Hello to the people out there. This is Steve Williams. I’m President and CEO of Pasinex Resources. Thanks for coming on to the webinar. I look forward to talking to you over the next hour. I know an hour seems long. The plan is that I’m going to talk about where Pasinex is at in the next sort of 30 minutes.
We released our financial results for 2017 last night, and so go through those financial results and talk a bit about where we’re going this year. That’ll take up sort of the first half of the presentation. Then the second half of the presentation, we’ve asked for questions and we’ve received quite a few questions.
I’ll work my way through some of the questions. I know that we won’t get to all of the questions, but we’ll try to get a fair coverage of the questions, I think they’ll provide some of the answers that some of the people are looking for.
That’s where we’re going and thank you for coming along and let’s get into it. As I said, we released our financial results last night and I’m very pleased with the financial results. We had a very strong year in 2017 and I’ll come to this a bit later on as I look at 2018.
I think we can have another strong year. I’ll take you through the financial results. So the highlight, what I think are the key points in the financial results and what that’s telling you about what’s going on.
And then, I’ll go into a little bit about 2018 towards the last part of my presentation. How do I make this go down? Like that. Okay. I’ve got Evan White, Corporate Communications Manager here helping me. He does all the technical stuff so I just have to press the buttons. Here we go, we pressed the right buttons.
So here’s the executive summary of the financial results, and we’ll start with the Pasinex Resources. We had a net income for the year of $5.8 million, that’s in Canadian dollars, and an equity gain from the Joint Venture Company of $8.2 million.
The Joint Venture Company, which is 50% owned by Pasinex, had revenues of $31.8 million for the year and net income of $16.3 million, which is a fantastic result. $16.3 million is a 64% margin net income and that then equates to the $8.1 million equity gain for Pasinex.
Maybe before I go any further, I should explain a little bit about this equity gained because I think, it’s a little confusing. Because this is a 50/50 joint venture under Canadian GAAP rules, we have to report this effectively as an investment.
I don’t like calling it an investment because to me it’s a lot more than an investment. This has been very much at heart and soul and we put a huge amount of effort into this. But in terms of accounting Canadian GAAP rules, it’s treated as an investment. So, as such, it comes through on one line, what’s happening with the Joint Venture Company in Turkey comes through on one line onto our income statement and it’s called equity gain.
If you look at the financial statements, which are now filed on Sedar and filed on our webpage and the financial statements on page two is the income statement of Pasinex Resources, you can see the first line is equity gain from Horzum AS.
Note seven is the Horzum AS results. So we’ve tried to sort of put it there nice and clear so you can see where the income is coming from, and it’s obviously coming from the Joint Venture Company. But unfortunately, that’s the only place where you see the effort and the result of the JV Company manifesting itself in our financial results, but we’ve tried to make it nice and clear.
Anyhow, from that equity gain from the Joint Venture, Pasinex took that and we had, some of our own costs, which are detailed in the financial statement. I won’t go through that here. So after our own internal costs, we ended up with a net income of $5.8 million, which is a fantastic result.
If you compare 2017 versus 2016, the big change is in the production and the Joint Venture Company. If you look at the revenues for the Joint Venture Company in 2016, it was $11.7 million versus $31.8 in 2017.
The margin went from $3.6 million in 2016 to $16.3 million in 2017. And that was very much due to a significant increase in production, which we’ll have a look at a bit further on.
For Pasinex, that equity gain coming from the Joint Venture Company went from $1.8 million to $8.1 million. So, I mean, it’s a very strong result and something that we’re very proud of and reflects a lot of work going on in the mine in Turkey. Just some of the highlights, production from the Joint Venture Company in 2017 was 57,600 tons.
That’s wet weight of direct selling material at an average grade of around 33% zinc. We will look at the exact numbers a bit further on. Below that in the slide there, you can see exploration and capital.
I’ll comment briefly about this now and I’ll talk a lot more about it a bit further on. But last year, or 2017, we spent a bit over US $1 million in exploration of the Joint Venture Company. This year we’re spending a bit over US $3 million, $3.4 million in exploration in the Joint Venture Company.
Both last year and this year, we’ve allocated US $1 million in capital expenditures, but 2017 and 2018, that is predominantly for, pretty much exclusively for equipment for the mine, new scoop trams, new trucks, this year we’re buying a new ambulance, ventilation equipment, pumping equipment, that sort of thing.
So it’s money being invested into the mine itself, the Pinargozu mine. I’ll talk a bit more about some of these things a bit further on. So here’s a bit more detail about our financial results. And I guess there’s a few things I should comment on here.
So this is the Pasinex financial results. The equity gain, we talked about $8.1 million for this year. The other significant thing that started to occur in 2017 and it will carry on in 2018, and I’ll talk quite a bit about this, is we are now starting to receive a dividend from the Joint Venture Company.
In 2017, we received Canadian $1.2 million approximately as a dividend from the Joint Venture Company. That dividend reflected the profitability of 2016. So 2016’s profitability was paid as a dividend in 2017.
And as we go into 2018, we are already receiving some dividend from 2017 profitability, but I’ll talk a bit more about that in a second. The other key thing is we are now 134 million shares weighted, that’s the weighted average for 2017 versus in 2016, 109.5 million shares.
The significant increase there, there was some warrants that were exercised. I think that was June of 2017, and that obviously gave an increase in some shares. There have also been some shares issued as part of the Gunman agreement, which we’ll talk a bit further about further on.
So that had a net effect of the income per share. We went from one cent income per share in 2016 to four cents income per share in 2017. Just some of them on this slide here, this is the Pasinex balance sheet, some highlights from the Pasinex balance sheet.
And for those of you who look up the financial results on Sedar or on our webpage, it’s page one, it’s the balance sheet. Our investment in Horzum AS is now Canadian $8 million. Our total assets were $11.6 million.
Total liabilities are very small. And so we now have a shareholder equity of $11.4 million. The shareholder equity has grown enormously from 2016, it was $3.8 million to $11.4 million in 2017. And that, again, very much reflects obviously the performance of the Joint Venture Company.
So the other thing that’s happening here, we are showing a positive profitability. We’re starting to receive a dividend and our balance sheet is strengthening significantly. So, all in all, it’s doing what really should be happening and it’s strengthening our financial results, something that which Pasinex is proud of.
Let’s look at the Joint Venture Company. These are the results of 2016/2017. And, in a nutshell, there you can see what really happened. In 2016, we produced wet tons, 26,500 tons and in 2017, we produced 57,700 tons.
So a significant increase in production. And basically, that significant increase in production is why you saw a significant increase in profitability and the results that we have now released. So it was very much about increasing our production. The grade, it’s all direct shipping material. The grade in 2016 was 33%.
The grade in 2017 was 33%. So they were the same grade. The increase in profitability is totally due to the increase in production. The gross margin increased significantly from 39% in 2016 to 64% in 2017.
One of the things I’m constantly asked is, “Where are you in terms of this sort of benchmarking criteria? Where are you? Where is Pinargozu and this mine in terms of its peers, zinc producing peers in the world?”
I feel very confident in saying that we will be the lowest quartile in terms of cost of production. If you look at the numbers down at the bottom in US dollars, cash cost per pound of zinc produced. And so that’s a criteria that you can use to benchmark us. In 2016, we had US 29 cents per pound zinc produced.
And in 2017 we had 19 cents per pound of zinc produced. The current zinc price, just for those of you who may not be up to date, is US $1.42 per pound. So that’s how you see sort of the profitability. And more particularly, as I said, that would put us into the lowest quartile of the cost of zinc produced.
Why is this important? This is important because metal prices are cyclic. We’re going through a period of strong zinc price at the moment. I’ll talk a bit more about the zinc price a bit on, further on, but we’re going through a period of strong zinc price. But inevitably, I don’t know quite sure when, but inevitably, we will come to a period where the zinc price will come off.
The sort of numbers we’re seeing at the moment will go back down. We’re still going to be profitable. So when the zinc price goes down, whilst we maintain that cost of production, we’re still going to be profitable. So it’s very important. We’ve got a strong mine and a resilient mine. A mine that is going to, be profitable in good and bad times.
And that’s all about the grade. One of the questions coming up, and I’ll talk a bit more about this, was sort of, “How many direct shipping operations are there out there in the world, Steve?” In zinc, I don’t know another one. I stand to be corrected. There may be, but I’m not aware of one. Pretty much all operations have processing plants where they have to upgrade the material they mine.
They take the material they mine. So they mine, 5%, 6%,7% 8% zinc, some up to 10% zinc, and then they upgrade it and produce a concentrate which they then sell. We don’t have to do any of that because we are very fortunate to have a very high-grade deposit. And it is that high grade that gives us these marvelous financial results and this marvelous margin.
We’ll have a look at the Joint Venture financial results now. These, for those of you who look up the financial results, this is note seven in the financial results.
I’m just flicking through the pages here. Give me a second, I’ll find note seven. Here were go. So it’s pages 16, 17 and 18 of the financial statements. We took the decision quite a while ago to actually publish the Joint Venture financial results.
This is a 50/50 Joint Venture, 50% owned by Pasinex but 50% owned by private partners, Akmetal and Horzum AS as such is a private company. But we took the decision to be fully transparent as much as we can to the market and publish the financial results of the Joint Venture Company, and that’s what you’re looking at here.
By the way, I didn’t mention this, but these are all obviously audited financial results, audited both in Canada and in Turkey. The reason we took the decision to publish these financial results is because of the issue that I mentioned a bit earlier, which was one of the equity accounting. And, for an investor to fully understand what is going on in our operation, you really have to look at the financial results of the Joint Venture Company, and that’s where you can see what’s going on.
That’s what I did there and it gives another depth of information for the market. The highlights on the Joint Venture results. The revenues, we already looked at, went from $11.7 million in 2016 to $31.8 million in 2017.
The cost of sales, $6.8 million to $9.7 million. Basically, there are more employees, the number of employees is going up. We’re just doing more production. The tonnage is up as we looked at a bit earlier. Obviously, the cost of sales is up. I won’t go through some of the minor items. The income before taxes went from $4.5 million, this is all Canadian by the way, in 2016 to $20.4 million in 2017.
The income tax rate in Turkey is 20%. It went from $903,000 to $4.1 million. Income tax, to leave a net income, in 2016 of $3.6 million and $16.3 million in 2017. And from there you get the equity gain.
Those are the overall results. We’ve already looked at this. The big difference is the increase in production. We went to 57,600 tons in 2017. You can get a synopsis of what we’re predicting in 2018 in there.
It’s actually just a touch, touch less than 60,000 tons. So we’re very much projecting the same sort of production in 2018 as we achieved in 2017. I’ll talk a bit more about that a bit further on. These are some of the details. We are producing three types of product.
We have an oxide product, we have a sulfide product, and we have lead product. They’re all sold to the global market. Most of our product is going to Europe at the moment. We sell through traders. We sell spot.
By spot, I mean, we have no long-term commitments. We have no off-take agreements. We produce, we sell. We have been getting into some slightly larger contracts recently of several months of production, but that’s all it is, several months of production, and it’s really to enable us to be a bit more aggressive in terms of pricing on the products we sell.
The zinc oxide is our major product, but we’re also, making a zinc sulfide product. The balance sheet of the Joint Venture Company is here. The highlights are the significant growth in total assets from $12.6 million in 2016 to $22.3 million in 2017.
The equity correspondingly has increased from $3.8 million to $16 million in 2017. The item of note and there’s quite a bit, there are things written about this in the financial statements is the increase in the receivable to Akmetal.
The receivable has gone from $2.4 million in end of 2016 to $18 million at the end of 2017. This was very much due to some toughness or some difficulties on the Akmetal side and was an issue that we had to deal with through 2017.
And I’ll talk about how we dealt with it in a second. I guess to back up a little here and just tell you a little bit about, how do we do this. I think it’s important to realize we’ve got a very profitable strong mine producing sort of numbers that you can see in these financial statements. And we did that without any debt.
So we’ve built this mine without any debt. There is no debt on our books as a result of this, and we did it also in tough times. 2014, 2015, and into 2016, we had tough times in the mining industry.
2015, particularly was a very tough year. By toughness, I meant that metal prices were a lot lower than they are now and more particularly, the investment market, the capital market was weak, share prices were weak, our share price was weak through those times.
We did it by doing what I have called and what other people have called bootstrapping, which is that we recognize that we were privileged, I think, to have a high-grade deposit in Pinargozu and we recognized these were tough times. It was going to be difficult getting debt and equity.
That our way through the tough times was to go in and mine and sell bits and then use some of that money to reinvest back in the mine development, and that’s exactly what we did, bootstrapped. And Akmetal played a very strong role and a very important role in that bootstrapping which I need to tell you about.
What Akmetal did is that… they’re an existing Turkish mining company. They had a lot of mines and they had a lot of mining equipment and mining people. And they said, All right, we haven’t got a lot of free equity, but we have this week in deploy and this week in deploy and this week in deploy.
All the mining equipment that we started with and all the expertise and the drilling equipment as well that we started with came from Akmetal. And Pasinex was very much doing the technical side, the technical leadership and, the guidance in terms of where the resource was.
But, Akmetal put the boots in, put the hard work in, which was the equipment and the people. And that was very much part of us getting this mining up. Akmetal also struggled through these tough times as did any mining company.
And so, as they’ve started to work their way out of the difficult times, as everybody has started to work their way out of the difficult times, it was in our interest to support Akmetal a bit by basically giving them some leeway on the receivable.
When I say “we,” I’m talking about the Joint Venture Company here, giving them some leeway on the receivable to the Joint Venture Company so that they could continue to strengthen themselves coming out of the tough times. So that’s what you’re seeing. That’s why you’re seeing the receivables going up. Obviously, though, it’s going up significantly and we needed to manage that receivable with our partners.
So a couple of things have happened relating to 2017 and coming into 2018. The first thing is we have…and it’s in the financial statements. We have a… yeah, here it is. This is page 18 of the financial statements. We have an agreed repayment plan on that receivable, which is basically to repay $14.3 of that $18 million over 2018 and 2019.
There’s a little bit going to 2020, but it’s mostly over 2018 and 2019. So there’s a clear payment plan where Akmetal has agreed to recover that receivable back to Horzum AS, and that as said on page 18 of the financial statements. So that’s amounting to $14.3 million of that receivable. Then the other thing that we’ve done, which relates to the dividend, is that we have we have agreed at the Joint Venture level, that both parties want to have an aggressive dividend from the Joint Venture company back to the partners, to Pasinex and Akmetal.
So to this end, and this is also in the financial statements, page 18. And you can see what we’ve decided to do with the dividend relating 2017’s profitability.
It’s in page 18 of the financial statements. There’s a paragraph there right at the end of page 18 clearly stating out what we’re going to be doing from 2017’s profitability relating to the dividend from the Joint Venture. But basically, we’re going to be dividending Turkish Lira 40 million, which is about Canadian $6.5 million to Pasinex.
And so, as a result of 2017’s profitability, a total of Turkish Lira 40 million will be dividend $20 million to Akmetal, $20 million to Pasinex. 20 million Pasinex Turkish Lira is about Canadian $6.5 million, and that will be dividended over 2018. And further, we’ve started to receive some of that.
We’ve received so far $0.8 million of that dividend to date from 2017’s profitability. And by the end of this year, we will have received a total of around $6.5 million, subject to foreign exchange differences. The Turkish Lira 20 million dividend from Akmetal will go immediately grants that trade receivable that sits on the balance sheet of the Joint Venture Company.
So it’ll bring down that trade receivable by TL 20 million. So that’s sort of the big story I think of the balance sheet.
A little bit about a forecast for 2018 or a guidance for our forecast for 2018, very much the same as 2017. We’re targeting just under 60,000 tons of total production, wet tons this is, with grades of very much the same sort of grade.
We expect the zinc price this year… I was going to talk a little bit about the zinc price. We expect the zinc price this year to be averaging around US $1.35, $1.40 per pound. It’s currently US $1.41, $1. 42 per pound at the moment.
So we’re forecasting something of the US $1.35 to $1.40 per pound. So given that, we should be able to have a similar financial result in 2018 as to 2017. So that’s sort of broad forecast for 2018. The one big difference in 2018 is that we’ve increased significantly the amount of exploration we’re going to do.
And here it’s lumped together down the bottom line, underground development drilling, but most of that is exploration or drilling. We have increased it to a bit over US $3 million this year in exploration being carried out by the JV Company versus a bit over US $1 million in 2017. So we are going to step up our exploration. Just before I go into exploration, a quick note on the zinc price.
We had a significant run-up of the zinc price in 2017. We actually peaked a bit over US $1.60 per pound by the end of February, beginning of March, I’d have to check my dates a bit there.
It went out $1.41, $1.42. We’re expecting, a strong zinc price this year. I’m not sure that we’re going to see much more upside on the zinc price. I think I had already indicated that our expectation is something $1.35, maybe we may average $1.40. We may see a little bit of a spike perhaps in the second half of this year.
But I think if it does spike it, that’s what it’ll be. It’ll be a spike and it’ll probably come back down. So we’re thinking, US $1.35 to $1.50 per pound is probably the range for this year and, it looks like that’ll be the sort of price going into next year. Because of zinc prices being strong, there is some production coming back into the market.
In Australia, there are some moves to bring production back into the market. And as we start to see that production coming back into the market, obviously, once that pushes through into zinc metal, we will see some coming off of the peaks, so the zinc price that we’ve seen in the last 12 months. So anyhow, $1.35 to $1.50 is sort of the range that we’re anticipating for this year.
I don’t think we’re going to see a lot more upside. Having said that, we have very lowest quartile in terms of cost of production. This is all a wonderful zinc price for Pasinex and for the Joint Venture Company. So our production is going well, Pinargozu is going well.
You can see the numbers here and it’s something that we’re proud of. Where do we go? I mean, it’s back to… not back to, that’s the wrong word, it’s exploration. The future is in building the company. Our vision is to build Pasinex into a mid-tier zinc company.
And we do that, project by project, mine my mine. So it’s back to, strengthening exploration and going after exploration. In Turkey, I’ve already told you, we’re going to put in a bit over US $3 million in exploration this year. And this year, we’re also starting, we’re actually started in the field in our new project, our in-option agreement on the Gunman project in Nevada.
And it’s all about trying to find more zinc and hopefully high-grade zinc because that’s what we’re particularly looking for. So that’s going to be very much our focus this year. Okay. And what are we going to be doing in Turkey? There’s a couple of things.
Obviously, the first priority, the top priority is to continue to grow the resource of Pinargozu. The resource of Pinargozu is still small. We think there’s a lot more to be found. But it’s controlled by the faults. I think I’ve talked to you about that before. And so we’ve just got to keep following the zinc as we see it, but that’s the top priority.
A significant amount of money is going into trying to grow the resource at Pinargozu. We now come to the property next door due north of Pinargozu called Akkaya. We’ve had Akkaya for a few years now, but it’s time to, now that we’ve got some strong profitability and we’ve got some cash that we can deploy into exploration, it’s time to be aggressive on Akkaya.
So Akkaya is our next priority. We are already in the field doing a lot of the basics of geology on Akkaya and we expect to be drilling second half of this year in Akkaya. Watch out for news on Akkaya. We’re hopeful. We think Akkaya is a great target for zinc and so watch our for the news on Akkaya because that’s going to be a big part of our focus this year.
The third priority is we’re looking for more targets for zinc within the properties we hold. We think…and we have some ideas I can tell you, we think there’s more zinc to be found in the properties of Pinargozu and Akkaya and we are already planning to be in the field and start to look for some of those prospects for future zinc opportunities.
We think there’s more zinc to be found. So very much looking for a lot more zinc first in Pinargozu, then in Akkaya, and then around. Then the other thing that we’re going to do is start to work in Nevada on the Gunman project. We’re actually already in the field. We have a geologist in the field right now doing some of the basics of geology.
And we’re planning to do some drilling in Gunman fairly soon. We will be putting out some news on what we’re going to be doing on Gunman soon. We’re not quite ready. I don’t have all the information to give you yet, but we will be putting out some news on what we’re going to be doing in Gunman.
But we plan to be aggressive in exploration on Gunman. We think that there’s zinc to be found there and we’re looking forward to putting the drills into the ground in Gunman and hopefully having some success there. I think that’s as much as I wanted to say right at the moment.
Let’s now go to the questions. We solicited questions and some people have sent some questions in and I appreciate it.
I’m just going to jump around and start to work through some of these questions. I wanted to certainly read the full questions because some of them are not only questions, they’re also statements, but I’ll try to sort of capture what I think the person’s really asking about. So the first question. I’m not quite sure where this one came from.
Obviously, the dividend payable to Akmetal will be used to reduce the trade receivable owing from Akmetal to Horzum AS. Yeah. So I talked about that in my presentation. But just to reiterate, I described to you why we have the trade receivable there and that we’ve done two things to mitigate against that trade receivable.
First of all, is a formalized structured loan agreement covering Canadian $14 million approximately. And then secondly, as a result of the 2017 profitability, we’re going to be dividending this year to the partners. I said 40 million in total Turkish Lira, which is Turkish Lira 20 million to Akmetal, Turkish Lira 20 million to Pasinex.
And the Turkish Lira 20 million to Akmetal would definitely be used to reduce the trade receivable.
The next question is, “I’m a bit confused about the dividend payout. Yeah. Can you clarify?” First of all, when I talk to people around, people ask me about the dividend, there are two things I think going on here.
The first question is, what is the dividend coming from the Joint Venture Company to Pasinex? And basically, that’s starting to happen now. As a result of the profitability from the Joint Venture Company in 2017, we received Canadian $1.2 million as a result of profitability from 2016.
And this year, over the year, in trances, it’s all paid in trances, we will receive Turkish Lira 20 million, which is about Canadian $6.5 million as a dividend from 2017’s profitability. So the JV is committed to, at this stage, committed to paying a dividend back to its partners, Akmetal and Pasinex, and that is already happening and we expect it to continue to happen this year.
When I say committed to a dividend, obviously we have to have working capital in the company. We have capital equipment which I talked a bit about earlier. And we’ve also got commitments to mine development and exploration.
And particularly, in the case of the Joint Venture, we’ve increased the amount of money going to exploration. But after that, that surplus cash, we are dividending to the partners. So that is clearly what’s going on. Then the second part of the question about confused from dividend is then people say, “Now Pasinex gets a dividend, will they dividend to their shareholders?”
And I’ve heard that question, several times from investors and it’s a question I fully understand as an investor myself. At this stage, the board has made no decision on that. I guess we’re taking that question on notice. What we’re doing, Pasinex is we’re still very much about growth.
This year is a big year on exploration. Obviously, there’s exploration in the Joint Venture Company, but we’ve also now acquired the Gunman property and we will be spending at least Canadian $1 million on exploration in Gunman this year as well.
So at the moment, we’re deploying the cash that we receive to growth, to exploration. We see that that’s the future. That’s how we build the company, that’s how we build the share price. So that’s what we’re doing. That’s our focus right at the moment.
So though we understand, that people would like to see a shareholder dividend, I think at the moment we’re taking that question on notice and really what we’re doing is focusing on the growth of the company. The other thing I should comment on in there… yeah, there was a question, “What are we doing with our Golcuk property?”
So it’s related. We did quite a lot of…Golcuk is a copper property in the north of Turkey in a province could Sivas for those of you who don’t know. It’s an exploration project. And we did some work on it last year. We had mixed results and really, the mixed results forced us back a bit in terms of having to understand… I guess our understanding of Golcuk, the geological model got challenged and we had to sort of step back a bit and, reappraise that.
So I can tell you we’re in that reappraisal process right at the moment. We’re particularly having a good look at that in the next couple of months and then we’ll decide where we go with Golcuk. At this stage, we haven’t allocated much money to Golcuk this year, but we are, going through a thorough geological review shortly to determine where we go with Golcuk.
Our focus is very much on exploration for zinc right at the moment. That’s where we’re going.
I’ll just keep moving on the questions here. So I’ll jump over here. Okay. “What companies do you see as competitors?” I know you’re worried about the companies with DSO programs.
Well, I think I already said we’re not aware of any other companies with DSO programs. I think that’s what makes us very unique. We have a very special mine in Pinargozu. “What companies are our competitors?” I mean, there’s more and more companies, juniors, going into the zinc spaces. The zinc price has improved. We actually keep track of them all.
I don’t think I should go through all of the companies at the moment. But, one of the things we could do, I’m just looking here with Evan, is that we could, start to give some indications of, some of the companies that we track in terms of peers in the zinc space. Obviously, there’s some big ones. The big guys are companies like Trevali, Hudbay, Teck, but those are the big, big guys.
But then there’s a slew of juniors. I think in the juniors, most of them are still very much exploration and I don’t think any of them have any significant production… oh, no, Ascendant do. I stand to be corrected. But, we can try to put out a bit more information about some of the sort of peers in the zinc space.
Okay. The next question. “In the second half of 2017, you did a lot of mine development, including a fourth out at the top of the mountain. I guess will this further increase production going into 2018?” Yeah. This leads to the next question, which was about the resource. We did a lot of mine development in 2017. If you visited the mine now, you would be amazed at, how much new area we’ve opened up.
We put new spirals in, opened up new mining areas, new ventilation, new pumping. And actually, we’re continuing to do more mine development this year to continue to open up more mining areas and also open up areas for exploration so we can get at greater depths in terms of drilling.
The question of will this increase production? I think I’ve already answered. We’re planning pretty much to have the same production in 2018 as we did in 2017. So the answer to that question is no, but it’s not so much to do with the development.
We could potentially increase the production. What very much, at the moment, controls our production is our resource We’ve put out our CSA-certified or 43-101 resource in November, December last year.
It was 200,000 tons of 31% zinc. So it’s still small, 200,000 tons at 60,000 tons a year is a bit over three years. And that resource was dated June, I think, June 30. I’d have to check the exact date, but I believe it’s June 30, 2017. So by June 30, 2018, we would have consumed about 60,000 tons.
So what is really controlling our production rate at the moment is the resource. We don’t want to get too far ahead of ourselves. We don’t want to, face an issue where we get in front of ourselves and we run out of production loss, we’re waiting for exploration.
So, our target every year is to replace and actually add to the 60,000 tons that we… our exploration target is to replace and add to the 60,000 tons that we deplete each year. So that’s the target that the geologists have for this year. And, that’s what we need to see and hopefully, we could add some.
And it’s really, as we manage the resource, and what that resource is as we, do the pluses and minuses on that resource as we go forward, that will dictate very much our production rate as we go forward. So that’s sort of the big question really and that’s really what’s controlling the production rate.
Having said that, 60,000 tons gives some very nice profitability as I think you can now see. “What would it take to upgrade the inferred resource to indicated resource?” Well, the simple answer to that is a lot more drilling and the next answer to that is, I’m not sure…where we’re at now is to drill to grow resource.
We want to replace the 60,000 tons we’re mining each year and we want to grow the resource and that’s a top priority of the exploration. And I think, I remain very optimistic that we can continue to do that, but it’s not so much in our minds about the category of the resource.
I know that the market would like to see that. But what’s more important is the resource that we see and that we can map it out and that we can plan to mine, and then get in mine it at some point in the future and have a profitable mine. That’s our priority right at the moment.
So it’s just the total amount of tonnage on the resource and really a map, a plan through to ultimately production. And that’s the way we’re looking at it, at the moment. Just putting a lot of extra drilling to raise the category of the resource. I’d rather put that money into opening up a new mining stope and getting in additional production.
And so that’s sort of where we’re at right at the moment. Now that can change. And again, that answer that I gave there can change as we grow the resource. But at the moment, that’s sort of the way we’re looking at it. “In the corporate presentation, you talked about a goal of getting to a million tons…” dah, dah, dah.
Okay. So, yes, that is our goal and it’s been our goal for a long time. We’d like to get to a million tons. It all depends, on success in drilling. The issue we’ve got is that this is controlled by faults and we keep saying that the faults are moving or have moved the zinc mineralization around on us.
So, that’s a challenge. Some of the experts we’ve had, have a look at a deposit, have come back and said, “Well, as you get deeper, it will get more consistent.” But I think we’ve still got quite a way to go yet. So that target remains our target, but that’s what it is. It’s still a target.
The reality will be that we will, replace the tonnage we’re mining and hopefully grow on that and continue to grow our resource, but it’s really is going to be an incremental process because we can’t… one of the things we can’t do with this type of deposit is we can’t just go and drill 100 meters off to the south and expect to find the mineralization.
That would be a wildcat drill and would be unlikely to succeed. So we have to be very methodical, systematic in the way we go about building our resource. That target, still there, but it’s going to take us some time to get there.
Next question. “What exactly are the indicators that make you believe that Gunman might be the same to Pinargozu?” Oh, many things. It’s all about the basics of geology, and I’m not sure that I’ve got the time nor should I take the time at the moment to go through some of the basics of geology, but it’s all about the basics of geology.
The rock type, the genesis, the faults, the structure, very much about those basics. I think I have said this before. One of the reasons that we like Gunman, and there are other opportunities like Gunman around, but one of the reasons we like Gunman is that a lot of the learnings that we have from Turkey, from Pinargozu, we can take and apply to Gunman in the exploration.
And I can tell you we are already doing that and it very much helps in terms of looking at information. Geology is very much about trying to work a very complex jigsaw, and it’s how do you work out that complex jigsaw. And, having the information coming from Turkey really helps us. But it’s many things that are similar.
Okay. I think those were the major questions I was going to comment on.
We were very pleased with our results from 2017. We have a strong mine and a strong team in Turkey that gave those excellent results. I believe that we can have a similar strong year this year.
Our target is to produce pretty much the same sort of production this year as we did last year. We are starting to receive a dividend from the mine, we Pasinex, Pasinex Canada to be specific, are starting to receive a dividend from the mine in Turkey. We received a bit over Canadian $1 million in 2017 and we expect to receive about a bit over Canadian $6 million in 2018.
That’s amazing. I mean, we acquired this property in the beginning of 2013. It’s amazing to have this sort of financial result, this sort of performance, just four, five years after we acquired the property. And, as I said to you, we put this property together and this production together in tough times, 2014, 2015, 2016.
We did it by bootstrapping, but that was difficult for both the partners. And so now we’re working a way out of the difficulties we went into to get this mine to where it’s now at. But we are very happy with where we’re at and I think things can get also strong in 2018.
Thank you. We’ve enjoyed the webinar. Hope you’ve enjoyed it, and all the best.