claude resources inc. q4 and 2015 annual conference call and webcast presentation
TRANSCRIPT
Q4 & Annual 2015 Earnings Call
March 31, 2016
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Cautionary Statement
Cautionary Note Regarding Forward-Looking InformationThis document contains certain forward-looking statements relating but not limited to the Company’s expectations, intentions, plans and beliefs. Forward-looking information can often be identified by forward-looking words such as “anticipate”, “believe”, “expect”, “goal”, “plan”, “intent”, “estimate”, “may” and “will” or similar words suggesting future outcomes or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. Forward-looking information may include reserve and resource estimates, estimates of future production, unit costs, costs of capital projects and timing of commencement of operations, and is based on current expectations that involve a number of business risks and uncertainties. Factors that could cause actual results to differ materially from any forward-looking statement include, but are not limited to, failure to establish estimated resources and reserves, the grade and recovery of mined ore varying from estimates, capital and operating costs varying significantly from estimates, delays in obtaining or failures to obtain required governmental, environmental or other project approvals, inflation, changes in exchange rates, fluctuations in commodity prices, delays in the development of projects and other factors. Forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from expected results.
Potential shareholders and prospective investors should be aware that these statements are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. Shareholders are cautioned not to place undue reliance on forward-looking information. By its nature, forward-looking information involves numerous assumptions, inherent risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and various future events will not occur. Claude Resources undertakes no obligation to update publicly or otherwise revise any forward-looking information whether as a result of new information, future events or other such factors which affect this information, except as required by law.
Cautionary Note to U.S. Investors Concerning Resource EstimateThe resource estimates in this document were prepared in accordance with National Instrument 43-101, adopted by the Canadian Securities Administrators. The requirements of National Instrument 43-101 differ significantly from the requirements of the United States Securities and Exchange Commission (the “SEC”). In this document, we use the terms “measured”, “indicated” and “inferred” resources. Although these terms are recognized and required in Canada, the SEC does not recognize them. The SEC permits U.S. mining companies, in their filings with the SEC, to disclose only those mineral deposits that constitute “reserves”. Under United States standards, mineralization may not be classified as a reserve unless the determination has been made that the mineralization could be economically and legally extracted at the time the determination is made. United States investors should not assume that all or any portion of a measured or indicated resource will ever be converted into “reserves”. Further, “inferred resources” have a great amount of uncertainty as to their existence and whether they can be mined economically or legally, and United States investors should not assume that “inferred resources” exist or can be legally or economically mined, or that they will ever be upgraded to a higher category.
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2015 – A Record Year Key Highlights
(1) See description and reconciliation of non-IFRS financial measures in the “Non-IFRS Financial Measures and Reconciliations” section of the Company’s most recent MD&A.(2) Cash and bullion relates to current cash on hand of $37.0 million and $2.8 million of bullion (gold poured in dore bars, not yet been sold and valued at market prices) as December 31, 2015
Record Production: record gold production in 2015 of 75,748 20% increase vs 2014
Excellent Safety and Environmental Performance
Higher Grades: mill head grade of 8.82 g/t in 2015 20% increase vs 2014
Record Earnings: 2015 net earnings of $32.3 million, or $0.17 per share a $27.7
million improvement from 2014
Peer Leading Cost Performance: 2015 cash cost per ounce (1) of $672 (US $525) 20% decrease vs 2014
2015 AISC (1) of $1,122 (US $878) 14% decrease vs 2014
Strong Balance Sheet: increased cash and bullion (2) to $39.8 million and decreased debt to $19.1 million (at December 31, 2015)
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Operating Execution
Record safety and environmental performance
Exceeded production and cost guidance for second consecutive year
Mine sequencing and higher grade Santoy Gap ore replaced lower grade Santoy 8 ore
Positive Alimak mining method results
Performance Driven by Better Ore Bodies and Mining Method
Production Results Q4 2015 Q4 2014 2015 2014
Tonnes Milled 65,950 60,551 277,368 279,597Head Grade (g/t) 8.99 6.57 8.82 7.32Recovery 96.3% 96.1% 96.3% 95.7%Gold Ounces Produced 18,340 12,284 75,748 62,984 Sold 18,311 16,639 72,699 62,772
2013 2014 20150
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
$0 $200 $400
$600 $800 $1,000
$1,200
$1,400 $1,600 $1,800 $2,000
Gold produced (ozs) AISC (CDN$/oz)
Gol
d Pr
oduc
tion
(ozs
)
AISC
(CD
N$/
oz)
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Key Drivers: Santoy Gap Higher Grade + Wider Veins = More Ounces per Vertical Metre
Production well-ahead of schedule and pre-feasibility design
Reconciling above reserves and resources on ounces and below on tonnage
Infrastructure upgrades on-going for 650-700 tpd profile in 2016
Transitioning to full production in 2016 - 2017
~80% of 2016 production ~10 year mine life at current
reserves and resources Total Mine Production
Tonnes Ounces GradeDevelopment (May 2014 to Dec
2015) 141,537 36,324 7.98Production (May 2014 to Dec 2015) 54,621 15,834 9.02
2014 47,594 12,182 7.962015 148,564 39,976 8.37Total 196,158 52,158 8.27
Q1 Q2
Q3 Q4
Q1 Q2
Q3 Q4
2016 E Q1 Q2
Q3 Q4
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
0
2,500
5,000
7,500
10,000
12,500
15,000
17,500
Santoy Gap Quarterly Production Profile
Budget T Actual T
Budget Oz Actual Oz
Qua
rter
ly T
onna
ge
Qua
rter
ly O
z
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Financial Highlights A High Margin Gold Producer
Financial Results (all $ amounts in CDN$) Q4 2015 Q4 2014 2015 2014
Revenue (000’s) $27,180 $22,707 $107,651 $87 372
Cash flow from operations (1) (3) (000’s) $12,695 $4,525 $49,005 $26 540
Cash flow from operations (1) (3) per share $0.07 $0.02 $0.25 $0.14
Net earnings (loss) (000’s) $11,306 ($516) $32,335 $4,552
Earnings (loss) per share $0.06 ($0.00) $0.17 $0.02
Adjusted net earnings (loss) (1) (000’s) $6,869 ($516) $27,898 $4,552
Adjusted earnings (loss) (1) per share $0.03 ($0.00) $0.14 $0.02
(3) Cash flow from operations before net changes in non-cash operating working capital.
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Strong Margins Generating Free Cash Flow
Q4 2015 Q4 2014 2015 2014Average realized price per ounce $1,484 $1,365 $1,481 $1,392Average realized price per ounce (U.S.$) $1,112 $1,201 $1,158 $1,260
Total cash costs per ounce (1) $679 $934 $672 $836
Total cash costs per ounce (1) (U.S.$) $509 $822 $525 $757
AISC per ounce (1) $1,103 $1,434 $1,122 $1,310
AISC per ounce (1) (U.S.$) $826 $1,262 $878 $1,186
Q4 2015 2015 $-
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,103 $1,122
$381 $359
Margin/oz in $CDN
Margin AISC
Gol
d Pr
ice
($CD
N)
Q4 2015 2015 $-
$200
$400
$600
$800
$1,000
$1,200
$1,400
$826 $878
$286 $280
Margin/oz in $U.S.
Margin AISC
Gol
d Pr
ice
($U
.S.)
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Strong Balance Sheet A $62.5 million improvement in financial position Debt reduction through $1.25 million/quarter principal payments ($5.0
million annually) Strong liquidity position with cash and bullion (2) of $39.8 million (at
December 31, 2015)
De-Risked Balance Sheet & Improved Financial Structure
1 2 3 4 5 6 7 8 9
-$10
-$5
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$(8.6)
$(1.2)
$(5.6)
$15.1
$11.2
$18.9 $20.9
$27.0
$39.8 $33.2
$27.2 $26.1 $23.5 $22.6 $21.7 $20.8
$20.3
$19.1
Cash & bullion Total Debt
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Sustainable Grades & Ounces
Reserves impacted by mining depletion, top-cut and dilution assumptions and infill drilling Santoy Gap mineral reserve grade increased to 8.12 g/t from 7.64 g/t The 20% increase in Inferred ounces was driven by expansion of the Santoy 8 ore body 2015 underground drilling program (~62,000 m) focused on resource expansion 2016 underground drilling program (~65,000 m) focused on reserve and resource expansion
Focused on Delivering High Margin Ore to the Mill
Seabee Gold Operation Mineral Reserves and Mineral Resources(4)(5) (as of December 31, 2015)
P&P Reserves 2015 2014 Change
Grade 7.62 7.03 8%
Ounces 239,300 299,000 -20%
M&I Resources
Grade 6.24 5.98 4%Ounces 128,800 125,200 3%
Inferred Resources Grade 8.76 7.96 10%
Ounces 1,012,900 847,300 20%(4) See appendix D for detailed Mineral Reserve and Mineral Resource table. (5) See appendix E for footnotes to the Mineral Resource Statement.
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Exploration
2016 surface exploration budget of $2.5 million (18,000 metres) Exploration will focus on:
Expanding Mineral Resources near infrastructure Testing greenfield targets for the next Santoy Gap
An additional 65,000 metres of underground drilling for reserve and resource growth
A Renewed Investment in an Underexplored Camp
Program Metres Purpose
Santoy Gap Deep 11,000 Test continuity at depth
Santoy Gap Up-Dip 4,000 Expand continuity up-dip
Carr Target 2,000 Greenfield exploration
Herb West 1,000 Greenfield exploration
Santoy Mine Complex 45,000 Resource conversion and expansion
Seabee Mine 20,000 Resource conversion and expansion
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Limited drilling below 500 metres
Exploration: Santoy Mine Complex
Underground drilling demonstrated economic grades and widths SUG-14-048 – 26.77 g/t over 8.7 m
Major step-out holes among the highest gram-metre product to date in the camp JOY-13-690 – 200.92 g/t over 1.9 m & JOY-13-692 – 30.08 g/t over 5.9 m
~63,000 metres of drilling in 2016
Excellent Growth Opportunity
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Outlook
Sustainable gold production guidance of 65,000 to 72,000 ounces
Low unit cost guidanceCash costs per ounce (1) to $700 - $775 (U.S. $530 -
$585*) AISC per ounce (1) to $1,125 - $1,245 (U.S. $850 -
$935*)
FCF in 2016 @ CDN ~1,270 Au/oz (U.S. $955 Au/oz*)FCF margin of ~20% @ current Au prices
Focus Remains on Operating Execution, Free Cash Flow & Exploration
*Forecast uses CDN$/U.S.$ exchange rate of $1.33, at CDN$ 1,620/oz and mid-point of production and cost guidance.
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Claude & Silver Standard
Silver Standard to acquire all issued and outstanding CRJ shares
Total equity value of C$337 million (as of March 4, 2016 closing price)
Exchange ratio of 0.185 Silver Standard share and $0.001 in cash per CRJ share
Implied premium of 30% to spot and a 25% premium to 20-Day VWAP as of March 4, 2016 closing price
C$1.65 per share at time of announcement (March 7, 2016)
Pro forma ownership: 68% Silver Standard and 32% Claude Resources
Transaction Summary
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Claude & Silver Standard
Establishes a high-quality intermediate precious metals producer with margin and scale in attractive mineral belts and political regions
Combined company is expected to produce ~390,000 gold equivalent ounces at cash costs of ~ U.S.$735 per Au Eq ounce sold in 2016
Immediately strengthens financial position with cash and marketable securities of approximately U.S.$330 million (C$440 million) for enhanced credit quality and financial flexibility
Combines complementary safe underground and open pit mining skills to realize portfolio benefits with growth and exploration opportunities
Well positioned to pursue growth at our combined operations and large exploration land package, and to continue our disciplined approach of reviewing external opportunities
Transaction Highlights
Notes: Au Eq production and cash cost calculated based on mid-point of each company’s previously announced 2016 production and cash cost guidance with silver converted to gold equivalent at a 75:1 ratio. Cash and marketable securities as at December 31, 2015. USD/CAD of $0.75 exchange rate used.
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Benefits to Claude ShareholdersMeaningful Ownership of the Next Mid-tier Au Producer 32% ownership in mid-tier precious metals producer
Provides immediate exposure to Silver Standard’s diversified project portfolio
Lowers operating risk and provides scale with multiple mining operations
Significantly enhances financial strength and free cash flow generation
Provides equity participation for exposure to future value creation and growth
Increases trading liquidity and capital markets exposure
Presents financial and tax synergies only realized through the combination
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2016 Outlook Creating Value and Growth with Silver Standard
Transaction creates an emerging Americas focused mid-tier precious metals producer
Strong financial position with cash and marketable securities of U.S.$330 million (C$440 million)
Low cost production with cash costs of ~U.S.$735 Au Eq/oz
Focus remains on operating execution, free cash flow & exploration
Notes: Au Eq production and cash cost calculated based on mid-point of each company’s previously announced 2016 production and cash cost guidance with silver converted to gold equivalent at a 75:1 ratio. Cash and marketable securities as at December 31, 2015. USD/CAD of $075 exchange rate used.
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Trading Symbol:
TSX: CRJ OTCQB: CLGRF
Investor Relations:
Marc Lepage, CPIR [email protected]
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Appendix A:Corporate SummaryStock Exchanges:
TSX CRJOTCQB CLGRF
Share Structure:Shares Outstanding (March 29, 2016):Basic 197.7 millionFully Diluted 205.8 million
Market Cap CDN ~$270 million (at March 29, 2016)52 Week High $1.5752 Week Low $0.51
Analyst Coverage:Richard Gray Cormark SecuritiesRahul Paul Canaccord GenuityRon Stewart Dundee SecuritiesAdam Melnyk National BankDon Blyth Paradigm Capital Philip Ker PI Financial Craig Johnston ScotiabankAndrew Mikitchook M Partners
Financials : (December 31, 2015) :
EPS: $0.17
CFPS (3) : $0.25
Total cash cost/oz (1) : C$672 (U.S. $525)
AISC/oz (1) : C$1,122 (U.S. $878)
Cash & bullion (2) : $39.8
Debt: $19.1
Outlook:
Gold Production: 65,000 – 72,000 ozs
Total cash cost/oz (1) : C$700-$775 (U.S. $530-$585)AISC/oz (1) : C$1,125-$1,245 (U.S. $850-$935)
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Appendix B: Seabee Gold Operation Project Overview Ownership: 100%Property Size:23,300 hectaresProperty Location: Saskatchewan, CanadaHistory:(1991 – Present) +1,100,000 oz of gold productionResources: See Appendices D & GStatus: Production from Seabee Mine and Santoy Mine ComplexProduction: Forecast 65,000 – 72,000 ozs of gold in 2016Infrastructure:
Mill: 900 tonnes per day (1,050 tpd peak) Shaft: 1,000 metresTailings Facility: Permitted 6 year life
Key Notes:• Santoy Gap ramp up ahead of schedule achieving
460 tpd in 2015• 2016 UG drill program 65,000 m • 2016 exploration program 18,000 m• Successful execution of Alimak mining method at
Seabee• Santoy Gap infrastructure upgrades on-going to
reach 650-700 tpd in 2016
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Appendix C: Amisk Gold ProjectProject Overview Ownership: 100% Property Size: 40,400 hectaresProperty Location: Saskatchewan, CanadaResource: Indicated Resources: 921,000 Au Eq ozs Inferred Resources: 645,000 Au Eq ozsStatus: Greenfield explorationInfrastructure: Exploration camp
Key Notes:• Large bulk mineable potential• Mineralization begins at surface and has been tested to
approximately 600 metres below surface• Close to provincial infrastructure and in proven mining
district and “mining friendly” community
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Appendix D: Mineral Reserves & Mineral Resources (5)
At December 31, 2015 Tonnes Grade (g/t) Contained Gold (Oz)Seabee Gold Mine Proven Reserves 167,300 6.01 32,300Probable Reserves 46,700 7.01 10,500Measured Resources 20,600 6.47 4,300Indicated Resources 94,600 7.79 23,700Inferred Resources 404,800 8.09 105,300Santoy Gap Proven Reserves 345,800 8.22 91,400Probable Reserves 386,700 8.04 100,000Measured Resources 84,700 5.63 15,300Indicated Resources 116,800 5.10 19,100Inferred Resources 1,101,900 8.52 301,700Santoy 8 Proven Reserves 5,000 5.89 1,000Probable Reserves 24,800 5.20 4,100Measured Resources 27,200 11.41 10,000Indicated Resources 37,300 5.22 6,300Inferred Resources 1,847,100 9.29 551,700Porky Main Indicated Resources 160,000 7.50 38,600Inferred Resources 70,000 10.43 23,500Porky West Indicated Resources 100,700 3.57 11,600Inferred Resources 174,800 5.48 30,800Total Gold Proven & Probable Reserves 976,400 7.62 239,300Measured & Indicated Resources 642,000 6.24 128,800Inferred Resources 3,598,500 8.76 1,012,900
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Appendix E:Footnotes
(1) See description and reconciliation of non-IFRS financial measures in the “Non-IFRS Financial Measures and Reconciliations” section of the Company’s Annual 2015 MD&A
(2) Cash and bullion relates to current cash on hand of $37.0 million and $2.8 million of bullion (gold poured in dore bars, not yet been sold and valued at market prices) at December 31, 2015
(3) Cash flow from operations before net changes in non-cash operating working capital(5) Footnotes to the Mineral Resource Statement:
• At December 31, 2015 and November 30, 2014, Mineral Reserves and Mineral Resources were estimated by Claude personnel. The Mineral Resource evaluation work was completed by a team of geologists and engineers under the supervision of Brian Skanderbeg, P.Geo., President and Chief Executive Officer. Mineral Reserves were conducted under the direction of Qualified Person Gordon Reed, P.Eng., Seabee Gold Operation General Manager. Mr. Skanderbeg and Mr. Reed have sufficient experience, which is relevant to the style of mineralization and type of deposit under consideration and to the activities undertaken to qualify as Qualified Persons as defined by NI 43-101.
• The Mineral Resources and reserves reported herein have been estimated in conformity with generally accepted CIM “Estimation of Mineral Resource and Mineral Reserves Best Practices” guidelines and are reported in accordance with Canadian Securities Administrators’ National Instrument 43-101.
• Mineral Reserves and Mineral Resources for the Seabee deposit are reported at a cut-off of 4.6 grams of gold per tonne. Santoy 8 and Santoy Gap Mineral Reserves and Mineral Resources are reported at a cut-off of 3.75 grams of gold per tonne. Porky Main and Porky West Mineral Resources are reported at a cut-off grade of 3.0 grams of gold per tonne. Assumptions include a price of CDN $1,400 per ounce of gold using metallurgical and process recovery of 96.2 percent and overall ore mining and processing costs derived from 2015 and 2014 realized costs.
• All figures are rounded to reflect the relative accuracy of the estimates. Summation of individual columns may not add-up due to rounding. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. There is no certainty that all or any part of the Mineral Resource will be converted into Mineral Reserves.
• Proven and Probable Mineral Reserves are exclusive of Measured and Indicated Mineral Resources.
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Appendix F: Executive Team
Brian Skanderbeg, P.Geo.
President &CEO, Director
Mr. Skanderbeg joined the Corporation in April 2007. He was appointed as President & CEO in November 2014. Prior to his current position, he was the Sr. VP and COO. He previously worked for Goldcorp, Inco Ltd. and Helio Resources, holding positions in both exploration and operations. He holds a B.Sc. from the University of Manitoba, an M.Sc. from Rhodes University, South Africa. Mr. Skanderbeg brings extensive experience in gold systems, operational management, cost and asset optimization and strategic analysis.
Rick Johnson, CPA, CA
Chief Financial OfficerVice President Finance
Mr. Johnson joined Claude Resources in 1996. He was appointed to his present position in 2004, having previously served as Company Controller. Mr. Johnson holds a Bachelor of Commerce degree from the University of Saskatchewan and is a member of CPA Canada.
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Appendix G: Board of Directors Brian Booth, P.Geo.
Chair Currently serves as the President and CEO of Pembrook Mining Corp. Previous work experience includes Inco Ltd. and Lake Shore Gold Corp. Over 30 years of experience in mineral exploration. Joined the Board of Directors in 2012.
Rita Mirwald, C.M.
Director Held a number of senior positions with Cameco Corporation, including that of Senior Vice President Corporate Services. Joined the Board of Directors in 2011.
Patrick Downey, P.Eng
Director Has over 25 years of international experience in the resource industry. Most recently, Mr. Downey was the President and CEO of Elgin Mining Inc., which was acquired by Mandalay Resources Inc. He has held numerous senior engineering positions at several large scale gold mining operations. He holds a B.Sc (Hon.) degree in Engineering from Queen's University in Belfast, Ireland. Joined the Board of Directors in January 2015.
Arnold Klassen, CA, CPA (Illinois)
Director Has over 35 years of experience in accounting, audit and tax, with over 30 years of experience in the mining industry. Mr. Klassen is currently President of AKMJK Consulting Ltd. and prior to that was the VP of Finance for Dynatec Corporation from 1988 to 2007. Mr. Klassen spent seven years with KPMG prior to becoming VP of Finance with the Tonto Group of Companies. He joined the Board of Directors in April 2015.
John Murphy, CFA Director Mr. Murphy recently retired from Raymond James Ltd. as Managing Director, Investment Banking, Co-Head Mining and Metals after more than 21 years with the organization. John also worked for more than six years at Swiss Bank Corporation in its corporate lending, restructuring and risk advisory activities. He has been directly involved in numerous financial advisory assignments and financing transactions in a variety of sectors. John has a degree in economics from the University of British Columbia and is a Chartered Financial Analyst.
Brian Skanderbeg, P.Geo.
President &CEO, Director
Mr. Skanderbeg joined the Corporation in April 2007. He was appointed as President & CEO in November 2014. Prior to his current position, he was the Sr. VP and COO. He previously worked for Goldcorp, Inco Ltd. and Helio Resources, holding positions in both exploration and operations. He holds a B.Sc. from the University of Manitoba and an M.Sc. from Rhodes University, South Africa. He brings extensive experience in gold systems, operational management, cost and asset optimization and strategic analysis.