Ero Copper Corp. Q3 FY2020 Earnings Call

Thank you, operator. Thank you and good morning, everyone. The news release announcing ERO's third quarter results is available on our website, and on SEDAR, as are our financial statements and MD&A for the three and nine months ended September 30, 2020. As usual, we will be making forward-looking statements on this call that involve risks and uncertainties concerning the businesses, operations and financial performance of the company. We would refer you to our most recent AIF, also available on SEDAR, for a discussion of the risk factors of our business and their potential impact on future performance. Unless otherwise noted on this call, all amounts are in US dollars. Joining me on the call today are David Strang, ERO's Co-Founder, Chief Executive and President; Wayne Drier, ERO's Chief Financial Officer; and Makko DeFilippo, Vice President, Corporate Development. As our results have demonstrated, this was another excellent quarter for the company, building on a strong foundation from the first half of 2020. Our operations have continued to achieve new quarterly records for operational and financial performance, contributing to the most consistent quarter-on-quarter improvements in key corporate level financial metrics. More importantly, third quarter results reflect the shared commitment throughout the company, an organization to keep our employees, contractors, their families, and local communities safe during this period of COVID-19. Highlighting these efforts, on September 30, we celebrated one year without a loss-time injury at our MCSA operations despite many challenges associated with mitigating the impacts of COVID-19. While new case counts moderated in Brazil during the third quarter from the peaks of July and August, we remain vigilant and continued to implement extraordinary mitigation efforts at site to ensure continuity of operations. Year-to-date, we have contributed approximately $1.5 million to local community relief and on-site COVID-19 mitigation efforts. As a result, aided by the hard work and commitment of our in-country colleagues, we continue to experience no disruption to our operations, supply chains, or sales channels to date. From a financial and liquidity perspective, we saw a noteworthy improvement in our working capital position, as well as a reduction in net debt relative to the second quarter. We ended the period with a significant improvement in our cash position despite paying down several short-term lines of credit during the period. We continue to remain in excellent shape as a company, well positioned with levels in hand to navigate any uncertainties associated with the current macro environment. We achieved another quarter of record cash costs during the third quarter, benefiting from the ongoing currency tailwinds. While the Brazilian real remained weak relative to the US dollar during the third quarter, a significant decrease in volatility of the underlying currencies lessened the non-cash impacts on our earnings and working capital during the period. We closely monitor and have continued to settle some of our forward-dated FX option contracts, as well as opportunistically rolling a portion to the future in line with our overall strategy for managing currency volatility, which is designed to protect the business in the event of a rapidly strengthening Brazilian real against the US dollar. More specifically, we continue to see a persistently weak Brazilian real; if we continue to see a specifically consistently weak Brazilian real, our underlying business will benefit, and we will continue to sell a portion of our existing contracts. On the other hand, the export-driven Brazilian economy is likely to benefit on a relative basis at the first signs of sustainable global recovery as we come out of the COVID-19 period. We are focused on ensuring our business and profitability are protected against the rapid strengthening of the currency. With that, I will now pass the call over to David to provide a brief review and update of our operations, and then Wayne will provide a review of the company's financial performance. We will all be available for questions immediately following the call.

Thank you, Noel. Following up on what Noel mentioned, our Brazilian colleagues throughout this entire year frankly have demonstrated their results by keeping our operations running safely, while managing and mitigating the impacts of COVID-19. The achievement this quarter of reaching one year without a lost-time injury at MCSA is a fantastic milestone for the company and we are incredibly proud of the efforts throughout our organization that went into improving upon our safety performance and setting new high bars for operational excellence. Implementing new improvement initiatives was made all the more challenging with the onset of COVID-19, and again credit to all our frontline workers, supervisors and senior leadership, many of whom are listening on this call, for making this possible. Focusing on operational highlights and outlook for MCSA up in Curaca Valley first, operations continued to perform well throughout the third quarter. We produced 10,961 tonnes of copper in concentrate in line with second quarter performance and our year-to-date results continue to track on guidance. During the period, we milled 553,148 tonnes of ore grading 2.18% copper, and achieved metallurgical recoveries of 19.8%. Decreases in tonnes mined and processed during the third quarter were more than offset by a 10% increase in grade and an increase in recoveries relative to the second quarter. Strong quarterly performance was driven in part by contributions from the Vermelhos Mine where 227,963 tonnes grading 3.76% copper were mined, a 15% quarter-on-quarter improvement in grades mined. At Pilar, 375,296 tonnes of ore were mined grading 1.36% copper, in line with the first and second quarter of 2020. As Noel mentioned, we achieved a new quarterly record with respect to C1 cash costs of $0.63 per pound of copper produced, reflecting continued operational performance, currency tailwinds, and improved by-product gold and silver prices. Year-to-date in 2020, C1 cash costs have averaged $0.66 per pound of copper produced. We are maintaining our 2020 production guidance for our Curaca Valley operations of between 41,000 and 43,000 tonnes of copper and maintaining our previously revised C1 cash cost guidance of $0.70 to $0.85 per pound of copper produced. Given the strong operating cost performance year-to-date, we expect full year C1 cash costs to be at the low end or slightly below this range. Similarly, we are maintaining our previously revised non-exploration capital expenditure items range of $56 million to $68 million. We have increased our full-year exploration spend by approximately $5 million to between $25 million to $30 million to reflect continuity and expansion of our ongoing drill programs in the Curaca Valley through the fourth quarter. As we now look to prepare both of our operations for extensions in mine life, we expect full year capital to fall at the high end of our guidance range. Most of the growth projects we set out to deliver this year have either been completed or remain on track for completion prior to year end. Among others, this includes the installation and commissioning of our high intensity grinding mill, the HIG Mill, which was commissioned in September. While based on preliminary data and feed and control system integration, work remains ongoing, we achieved 92% recovery during the month of September, a monthly record for us this year and certainly a strong leading indicator as it relates to improving recoveries and stabilizing overall mill performance. In late September, we completed the test work of our ore sorting trial campaign, successfully demonstrating the excellent upgrade ratios and minimal copper loss that can be achieved at a commercialized run rate. As a result, we fully expect this technology to be an integral component of our efforts to further optimize our production portfolio across the various operations of the Curaca Valley. We currently view the Vermelhos District as the most logical place to integrate ore sorting operations due to the results obtained in testing combined with expected savings in transportation costs. Our 2020 resource reserve and life of mine plan update for our MCSA operations continues to remain on track for completion prior to year end. One of the primary near-mine exploration objectives in support of this effort was to undertake an aggressive drill campaign focusing on the high-grade deepening extension zone of the Pilar Mine. This program started in earnest around this time last year, during our analyst visit, and we continue to be extremely pleased with exploration results and progress on engineering and mine planning over the past 12 months. These efforts have effectively taken this project from concept to nearly completed engineering study in the year's time. For the cut-off date for this year's report has passed, drilling of the zone remains ongoing, including from surface using directional drilling technology. When balancing all factors, we see this project as having considerable potential to not only meaningfully extend the life of the Pilar Mine but certainly carries the potential to expand production volumes. Engineering work on these fronts has well advanced and we expect to provide further details on these plans in the fourth quarter. Throughout the Curaca Valley, we have 26 drill rigs operating, including those allocated to the Deepening Extension zone. Our exploration focus during the fourth quarter can be summarized in three areas: continuing to demonstrate down plunge high-grade continuity within the Deepening Extension zone using directional drill technology from surface and underground; aggressively targeting a recently discovered mineralized zone between the Vermelhos and Siriema deposits. Results to date within this zone, which extends approximately 700 meters on strike length, suggest that multiple high-grade lenses may be present; and expanding the breadth and priority of our regional exploration campaigns throughout the Curaca Valley on select priority targets, which we continue to remain very excited about. Consistent with our scheduled quarterly updates, results from our ongoing exploration programs will be further detailed in our upcoming exploration update, which we typically release four to six weeks following our financial results. With respect to our ongoing exploration activities and improvement projects, our ability to conduct multi-element analysis in-house is now complete and daily sample volumes have reached steady state. In accordance with our schedule and best practices, we have implemented the standard quality assurance and quality control program using third-party laboratories, as required to ensure a calibration of the equipment and to ensure consistent and reliable assay results can be obtained. We expect this addition to our laboratory to significantly reduce costs and turnaround time for Platinum Group Metal assay results in the future. At the NX Gold Mine, production during the quarter totaled 9,436 ounces of gold and 5,736 ounces of silver from total mill feed of approximately 41,749 tonnes grading 7.64 grams per tonne gold, with average metallurgical recoveries of 92%. While gold production, mill throughput, and recoveries continued to improve quarter-on-quarter, an area of the Santo Antonio Vein that we expected to mine this year encountered suboptimal ground conditions that will require an enhancement of our inherited ground support capabilities in order to mine effectively. Since encountering this zone, our team has acted quickly to implement characterization work and engineering studies for the installation and implementation of a small, modular paste-fill plant on-site. While a modest investment of approximately $2 million, we view this as a significant first step in securing long-term production stability and extending the life of the mine at NX Gold. We fully expect the implementation of paste-fill will allow us to not only recover the area that we intended to mine this year but also improve overall resource conversion and mine recoveries in the future. We expect to incorporate these plans into our 2020 resource reserve and life of mine plans for NX Gold, which also remains on track for completion prior to year end. While longer-term, we expect a net benefit as a result of operational changes and re-sequencing in 2020, we have lowered our full-year guidance for NX Gold to between 36,000 and 37,000 ounces of gold, and increased our non-exploration capital spend by approximately $2 million to between $9 million and $11 million. We are maintaining our previously revised C1 cash cost guidance range of between $425 and $525 per ounce and expect to be in the lower half of this range for the year despite lower production guidance. Full-year exploration expenditures have been increased by approximately $2 million to between $3 million and $5 million as we continue to grow our exploration footprint at NX Gold during the fourth quarter. With that, I will now pass it over to Wayne, who will provide an overview of our financial performance.

Thank you, David, and good morning, everyone. Echoing what has been said previously by Noel and David, the third quarter of 2020 was simply an outstanding one for the company. Quarter-on-quarter, sales volumes were up 9% and 17% for copper in concentrate and gold, respectively, contributing to a record $94.3 million in quarterly revenue, a 33% improvement over the prior period. As mentioned, we achieved another great quarter with respect to C1 cash costs across our operations. Impressive quarterly revenue paired with these low operating costs contributed to another record quarter of cash flow from operations and adjusted EBITDA totaling $44.4 million and $62.5 million, respectively, during the period. Quarter-on-quarter improvements in the company's consolidated financial metrics continue to be underpinned by the strong operating performance, favorable exchange rates, and increases in underlying commodity prices. During the first nine months of 2020, adjusted EBITDA totaled $138.4 million, exceeding our full year 2019 number of $134.1 million. This performance continues to speak to the growing strength and profitability of the business. As Noel mentioned, we did continue to benefit from the sustained weakness of the Brazilian real against the US dollar, while the reduction in underlying foreign exchange volatility lessened the impact of non-cash adjustments on our third quarter results. During the period, we recorded approximately $6 million in actual losses related to the settlement of maturing foreign exchange contracts. The non-cash adjustments included a further $1.1 million in unrealized foreign exchange derivative contract losses, based on the fair market value of these contracts at September 30 versus June 30, and a further $2 million related to the translation of our US dollar denominated debt in Brazil, as a result of our functional currency being the real. Our headline net income for the quarter was $31.1 million or $0.34 per share. After adjusting for the non-cash components of the foreign exchange loss, our adjusted net income was $36.7 million or $0.40 per share fully diluted, which much better reflects the performance of the underlying operations. The strength of our balance sheet continues to improve quarter-on-quarter. The company's total cash position at quarter end was $54.3 million compared to $51.6 million at the end of the second quarter. Increased sales volumes and rising commodity prices also contributed to a significant $16.3 million improvement in our working capital position compared to the prior period. Increases in accounts receivables at quarter-end were primarily driven by increased sales volumes, the timing of these sales, and a modest positive provisional pricing adjustment at the end of the quarter. The company's net debt improved by $12.5 million quarter-on-quarter, primarily as a result of the repayment of certain short-term lines of credit that were withdrawn during the first quarter of the year as a precautionary measure. Repayment of these lines reduced the current portion of loans and borrowings by approximately $8.5 million relative to the prior period. In summary, our business continues to run extremely well and generate significant free cash flow, particularly at prevailing metal prices and foreign exchange rates. On that note, I'll hand the call back over to Noel for some concluding remarks.

Okay. Thank you, Wayne. Our performance year-to-date can be summarized as follows: one, proactive and ongoing efforts to mitigate the impact of COVID-19 on our operations, prioritizing the safety and well-being of our colleagues, contractors, and local communities; two, continued advancement of key growth projects and objectives, including on the exploration and mine-planning fronts, in spite of challenging conditions; three, exceptional operating and financial performance across our core business bolstered by ongoing currency tailwinds. To reiterate what David mentioned earlier, we are looking forward to the completion of our 2020 resource reserve and life of mine plan updates for both MCSA and NX Gold, which we expect will incorporate many of the objectives we set for ourselves this year, all of which have progressed largely on schedule. Thanks very much for joining the call. We will turn it back to the operator to open the line for questions. Thank you.

Thank you. We will now begin the question-and-answer session. Our first question is from Jackie Przybylowski with BMO Capital Markets. Please go ahead.

Thanks very much. Congrats on the great quarter, guys. I guess I just wanted to circle back with the comments made by both Noel and Wayne in the preliminary remarks. Your balance sheet is in great shape. And as a result, I'm still kind of not understanding why you're holding cash strong from your credit facilities. I know initially a lot of companies did that to preserve liquidity during the first early days of the COVID pandemic. But most other companies have repaid that. Can you give us some thoughts into how long you might hold that for? And sort of what the liquidity needs are that you are holding thus far? Thanks.

Yes. Sure. Look we are a conservative bunch. We live in uncertain times as we know from what's going on south of the border in terms of the election. So we're paying things back progressively. Could we do it all today? Yes, we could. But we just said, why don't we just wait and see what happens? And we'll go from there. I think that's just generally our mindset. We'd like to be conservative both, as you know, in terms of our projections or expectations for the year, but also in terms of how we manage our liquidity. Wayne, do you want to add to that?

Okay. So…

No, I think, Noel said it very well, Jackie. I think we are watching that very closely. Our cost of borrowing is extremely low given our leverage ratios. So, the holding cost of that is immaterial in the scheme of things. When you sort of match that up against the uncertainty, as Noel put it, it wasn't that long ago when the world was a very uncertain place. So I think we'd like to see a little bit more stability in the world, in the markets. Absolutely, we will continue to work to bring down the lines of credit when we feel appropriate.

There is no immediate liquidity need that you're anticipating. This is just a conservative approach given the current situation.

Correct.

That's correct.

Okay. And I apologize for taking up time.

No. No. Carry on.

This is not a different question then. You presented some impressive results regarding Siriema and possibly the lenses that could move towards Vermelhos. Can we expect to receive more information about that? Or will we see it included in the life-of-mine update expected later this month?

Good question, Jackie. It's too soon. We have now moved six rigs on-site between Vermelhos and Siriema. We are now going to systematically drill that zone out. As we mentioned on the call with the deepening project last year, when we ultimately put five rigs down in the deepening project and have now drilled that zone out, the intent is here to try and do the same thing. Hopefully, this time next year we will be able to include resources from the new zone into our life-of-mine plan at that particular time.

Okay. That's helpful. Just one last question from me. You typically release your exploration update about a month after earnings are announced. However, this seems to coincide with the timing for your life-of-mine update. I wanted to clarify if you plan to release both updates within the next month or so.

Yes. Mak is going to be very, very busy. So we have both the updates on the 43-101 for the Curaca Valley. We have the update in the 43-101 for NX Gold along with our normal exploration quarterly exploration update that will occur, I think, towards the latter part of this month going into December.

Got it. Yes, I was just not sure if you were going to still do the exploration update given the other update that's coming out. But that's helpful. I'm going to pass the baton on to somebody else. Thanks very much.

Our next question is from Raphael de Souza with CIBC. Please go ahead.

Hi, good morning. Congrats on the strong quarter, guys. I had a quick question on Vermelhos. So despite the strong C1 cash costs for the quarter in local currency, you reported an increase in mining costs. I'm just wondering what's expected going forward in terms of like that number in Brazilian reais?

With regards to that, Raphael, that number bounces around on a quarter-by-quarter basis due to the allocation of the development costs between operating development and capital development. So where you see a slight increase in costs on the quarter is more likely reflective of the allocation of the development than anything else. So operations there on a month-by-month basis in terms of our normal operating, we have not seen any real deviation in costs at that mine month-to-month with respect to direct operating mining costs.

Okay. And just then changing gears a little bit, so I saw the processing costs also increased a little bit on Brazilian real terms. Any comments on that as well?

No, again, costs may vary from quarter to quarter. It's important to consider them on an overall basis and on a per tonne basis throughout the year. We have a similar situation at Pilar, where we alternate between capital and operating development. Some quarters may see more capital development, while others focus on operating development. It fluctuates like that. However, from an operating cost perspective, we haven't experienced any negative trends. There is a slight increase in certain material costs, particularly for maintenance, which are priced in US dollars. This has led to real cost increases due to the direct correlation with pricing. Overall, we haven't observed any significant negative changes in our real operating costs.

Okay, I understand. I would have expected the allocation to impact the mining costs to show up early in the processing costs. Moving on to a different topic, you released the results from the ore sorting plant, and it seems your plan going forward is to primarily focus on other majors and how that affects transportation costs. Do you have any comments on open-pit mining? I believe that was your initial goal for this project, correct?

When discussing the Vermelhos District, it’s important not to solely associate it with the Vermelhos Mine but to consider it in relation to the ore sorting technology applied to the various resources available in the Vermelhos District. This is the area we are currently focusing on in terms of using ore sorting technology.

Okay. So you can probably use that upgrade like N8, N9, and similar options.

Exactly. Exactly. Exactly. That's really where our focus is right now.

Okay. Fantastic. Well, thank you. Thank you again.

Thanks.

Our next question is from Stefan Ioannou with Cormark Securities. Please go ahead.

Yes, thank you everyone, and congratulations on the quarter. I have a question regarding the exploration efforts, specifically with the full Q4 budget now in play and the shift to regional exploration this quarter. I’m curious if you anticipate this trend continuing into next year, even though a budget for next year hasn’t been established yet. Will there be a return to near-mine exploration at the beginning of next year in anticipation of the mine plan update, or do you expect to maintain focus on regional exploration for the foreseeable future?

Well, as always, regional exploration is an important part of the project and everything that we do in terms of the development of new resources in the district. As we pointed out, I believe in the press news release, we are still focused on these four or five areas in the district right now. We're still very encouraged by what we're doing there in terms of the work. We see no reason to really get out of those areas in terms of the regional exploration program until we fully understand what's going on there. Obviously, there is a big focus now on drilling between Siriema with six drill rigs allocated to that program and we will continue, how many rigs we are going to be using with regards to the Deepening project remains still being worked through in terms of the budget. But we will also continue to drill and continue to expand and drill out the Deepening project. Those are the three main focuses in terms of exploration, but regional remains a very important part of all of that.

Okay. Okay, great. And then, I'm not sure if I missed it, but I just obviously at MCSA for the quarter, the mine production was strong. But the mill throughput kind of lagged like the mine output. Was there any particular reasons or was it because you're now retiring the HIG Mill and things like that? Or can you maybe just provide a bit more color on that?

Yes. It's just, again, you know, I think everybody takes that on a firm. When you look at us on a quarter-by-quarter basis, everything is going to be exactly the same whether things lag or not lagging. It's got nothing to do with that. We just had one of our mills down in terms of doing some repairs. So at the end of the quarter, I think we've built up a bit more material sitting in the yard in terms of that. So nothing that's untoward from a month or quarter-by-quarter basis in terms of how we are operating whether we have material sitting in the yard or running through the plant. It fluctuates.

Fair enough. Fair enough. That's good. That's very helpful. Thanks very much, guys.

Our next question is from Orest Wowkodaw with Scotiabank. Please go ahead.

Hi, good morning, guys. I realized it's probably a little bit premature, but I wanted to see if we can get a bit of an understanding of how you're thinking about the new mine plan that will be coming out about a month. And I don't mean specifics, but more of just from a philosophical perspective, whether you're thinking of the approach to be more of a lower throughput, higher grade type of mine plan? Or does the addition of the ore sorting technology kind of make the larger throughput lower grade type of mine plan more economical, say than last year? I'm just kind of wondering where the thinking is right now?

It's a good question, Orest. Our philosophy in the marketplace is centered on a return on capital focus. We aim for the highest return on capital possible. As we have highlighted, we are targeting operating costs at or below a dollar or pound. Our priority is not solely on the grade but on how we can maintain high profitability. We are aiming for the lowest possible operating costs while ensuring a high return on invested capital. This philosophy influences our mine plan for this year. If a project can sustain a high return on invested capital and also keep the long-term life of mine average operating costs at or below a dollar a pound, we will consider it for our production plan. We are not focused solely on net asset value, so we will not indiscriminately include projects in the mine plan; however, if we can meet the targets we outlined, we will definitely consider them.

Okay. No. That's helpful. Thank you. And then just a follow-up, I mean, do you have a sense of the earliest when it can be that material actually makes it into the mine plan, like it's not going to take a couple of years in terms of development?

Yes, I believe the reason we took on this work early was to give us the flexibility to optimize the development of the Deepening project in the best way possible for maximum return. A significant part of this involves transportation, and our team has invested a lot of time considering what will yield the highest returns. Fortunately, we now have the flexibility to implement the deepening project on a timeline that allows us to achieve the best possible returns. While I can't provide a specific date, I can say that we have plans to advance the Deepening project in alignment with our goal of maximizing returns. We're really excited about the potential outcomes at this stage.

Okay. That's awesome. Thank you. And then just finally, in your last exploration update, I guess it was sort of clear that you were a bit behind schedule on where you hoped to be on some of the regional exploration because of kind of COVID constraints. Do you feel like that's now behind you in terms of are you actually able to start drilling those targets now? Or should we expect more of a longer delay on the regional exploration program?

I think the thing to take away when we talk about the impact of COVID is the inability for us to travel, not only for us to travel from North America, and Mike and Pablo to be able to be on the ground with the guys and looking at what is going on in terms of that regional program, but there's also been constraints with regards to some of our team in Brazil. Some of our team are older. As you know, we have restricted certain people due to age to work at home, and we have a couple of our senior GOs in that position. They have not been at the operation, and then some of our other GOs who work directly for Europe, when Brazil was in lockdown, were unable to travel. We were able to do one trip during the quarter to the site and it was a fantastic trip in terms of getting the guys and our GOs now on-site can get to work. It’s not so much that we haven't been able to drill; we have been evaluating projects. The issue more is about what we are seeing and then moving rigs to be able to more optimally drill some of the targets that we are uncovering. That's been the issue more than anything else. These ore bodies are big porphyry ore bodies; we just have drilled here and then step out 150 years and drill again, and it takes a lot of work and need intellectual capital on site. So, we are drilling targets. We're pretty excited about some of the stuff that we are seeing. But where we see the delay is understanding what we are looking at with material coming up to ground and then being able to move rigs to drill targets optimally. We came a little bit more inefficient in doing that, I would say, due to the lack of the intellectual team being there to review. Does that makes sense?

It does. Thank you, David.

Our next question is from Dalton Baretto with Canaccord. Please go ahead.

Thank you. Good morning guys. Just one question from me. Now that you've got the lab on-site for multi-element, have you had any results since?

Dalton, we have results every day. Certainly, we have some results, but there is nothing to really talk about. It's far too early to be able to address anything. There's a lot more work that needs to be done in a number of different areas. So it's no point even speculating that anything. Like anything else, you see something, you get excited about it. You do some more work; sometimes the new work turns up new insights. Well, I guess we have to move on. Sometimes you keep scratching and keep going. We're really in that kind of phase right now. I can't tell you whether things will break one way or the other. But having that capability now on site is certainly going to allow us to accelerate some of the work that we have been doing. But we had significant delays in turnaround time because we were having to send samples to labs outside of Brazil. So that's the best insight.

To add, David, the labs are just ramping up. It won't be really at full speed until January onwards. It's kind of we're in a ramp-up phase.

Yes. Thanks, Noel.

Got it. Okay. Thanks, guys.

This concludes the question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

I’ll take it from here. As Noel mentioned, we’re truly excited about reaching a significant milestone for our team. This is a tremendous achievement for our colleagues in Brazil, especially considering we have now gone over a year without any accidents. This sets a crucial benchmark for underground mining operations like ours at Ero, and we sincerely appreciate the efforts of our team members in Brazil. We're always available for discussions and look forward to connecting with you all in the coming weeks as we approach updates regarding our 43-101s. Thank you, operator, and have a great day everyone. Thank you.

This concludes today's conference call. You may disconnect your lines. Thank you for participating. And have a pleasant day.