the end of the quarter with the Macquarie facility been restructured. That these three things along with the underlying Wassa performance really to position FGR in terms of focusing on realizing the full potential of Wassa going forward. We have noted in the financial results, as a consequence of the Prestea disposal we've actually had to separate out the P&L and the cash flow statements and to continuing and discontinuing operations. So, if I focus first on the continuing piece for Wassa. So, in total, the gold production benefited from the higher realized price, so we an average realized price of 18 with or team.

So, it did quarter and expected pricing. Adjusted EBITDA from the continuing operations was $37.5 million for the quarter. Demonstrating the business's ability to deliver strong profitability, and cash generation Turning to the impact in the discontinued operations of Prestea that impact was $40.8 million. So we had loss from the sale of Prestea, which we start to $6.9 million, and then there with the operating loss during the quarter of $3.9 million. So, that translates into the net income per share for the continuing operations being 13% per share. And then, the net income per share for the continuing and discontinuing operations was negative 61. In relation to the Prestea accounting treatment for the sale this primarily represent the non-cash de-recognition of the non-controlling interests in Prestea.

Through the methodology used to calculate that loss to start to 6.9 is essentially in three parts. So there is a fair value of the consideration to be received from SGR with the net liabilities at starting September 2020 the disposal of which were transferred to FGR. Then, there is a non-controlling interest of Prestea assets, that's primarily driven by the inter-company debt restructuring a consequence of the sale. So in terms of non-controlling interests in the balance sheet, specifically the equity section Golden Star presents non-controlling interests separatly to the equity of the shareholders of Golden Star and it's only foreign consolidated level. So the NCI impressively over 68.5 million, which represents the Government of Ghana is 10% share in the equity of BPO, that's Prestea.

And so, that then meant the NCI decreased by 38 million since June 2020, due to that intercompany restructuring, and that's why we have this net, we have the shareholders loss, including the discontinued operations is being minus, sorry negative points 0.61 per share. If we just turn to slide 15, please. This slightly emphasizes the fact of what's happening in the balance sheet. So at the start of the year, our objective was to create balance sheet flexibility to give a platform for growth going forward. This has been done firstly by the sale of the year, that removes the operating losses, and the requirement to fund those. And also removed a large negative working capital position, and the rehabilitation provision. The net impact of best in the group balance sheet has actually transition from housing negative net assets to having positive may assets.

In terms of the Macquarie facility restructuring, which we completed in the first, second, week in October. So let's say the Prestea was a major factor in terms of securing that restructuring, that actually completes post-quarter end, so it's not reflected in these Q3 balance sheet numbers. So in summary, facility's now 70 million, which provides an additional $35 million of liquidity. So we had 10 million of principal repayments made in Q2, and Q3 2020, which have actually been redrawn. And we've rescheduled the principal repayments, which actually commence in September 2021. So, just looking forward from there, the Prestea disposal, Macquarie facility restructuring and underlying financial and operational performance of Wassa, provides additional liquidity in 2021 to satisfy the repayment of the convertible debenture in August 21.

As the prevailing price, the share price that exceeds 450 in August 2021, when the convertible debentures expire, we have an option to manage the dilution with either firstly paying cash, secondly, issuing new shares, or actually getting a combination of cash and shares. The last point to note which Andrew mentioned at the start, was we put in place an ATM program. So the purpose of Wassa to give an option to really, raise capital to fund discretionary capex, its been beyond what is currently planned. We turn to slide 16 please. So in terms of the underlying capability of Wassa, this chart to me really summarizes and pits in a really good light. So we can see that we ended the quarter with cash of $40.3 million, but that's not the full story. So, if you look at the actual cash from the continuing operations, Wassa has generated 40.4 million. So the actual, sorry that's Wassa and our corporate costs.

If you look at Wassa in isolation. It's actually generated over 30 million before working capital movement. The tax, the 8.7 million related to the Q2 tax possession because it's paid in arrears in the following quarter. The other point to note is within the corporate and other costs of 7.1, that includes G&A of 4.7 and 2.4 million and the gold hedge losses. Everything to know here are in terms of the finance principal the 5.1 million. So that was the Macquarie principally will be repaid during Q3, that's now obviously been redrawn as I said in Q4 2020. The other point to note is, is the cash used by the discontinued operations of Prestea that was 10 million. So we saw, it consumed almost $7 million during that quarter. And then there was a transaction costs, and then the cash de-recognition, which gave an overall cash position of 10 million that was consumed.

With that, I'll hand over to Peter, who will cover off the exploration in geology section.Thank you.

Peter Spora -- Executive Vice President Growth & Exploration

Thank you, Paul. And on slide 18, for everyone. And good afternoon. So just to give a bit of an update on where we're at with exploration and as Andrew said earlier on, we've got an extensive land holding in as very perspective belt host of more than 10 million ounces at Wassa. We have this around in 52 square kilometers a longer perspective Greenstone Belt, that's been over 90 kilometers of geology from the coast is down all the way back up to Wassa. And most of that land package is linked by a haul road from Father Brown from back up to Wassa, covering about 85 kilometers, and in quite good condition. During the year 2020, we had a pretty quiet quarter one and quarter two, and due to COVID and suspension of field activities.

So, we took advantage of that period And we spent a lot of time compiling historic data, reinterpreting information and that led to us determining around about that 40 new or 40 new and existing targets, cross sell ad package for follow-up. And as part of the Q3 work we started on following up those, those targets on our regional projects. We undertook around 2600 orders and soil samples on our original targets at HBB and also around Wassa. We recommenced extension will step out drilling on the Wassa orebody, looking at extension to the existing resource areas is in the shallower parts of the orebody. Going forward into Q4 and then into 2021, we expect to see a step-up in Wassa drilling expanding that, moving to two rigs this month and 30 rigs in January.

We start drilling at out rural project in the far southwest of our land holdings, where we are taking a 3-kilometer long golden soil anomaly. And we will start delineating adding further work programs 2021 to test the bulk test a large number of the highest priority targets, now 40 targets, that's 2021. Next slide, Michael, slide 19, just aiming in at Wassa, and just a quick snapshot of the programs that are ongoing and going to go into 2021, on the long section on the left hand side, you can see the extensive Wassa orebody extending over 0.5 kilometers from north to south from the left hand side of the right hand side of the long section. Our current drilling is surface drilling focused on the up extensions, so the target area of looking at mineralization between previously mined open pits, and the current and plans infrastructure at Wassa in the grade blocks there, which is the 2019 reserve. So, we are targeting there with two diamond rigs from the start of November, and looking looking at uptick extensions of existing base shoot hanging wall and for Walgreens.

I'm going into 2021, expanding the number of drill rigs, and starting to look at the up plunge extensions to the southern the southern area, but also the down dip extensions to existing base hanging wall and foot wall zone in the down dip extensions area will be initially doing some two hundred-meter space lines, and we think that there is good potential to take that to identify extensions of of the mineralization that, that's been mined to date.planned to be mined in the shallower parts of the ore body. On the Greater MLN image on the right, the soil sampling program that is to me to corridor size extending over eight kilometers long, the Wassa corridor is the one sending from Wassa 242 down to anomaly 4, and the SAK corridor extends from SAK1-two-three to anomaly three, multiple kilometers scales all down limited amount of testing below drill testing at all if, if at all, most of the drilling is sub 50 meters where some of the anomalies have been tested, and there are other anomalies that we will be, we will be following up those large programs of assay, and assay diamonds plan for our drilling on these anomalies in 2021. And all these sit within two to ten kilometers of the mill.

Our next slide, Mike 20. And then just originally significant land holding focusing on the left hand image there, and just the HBB, Benso and really projects, which are between 40 to 85 kilometers from Wassa, connected by that whole road as we spoke, and more than 30 targets identified, we're just prioritizing these targets presently in order to determine Wassa programs we're probably getting and test around 16 of these targets next year. Initially, most of the targets are soil anomalies with limited to no testing at all. We will be doing Heiko programs across across those anomalies and then where we had red revenue anomalies from historic drilling will be undertaking significant Wassa and Diamond programs testing some of these targets. I think there is significant potential defines a number of orebodies here, in terms of the lack of work that's been done and from the work that's been done from the compilation of completion.

And I'll hand back to Andrew. Thank you.

Andrew Wray -- President and Chief Executive Officer

Thanks very much, Peter. So just on the last slide, the slide 21, as I mentioned at the start of the call to transformational quarter for our business, we're setting it up with a sound balance sheet is Paul set out, and able to really invest in Wassa, and growth more broadly and at the same time during the quarter, Wassa's continue to deliver strong operational performance, looking-forward you've seen some of the photos there of the infrastructure going in at Wassa with a view to the longer-term development of that asset, and that will support the growth of Wassa for the next few years.

The PA, I think I'll add more color on the substance to how that develops going forward and there'll be a significant ramp, in the drill out Wassa, as we go into 2021. And finally investment as Peter was just setting out in some of those exciting targets that we've got on our property. So with that, I'll stop there and hand back to the operator and we'll take questions.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen we will now begin the question-and-answer session.

[Operator Instruction] Your first question comes from Carey MacRury with Canaccord Genuity. Please go ahead.

Carey MacRury -- Canaccord Genuity -- Analyst

Hi, good morning, guys, or good afternoon. Good step up on the mining rate there. I'm just wondering is that a rate now, you think you can sustain or how should we think about the mining rate over the next few quarters?

Andrew Wray -- President and Chief Executive Officer

Thanks. Carey, I will just pass that one to Graham.

Graham Crew -- Chief Operating Officer

Yes, I think Carey was saying a sustained improvement in mining rates, we're busy now looking at the 2021 budget, and certainly looking to target significantly in excess of 4.5 tonnes per day over the year. Yes, I think there is a bit of work to do around what's available, and the stopes and pillows et cetera, but some, the other big advantage we have coming into 2021 is the paste plant and that I will turn mine. The primary, secondary sequence on some of the level. So, yes, so I think maybe not quite 5,000 tonnes a day, but certainly touching and looking for ways that we can exceed that sustainably beyond 21.

Carey MacRury -- Canaccord Genuity -- Analyst

And, maybe just on the grade and with the additional operators coming back, any expectations on what we can expect for grade for the Q4?

Graham Crew -- Chief Operating Officer

Yes, Q4 definitely looking back above 3 grams. We we're starting to get those jumbo operators back starting to push it development rights getting the getting the decline moving again, which is all pretty positive, and we've got some higher grade stopes in the quarter with the pretty high proportion of hanging wall stopes in Q3 relatively. So yes, I think we'll see a bit of a step-up there in Q4, but probably around the similar sort of ounces is where we're looking as we've guided.

Carey MacRury -- Canaccord Genuity -- Analyst

Maybe just one more from me just on the PEA, PEA. Just wondering if you could share sort of the scope that you're thinking about is this can going to cover sort of the full extent of the mineralization or is it more like a stepping stone to our future, longer-term solution?

Peter Spora -- Executive Vice President Growth & Exploration

Yes, so its the PEA is looking at the whole southern extent. So, based on the resource upgrade as of December 19. So, yes, so it's kind of looking holistically at the whole, the whole southern extent, and with an overall aim of how do we fill the mill capacity from Wassa.

Carey MacRury -- Canaccord Genuity -- Analyst

Okay. Thank you, guys.

Operator

Your next question comes from Heiko Ihle with H.C. Wainwright. Please go ahead.

Heiko Ihle -- H.C. Wainwright -- Analyst

Hey guys, thanks for taking my questions.

Andrew Wray -- President and Chief Executive Officer

No problem.

Heiko Ihle -- H.C. Wainwright -- Analyst

Can you walk me through a little bit more through your rationale of the ATM that you just put in place. So it was a bit surprised to see it given the sale of Prestea and the improvements in balance sheet of that brought along. I mean you mentioned earlier, you want to use it for discretionary capital at another point in time you mentioned it as an option. So that doesn't really narrowed down all that much. I mean few things on that, do you anticipate using it 40 end of the year? Have you received the mandate from your largest shareholder as to minimum price to be selling any shares? And lastly, those risk because I'm not a banker, how soon could you theoretically utilize the program? Please.

Andrew Wray -- President and Chief Executive Officer

Hi, Heiko. It's Andrew, I'll deal with the question. So, I think the ATM should be looked at in the context that as you mentioned Prestea sold. So, that was a major step forward the Macquarie restructuring, which together with those sale process proceeds due in 2021 provides us the solutions, the convertible debt inches should we need it in the sense that if there are out of the money and we're going to repay them. We've established a solution for that.

The way we are looking early stages, but the budget at this point, there is a step up and probably a significant step up in drilling at Wassa which will be required. There will be a step up in exploration, so that's the base case and we don't see any capital issues with respect to that base case. The element that we don't know is potentially success based drilling that may come in over the course of the year. Additional opportunities to deploy capital through the budgeting process.

So, rather than simply raise capital is a nice to have and sit there, we thought the ATM is a good solution, if we do need to access capital at the opportunities of that both to deploy it as well. It wasn't a attractive price and the demand for the stock is there, but it's a facility that is relatively straightforward to put in place. It sits now for just over a year through to November the next year, and we can use it as required if we don't use it, there is no cost to the business. So, that doesn't prevent us from saying we're not going to use it.

So, in terms of discretionary, that's what I was referring to. But it's there, should we feel that we wish to use that, we don't have to. And, we'll -- I think take an active view on what's the appropriate price to use for that La Mancha's have got representation on the Board. The Board has approved that facility. So La Mancha fully aware of that, as you know, through the Investor Rights Agreement, like anti-dilution right, which they can exercise if they want to stay at the same level. Should we use it? So, I think we'll take a relatively conservative approach, but we thought, it's a good opportunity and a good point in time to put that in place. If at any point over the next year, we see that requirement for incremental capital.

Heiko Ihle -- H.C. Wainwright -- Analyst

Yes. Okay. And then just a clarification. In your release you mentioned you got corporate G&A of 4.7 million in Q3 2020. And then there's a quote, the increase was due primarily due to higher insurance and the labor costs, you didn't mention in the same paragraph that the increase, the 26% increase was primarily due to non-recurring costs incurred as part of relocations in the corporate office from Toronto, Canada, to London.

Two things on this. First of all, the labor doesn't sound like something that's a one-time item, unless when you're saying labor you mean severance expenses for the Toronto office, am I, it was I just misunderstanding that or over thinking it?

Graham Crew -- Chief Operating Officer

Yes, I think the labor pool can add in, but I think the labor is referring to the fact that certainly the first quarter of the year, we duplicated labor because we were running still most of the Toronto office as we said the London office up. So, we had a heavier component of LIBOR plus there are obviously severance costs.

But, this refers specifically to the fact that we duplicated LIBOR for a period of time, so certainly the duplications non-recurring. The ongoing costs are recurring. And then, Paul if there's anything else you'd like to add?

Paul Thomson -- Chief Financial Officer

No, there is nothing much more to add to, as you said, it's just that's of double count in terms of having, London and trying to work concurrently at that time that small time of overlap.

Graham Crew -- Chief Operating Officer

Paul, if I may add, and yeah, that impact is in the year-to-date numbers rather than in Q3. There is a dip back at the duplication didn't occur this quarter was earlier in the year.

Heiko Ihle -- H.C. Wainwright -- Analyst

Yes, yes, though it does sort of continue because you've got $4.7 million in Q3, which is just about a third of your year-to-date figure?

Paul Thomson -- Chief Financial Officer

Sorry. So in Q3 that a step up in insurance. But specific duplication of cost is removed.

Heiko Ihle -- H.C. Wainwright -- Analyst

Got it. And, the insurance is going to fall off again going forward? Or not?

Andrew Wray -- President and Chief Executive Officer

It will do, it will fall off. There's obviously been of an increase in terms of their, in terms of the class action with the D&O cost, which has been directly impacted, but that will obviously reduce the overcome.

Heiko Ihle -- H.C. Wainwright -- Analyst

Excellent. Thank you, guys. Be safe.

Paul Thomson -- Chief Financial Officer

Yes. Thank you.

Operator

[Operator Instructions] The next question comes from Don DeMarco with National Bank Financial. Please go ahead.

Don DeMarco -- National Bank Financial -- Analyst

All right. Thank you for taking my call. So, gentlemen, in a previous question you responded, you commented on the mining rates. And, I'm wondering, how should we model the benefits of the paste fill plant? Do you expect a gradual improvement in mining rates over the next 12 months or will be a step change in the next 6 months?

Andrew Wray -- President and Chief Executive Officer

Graham, do you want to take that one.

Graham Crew -- Chief Operating Officer

Yes. Hi, Don. Yes, I don't think we'll see a step change, and certainly not looking at budgeting beyond the 4,950 cable take over Q4. That is something that we'd like to be touting toward the end of next year. But, I think over the next year will be targeting somewhere between 4 over 4.5 up to that 5,000 just depending on ore availability through the year, 22-23 years where we start to see a step-up, a lot of that will be based on the drilling that we get to do next year. That's kind of broadly the plan at this stage.

Don DeMarco -- National Bank Financial -- Analyst

Okay. Thanks, Graham. So basically, as far as the paste fill plant is concerned, you might see some kind of gradual quarter-over-quarter improvements in the mining rates, leading up to some of those targets toward the end of next year.

Graham Crew -- Chief Operating Officer

Yes, and consistency a little bit more consistency on the grade is what we -- that would be targeting to see.

Don DeMarco -- National Bank Financial -- Analyst

Okay. Just shifting topics to exploration and looking at these regional exploration targets. Most of them seem to be early stage. So, potential no supplement more of a 2022 or beyond story, or what do you need to see at Father Brown to make it a viable option to supplement, if it seems to be the largest of that your targets in terms of the current resource.

Andrew Wray -- President and Chief Executive Officer

Yes. Maybe, I'll hand to Peter to talk a little bit about what we see happening around Wassa. And then, the question on Father Brown in the more regional exploration.

Peter Spora -- Executive Vice President Growth & Exploration

Yes. Thank you. Good afternoon, Don. Yes, just briefly at Wassa. I think that there is a really good opportunity there to find additional ounces those up dip and down dip of the time. In the current results. There is basically no drilling below panel 1, 2, 3 so that up a part of the mine, that's been in the mind or is in the next three, four-year plan. So, that is the focus and I think if we can find something quite close there. We've got the potential to, to look at additional sources of all of their as shallower depths, and potentially additional access to the orebody, particularly in the upper part of the mine.

So, I think that's probably within the three you will know. So, for that something like that to come on. On the regional stuff you that bend so AML and we've had for a historically three or four pits mine there. Graham and I were on site, the last couple of weeks and going through some of the prospectivity under some of those pits. I mean those mines, seven years ago, and even just looking at some of those pits they really, there was one hole. one or two holes per section under the pits, they really haven't had, and a real touch up in terms of exploration for the last five, six years. So, they could be medium term targets there. So,we've got some plans drilling under those pits and some of the other prospects that sit on that mining license, and then so. So, that will be a secondary focus in terms of potentially bringing some either high grade underground material from those previously mine pits or something stacked up.

And maybe a cut back on one or two of those plus looking at expanding a couple of the smaller resources down in that been so area that with our revised structural interpretation and some of the work we've been doing, trying to target some of these high-grade shoots we might be able to grow the overall results. As far the Father Brown, yes, look, we've done a bit of work we're still some work on at the moment, it's two pits there Adoikrom and Father Brown that were mines. We are looking at both under the, both of those potential underground sources it's really dependent upon being able to access both those deposits at the same time in order to get the ounces per vertical meter, it's going to need a bit more drilling there taking more detail to give us a little bit more confidence. It's caused vein structure course grain nobody gold. So it really probably need another level of infill drilling down on it.

So, it give us the confidence on that 230 to 300,000 ounce range. And then, what's in the next 100 meters below? What's currently sitting? Indicated whether that we could prove that up and potentially get ourselves something that is more conducive to being the capital being spent on it to mine. Graham, any other comments on that?

Graham Crew -- Chief Operating Officer

Sorry. I just had to -- I mean, no.I was thinking about Benso. So as you were talking Pieter, and those those pits were sort of drilled 2--2 of these optimization shell and that was it. So some of them got one drill hole, and item and open and plus four grams. So there is lots of potential there but I don't think it's a definitely not a '21 production. Maybe, maybe '22 or beyond, yes I would like to do yet.

Peter Spora -- Executive Vice President Growth & Exploration

Okay, guys, I appreciate that. We'll look forward to exploration updates and good luck on next steps.

Andrew Wray -- President and Chief Executive Officer

Yes, thanks.

Peter Spora -- Executive Vice President Growth & Exploration

That's all from me.

Andrew Wray -- President and Chief Executive Officer

Thanks, John.

Operator

Your next question comes from Raj Ray with BMO Capital Markets. Please go ahead.

Raj Ray -- BMO Capital Markets -- Analyst

Thank you, operator, good afternoon. Andrew and team. Just have a couple of question for from the open pits reserve. Earlier, you had mentioned about potential to tap that from underground has there been any additional work done on that, so we can provide some color. The second question is with respect to the underground flexibility under the grid volatility we are seeing, part of your vertical development was based on improving that flexibility. Can you give us some timeline as to when, how much more development you need, and when do you expect to have some amount of flexibility, so that we don't see it is variability every quarter?

Peter Spora -- Executive Vice President Growth & Exploration

Hi Raj. I'll pass to Graham. I guess the one overriding comment, I would make on which really relates to both those points you're making is that, it's now that we've got the business in a position where we can actually put the capital to work, be it do some work additionally drilling out and potentially accessing, what we call the open mind on the open pit reserve that's there be it the development and drilling that's really necessary to step up to give us that flexibility, but until this point with the balance sheet in the position it was with Prestea still bleeding cash.

The business didn't have that ability. I think the great thing now is we've got that flexibility. Clearly, there is upfront work on those is upfront work on the exploration portfolio. So, it's all going to take us a little time, but we've certainly now got ourselves in a position where we can start to plan, and execute that work provided, Graham, if you want to give any specifics around the work done or work planned on either of those elements.

Graham Crew -- Chief Operating Officer

Yes. All right. Yes, as usual, Andrew's described it pretty well. We have advance the upper mine or open pit work. So we've got, we've got more to do on that and when we do a reserve update as at the end of this year. I think that will be the appropriate time, assuming that all sort of comes together, that we can update that in the reserves. One of the things that will need to do there over '21, is a bit more drilling to be able to build that into, into a higher category resource and build out the plan there. So that's currently in the capital considerations for the '21.

So, that's one opportunity. In terms of the development right, certainly over Q3, Q4 we were looking, we had a new jumbo, replacement jumbos and not additional replacement jumbo come into the fleet in Q3, didn't get utilized. In fact when we're on-site still on the surface waiting for our expect jumbo operator trailers is to get back on site, which been started happening from essentially early October. But, we're looking looking for a step up in that development.

Probably, 10% month-on-month next year, maybe we can push that a bit further, but conservatively 10% and then probably the K1 that we talked about is just having the paste fill capacity. So, getting that online by the end of this quarter, and then getting it into the routine and the plan and the schedule each month that and giving us access to secondary stopes, within the sequence. That's another key enabler to that consistency of grade performance rather than having to bring things into the plan sort of lighting the pace, if that makes sense. So they had a couple of things that we're looking at to improve that consistency over '21 and beyond.

Raj Ray -- BMO Capital Markets -- Analyst

And Graham, you might also comment on the resource definition drilling step up?

Graham Crew -- Chief Operating Officer

Yes, I mean that's certainly that's another one of the capital plan panel three, and the southern extensions really looking at. We've got proximity drill drive has progressed well. And looking at what we can access from there over '21, to really build out the resource in the southern portion of the ore body is another big step-up that we're looking at for '21.

Raj Ray -- BMO Capital Markets -- Analyst

Okay, thanks, Graham. And just a follow-up question on and that Q3, higher throughput. The grade that you've got 2.81 grams per tonne. Was it, how did they reconcile the reserve grade or did you have any impact from the higher productivity on dilution?

Graham Crew -- Chief Operating Officer

Yes, that's a good question. Reconciliation was down a little bit on the quarter. I mean that's compared to year-to-date. So there was, there was roughly of the stope tonnes, there was about 25% came from the hanging wall stopes, and then there was an increase or development that I mentioned earlier. So, and it's quite difficult because we're doing the myself, Paul, it's quite difficult, other than through grab samples to really see through all of that noise, but the reconciliation was not, not as good as it had been in the previous quarter. So something that we're looking through and looking into now.

Raj Ray -- BMO Capital Markets -- Analyst

And do you attribute that to the higher tonnage that you pulled,to better cost it or...?

Graham Crew -- Chief Operating Officer

Yes, look, Raj. I haven't haven't gone through stope by stope for September yet, but when we sort of looked at August over break, it was kind of in the 5% to 10% range on most stopes there were a couple that once in particular where there was a bit of pillar failure, but not it looked kind of consistent. So yes, don't have all of the answers to that at this point in time, but something that we're definitely working through.

Raj Ray -- BMO Capital Markets -- Analyst

Okay, thanks. Graham. Yes, that's it from me.

Graham Crew -- Chief Operating Officer

Thanks, Raj.

Operator

There are no further questions at this time. Please proceed.

Andrew Wray -- President and Chief Executive Officer

Excellent. Thank you very much. Thanks everybody for taking the time, if there is anything else. You've got our coordinates give us a shout be happy to catch up and answer those questions, and look forward to speaking soon. Thank you.

Peter Spora -- Executive Vice President Growth & Exploration

Thank you.

Andrew Wray -- President and Chief Executive Officer

Thank you, Raj.

Operator

[Operator Closing Remarks]

Duration: 41 minutes

Call participants:

Michael Stoner -- Investor Relations

Andrew Wray -- President and Chief Executive Officer

Graham Crew -- Chief Operating Officer

Paul Thomson -- Chief Financial Officer

Peter Spora -- Executive Vice President Growth & Exploration

Carey MacRury -- Canaccord Genuity -- Analyst

Heiko Ihle -- H.C. Wainwright -- Analyst

Don DeMarco -- National Bank Financial -- Analyst

Raj Ray -- BMO Capital Markets -- Analyst

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