Q2 2020 Yamana Gold Inc Earnings Call
[music].
Thank you all for joining us this morning before I turn the call over I need to advice that certain statements made during this call today may contain forward looking information and actual results could differ from the conclusions or projections in that forward looking information, which include but are not limited to statements with respect to the estimate.
One of mineral reserves and resources, the timing and amount of estimated future production cost of production capital expenditures future metal prices and the cost and timing of the development of new projects.
More complete discussion of the risks uncertainties and factors, which may lead to actual financial results in performance being different from the estimates contained in the forward looking statements. Please refer to Humana's press release issued yesterday announcing second quarter 2020 results as well as the management's discussion and analysis.
Thus for the same period and other regulatory filings in Canada, and the United States United States I.
I would like to remind everyone that this conference call is being recorded and will be available for replay today at 12 PM Eastern time.
Replay information and the presentation slides accompanying this conference call and webcast are available on Humana's web site at you know dotcom.
We'll now turn the call over to Mr., Daniel Racine, President and CEO.
Thank you operator.
All for joining us as a warm welcome to our second quarter conference call.
With me to these days under the block our CFO.
There's only been a few months since the emergence of Cowen 19, Dolby Ttfields longer.
And then make us change our lives and while there is no doubt that we will go get through this.
Certainty created by the virus has not been easy for anyone including our employees and contractors.
Our people that persevered and done indexed on that same thing job through the first half of the year.
So I want to take a moment to recognize and thank our employees and contractor for their remarkable dedication.
Mittman professional this and compassion.
I'm proud to be or CEO.
Local than 19 remain prevalent in Latin America, we have to full support of our employees in those communities to continue operating.
We are grateful for the support and do that do not tickets for granted.
We have implemented strict brought nichols and be caution that our operation.
The health and safety.
Our employees contractors and communities.
Physical just dancing use of BB, and then cleaning and disinfecting and then screening procedures and the rapid contact tracing protocol or just some of the measures. We've implemented to contains the risk of infection.
I should note out debt in Chile, where we operate two mines the infection rate is declining and some businesses are starting to reopen.
While there is some concern about around mining in the country. This is primarily interest relation the copper industry, where some companies I've experienced high rates of infection.
In the town object will be not in north east in Brazil. The number of cases is limited and on the design.
We have from the earliest stage of defend damning been supporting our oldest communities in the fight against Govan 19, providing various the nation, along with critical equipment and supplies.
We will continue to work closely with our communities D partner to understand their need and do everything we can to support them through this challenging for you.
Turning now to our safety performance.
Our total recordable injury frequency rate in Q2 was zero point 38.
That compares to 0.6 in the second quarter of 2019.
During the quarter Canadian Malartic reach collaboration agreement with Forney nearby initiating a b first nations communities sitting out measured to increase training.
I've been business opportunities and environmental protection.
Both several mobile and Canadian Malartic resumed mining activities in April following temporary suspension.
To government restrictions related to go a bit 19.
The ramp up at Canadian Malartic progress faster than expected with mills was put in May and June exceeding 60000 done for the.
Ladies with both in May of Nerdy 64000 done what's the records for the operation a remarkable achievement considering that you talk through it on did you have a suspension.
Several Mo Interprovincial traveled restriction, resulting in the reduced workforce in the second quarter extending than that of the rental.
The operation is implementing a new initiatives to improve efficiency and production, including optimizing mine sequencing improvement to drill and blast procedure.
And a review of the mine design, the lower costs and accelerated development of high grade zones.
This initiative will provide long term benefit to several mobile thus far outweighed into short term in back of the travel restrictions.
We delivered strong operational and financial resort results during the quarter.
Gold production of 106, 64, 141 ounces was driven by exceptional performances from Jack will be the L. opinion, Minera, Florida, and Canadian Malartic, which all exceeded their targets production.
Silver production of 2 million ounces refresh reflect a strong performance for millennials.
While the price of gold, which is a nine year height. This week is contributing to our strong financial results. The price of silver is also up for sharply in recent months and bringing upside to our margin and cash flows.
Geopunch and over 183 500, any do two ounces was in line with plan, while cash costs and all in sustaining cost of 715 per Geo and 1125 or do you respectively were better than plan. Despite the geo ratio being higher at 105 hundred 40.
And then guidance of 98 point 85.
Costs were.
Positively impacted in the quarter by foreign exchange movements.
Adjusted net earnings of 63.3 million or seven cents per share while cash flow before net change in the working capital came at a 118.1 million.
When normalized for costs associated with Govan 19 cash flow from operating activities before net change in working capital.
137.3 million.
Net free cash flow during the quarter was 60.3 million or 41.1 million without normalizing for the impact of the temporary suspension standby and other incremental coven 19 related costs.
Despite these impacts gross margin and free cash flow on the verge yield basis increase in Q2 over Q1.
Yesterday, we announced that we are increasing our annual dividend by a further 12% or seven cents for sure.
Is the fourth increase to our dividend announced in the past year for competitive increase of 250%.
We will continue to take a gradual and progressive approach the dividend increases as our cash balances continue to grow from rising cash flows and successful initiatives to monetize our portfolio of nonproducing asset and financial instrument.
The new annual dividend rate the dividends paid will be above $70 per view in line with our target of between 50 and 100 bridge you.
We reiterate our 2020 guidance for 890800 90000 Geos.
Just compromise of 786000 ounces of gold, but and.
10 point 25 million ounces of silver.
All in sustaining cost guidance for the second half of the year is for 1020 and between 41020 in 1060 per deal.
Well the option is already tracking ahead of guidance with Q4 expected to be an exceptionally strong quarter on both production and cost.
As a result, we are evaluating an increase to current production guidance. We are also reaffirming our 2021 and 2022 outlook for production of 1 million Geo in each of those years gold production as you can see will be slightly higher in 2022 at hate.
Hundred 85000 ounces compared to 873000 ounces in 2021.
Silver production will be at 11 million ounces next year, the being to 10 million ounces in 2022.
Turning out to our operational result.
Hi mine, Jack will be enough posted its six consecutive quarter of record setting gold production at 45646 ounces.
The record production reflect higher grade and increased with both which averaged 6850 tons per day, well above the phase one target of 65 on distance Buddy.
El Penon delivered another strong quarter with both gold and silver production higher than planned.
Primarily due to processing higher grade or.
As mentioned the ramp up at Canadian Malartic progress faster than expected.
The ramp up that settlement slow, but steady despite the impact of travel this fiction in Argentina.
Production of that several model in June was almost 50% higher than in May.
Production at Minera, Florida in Q2 was better than plan benefiting for higher grades higher feed grade and increased done process largely due to continuing improvement in productivity.
As mentioned our overall production is tracking ahead of guidance and expected to be more heavily weighted towards the second half in line with annual trend with Q4, our is production lowest cost quarter.
I will also add that we now expect second half to be higher than the 54% waiting that we had previously forecasting.
There were a number of positive catalyst during the quarter.
We delivered significant exploration update that support mine life extension project will be now and that opinion.
We also provided an update on the face do.
The phase two deck will be next pension plan announcing robust project economics.
A few key Q highlight as a reminder.
The plan as a modest capital costs estimated at 57 million using a conservative exchange rate of 4% in Rio two one U.S. dollar.
I wouldn't know that capital is tracking closer to 50 million dollar based on the current exchange rate.
1.7 billion dollar and cash flow into first 10 years under the expected extended case scenario, assuming a gold price of 1500 50 branches and the same conservative exchange of four to one.
Rich gold production of 230000 ounces per year at an average feed grade of 2.4 grams per tonne at 31, 31% increase compared to the phase one rate of 175000 ounces per year.
We are now doing a backfield study.
For 2000 ton per the plan.
We are studying to auction first option is on outdoor they backfield plan that will cost between seven and 10 million dollar the face and the pace field plan as a second option between 15 and 20 million dollar.
We have bolt option very well study right now and is leaning towards the adroitly feel again between seven and 10 million dollar we would that's up we will accompany this study in the second half of this year and come back with with the decision and more precise number in the coming quarters.
During the quarter, we also announced an option agreement on the C. We project.
The agreement with console doors assessment regimen privately held portfolio management and capital market in Argentina.
As an important step that we believe we advance DSG matter related to the project.
At Canadian Malartic, we have authorized the construction of surface in Sorrento, instruct infrastructure and exploration ramp into Odyssey and these might uptick.
Governmental approval already in and construction of the surface infrastructure and bortle in preparation for development of their ramp is expected to began in August.
2020.
With the budget of 6 million for the remainder of the year on a 50% basis.
Ramp development should start in Q4.
Once complete the new ramp will allow us to carry out a bulk sample of up to 40000 done before.
We advance the integration of a gorica without an umbrella to create the significantly de risked Legwear Rica, a number of our integrated project. We also continue to advance the permitting and visibility study for this long life low capital intensity project.
We completed internal studies for the advancement of Millennium and B as a high grade underground project and developed a plan for exploration of significant don't pledged extension and satellite areas.
You may have seen our release 30 or this weekend on seeing art and then intension to this on the main markets of the London stock exchange.
When the advanced stage of the listing process and expect to begin trading in the next few months.
London listing will improve our liquidity and expand our share of it just or in the large under served market for pure gold believes there's with assets in the Americas.
Our goal is to become the investment of choice in on the LSC will those looking for exposure of gold equities in the UK in Europe, and we believe our raising rising cash flow and dividend profile high quality asset portfolio and strong balance sheet will help us achieved this objective.
I should also note that we that we do not intend to raise equity capital in conjunction with the LSC existing.
During the quarter, we have also completed the sale of their well deep portfolio.
For total consideration closing at 64.2 million, including a dirty 13% in normal will what no matter the wealthy.
No matter as a strong balance a strong base of growth mandate and it is already beginning to generate value for us due to share price appreciation that takes the value of our stake to 102.6 million as of July 22nd compared to 64.2 million when the transaction closed in late.
To me.
Finally, we completed the sale of 12 million unit of Waco, Nucs gold for gross proceeds of 120 million with the units structure, that's expected to generate an additional 81 million for total proceeds over 200 million.
I will now turn.
Over to Jayson to discuss the financial.
Thank you Daniel and good morning, everyone.
Turning now to our financial performance.
Revenue in the quarter with $303.4 million.
Very good $463.5 million in the same period last year.
On the inclusion of ship had it in last year's results. We also had the impact of coated on our sales level. During Q2, mostly from mines that had temporary suspension is during the quarter.
But as Daniel mentioned those impacts are largely behind asset Malartic had a very quick ramp up in Cerro Moro had a steady performance since Q2.
Higher year on year, DNA expenses, reflecting 11.8 million dollar increase.
Storable stock based compensation from the increase in the company's share price during Q2.
On a cash basis, however, GNS expenses were $14.6 million during the quarter in line with plan and lower than a 17.9 million in the second quarter of 2019.
Earnings during the quarter of Neal per share were impacted by a number of items, including $19.2 million and cobot related costs that will talk about more in a moment.
On an adjusted basis net earnings were seven cents per share compared to two cents per share a year earlier.
One of the other impacts from program has been an understanding on plan capital during Q2.
Future quarters capital increase more in line with the value DC here for 2019.
Thats, just over $40 million sustaining capital per quarter, and $20 million of expansionary capital per quarter free to Q3 in Q4.
This ties to our revised guidance for the year.
The same is true for exploration spending for the full year, we expected $64 million of capitalized exploration spend $23 million here today, so that leaves about $20 million per quarter for the balance of year.
We also guided $20 million of exploration expenses for the year and expense about 5 million today. So that's about 7 million per quarter remaining for Q3 in Q4.
Beyond our regular exploration program in years past, we announced additional January of exploration program earlier earlier this year to advance our pipeline of prospective projects, mainly in Canada and Brazil.
It's primarily includes the monument Bay domain properties in Manitoba and elaborate there what Barack Obama you were non-GAAP and Jack will be in NRT properties in Brazil.
As we've said our objective objective is within the next three years to increase to increase at least one reserve base from our general program to 1.5 million ounces.
Which would represent the next mine in our portfolio.
Quarterly cash flow performance continues to reflect the impact and strong production and gold prices with cash flows from operating activities of $118.1 million during the quarter.
Normalized for the 19.2 million in outflows associated with Koby 19 cash flows on the same basis would've been $137.3 million.
Free cash flow before dividends and debt repayments during the quarter was $38.3 million in marked our fifth consecutive quarter, a positive free cash flow generation.
We also reduced our net debt during the quarter by a further $101 million to $768 million.
During the quarter, we brought 120 million in treasury from the sale of Equinox Gold units, which consisted of one common share of equinox on by the company in one half warrant with each for weren't exercisable into a further equinox, Sarah 13 50 per share until January 2021.
As of today, the warrants were in the money if all the warrants were exercised that represents about $81 million Canadian.
In addition to there's likely warrant exercise. We also hold a further 1.2 million shares of equinox valued at just under $20 million Canadian as well.
Daniel mentioned, we added 10 million in cash to treasury from our sale of our royalty portfolio during the quarter.
In addition to that upfront cash we also called Nomad shares in deferred consideration back over $90 million today.
Finally in June we repaid $100 million on the 200 million dollar borrowed in March on a revolving credit facility Haggard precautionary measure due to the uncertainty around the global pandemic.
We expect to repay the remaining hundred million dollars by the end of the year.
From a balance sheet perspective, you should expect to see a steady reduction in our already low debt levels quarter by quarter.
I've mentioned, we incurred a $19.2 million a corporate related cost during the quarter.
These can be broken down into two got two categories as follows.
Temporary suspension in standby costs, which include cost associated with placing certain mind compare and maintenance. The subsequent ramp up of those operations and the under utilization of labor and contractors in relation to our pre Coakley mine plans.
And incremental costs, resulting from koby 19, including community support additional pp higher transport cost and overtime costs, resulting from lower headcount leveled at site to accommodate social gifting thing.
You can see the breakdown by site and by category on this slide.
We expect the temporary suspension in standby costs to be minimize for the balance of the year as the mines returned to full production levels.
The incremental costs are also expected to decrease prospectively over the rest of the here, but this will ultimately be dependent on the path of the coated virus.
Despite the impact of the pandemic in Q2, our free cash flow gross margin in all in sustaining margin per Geo were all higher in the quarter compared to Q1.
If that does not for a strong second half from a margin perspective, as we expect lower unit cost for the balance of year with the kicker that the gold price per ounce is about $200 per ounce higher than Q2.
So with so both will positively impact the margins you see here.
Well, our production will increase sequentially over Q3 in Q4, so that higher margin will apply to more units as well.
With that I'll turn the call back over to Daniel.
Thanks, Jason and closing all come back to my remark at the end of Q1 call and double down on them.
We believe our business baby, maybe in a better position that is as ever been.
The temporary Edwin et cetera model, not withstanding our operation, our executive exceptionally well and we add into the stronger second half of the year.
Our net debt continues to decline in cash flow continue to rise.
You mean, giving us the fixed financials exhibit easy to advance our organic growth opportunities one further increasing shareholder returns.
And despite the gain in our share price in recent months. We believe we are in the early days of the cycle, how our share remains undervalued relative to our peers and thats consider liberal and sustainable upside remains.
And with debt will be happy to take your questions operator.
Thank you Mr. receipt, we will now take questions from the telephone lines. If you have a question when you use speakerphone. Please lift your handset before making a selection. If you have a question. Please press star one on your telephone keypad. If at any time you wish to answer your question. Please press the pound.
Please press star one at this time, if you have a question there will be a brief pause all participants register for questions. Thank you for your patience.
First question is from the had carried from credit Suisse. Please go ahead.
Hi, Good morning, Thanks for taking my question on Cerro Moro can you talk about the plans to increase throughput in the second half of the year in how we should be thinking about that it sounds like grades will improve.
From the underground mines, but maybe just talk about throughput and some of the efficiencies that you're seeing with the lower workforce. Thanks.
Good morning Fad. Good question. So yeah, we see well first an increase into it but you know we were quite affected by traveled restriction in Q2.
Getting better in Q3 and four these will be almost back to normal in Q4.
The first thing grade will effectively increased quite a lot in the.
Q3 in Q4 compared to Q2 in Q1, and it's mostly in what I said during the.
Presentation is the the area, where we're developing right now with limited workforce, but where we're developing with higher grades zone.
Hold on the on the underground and the on the open pit so we see.
Better second half for several several mobile compared to the the first that especially Q2 was.
The affected by a travel restrictions.
Okay, and just as a quick follow up what what percentage of the workforce was there in July.
I think is like 48% in June, but what were where are you now in July.
We are on between 70 and 80% it depends on the shift.
It will increase because we are also kept.
Limited capacity because of gold at 19, we have to respect social distancing, so where before we had no two people per room now were limited to on the one.
So we had to add some some room capacity at the cash at the cap we're doing that right. Now. So this is why we're very confident and into Q3 in Q4 that that will increase.
Okay, Great. That's it from me. Thank you. Thank you.
Thank you next question is from Ralph Profiti from a capital. Please go ahead.
Hi, good morning, Thanks for taking my questions.
Daniel on objectively in a phase two timeline.
What's your estimate on how long.
Do you foresee you're running at the phase one optimized rate before.
Hi, good about optimization I'm, just wondering how much we should think of both the decision trigger being.
Feasibility study.
Good morning, Rafa good question.
No. The timeline is quite clear for us at the Jack will be no. We have to complete the feasibility studies. So we have to pre feas. We already know that phase one is achieving a lot better than the 6500 tonnes per day for the first quarter, we achieve above.
So.
Im sure you can all assumed that this year production from Jack will be now I will be higher than what we guide than it will be probably closer to the run rate of fees. One we announced before so we're going to run at that level for the next.
Two years, because we're going to make the decision. After competed the feasibility study early next year than we have to order equipment and we have to go to the permitting as you. All know we have already apply for the permit to 10500 tonnes per day.
As to Jack will be not so we're in that process completing the feasibility study right now so by this time next year, we will.
I mean the decision to.
Go ahead or not go ahead with phase two that phase two.
Construction that will take 18 months or by the end of 2022. So early 2023, we would be at the new.
Rate level is it going to be 8500 tonnes per day. This is what we going to see what will be phase one real phase one that we did 60 over 6800 tonnes per day in Q2. So we'll see in Q3 Q4 will that be Q1 next year and that that will guide us to what will be the new.
Tonnage for phase two is at 85 or above 85, we have to see what will happen in the next.
Next few months so that's our timeline by second quarter next year and made the decision to go ahead, and then we're going to run at the actual fees one until fees to construction is completed by the end of 2022.
That's great. Thank you.
On the backfill maybe to address on the backfill that might arrive sooner.
Because backfield is a lot easier to.
As a process to do at the meal.
Especially if we go with hydro they feel we know it's only cycle owning the tailings to separate the the coarser or of course or waste to send on drawn on the training. So that project. We're doing this this study right now will be completed in the second half and then we might decide to go sooner or for that one big.
As it is going to bring extra ounces to their meal that we're living in builders right now that we can recover with the backfill that.
Yeah, that's clear.
Maybe for Jason on the dividend reserves.
With the stronger outlook for free cash flows right coming from not only operations, but stronger gold and silver prices.
How much more work needs to be done on the balance sheet before kind of Notionally, where you're you're wire, where your where you want to be.
Hey, Thanks, Ralph Good morning, Great Great question as the as you know that where the concept reintroduced yeah, I guess about a year ago, we want to get to get to a point, where we could backstop.
Three years of our of our dividends with cash.
Aside on our balance sheet aside from that from a day to day need so we've been steadily progressing.
Towards that with free cash flow generation monetization of some assets.
With the dividend increase.
As of today, you know that that three year dividend levels about $200 million is kind of what work what we're aiming for if you look at the balance sheet, where we sit here today, we heard about 325 million a cash on balance sheet.
100 million and that was from the remaining revolver draw us if you'd that that off your to 25.
We've always run about $100 million, a maintenance cash that leads us about 125.
Otherwise on balance sheet, so we see.
The Delta between 125 in 200, it's kinda like the cash flows are going to be generating good balance of the year alone but.
Both Daniel and I talked about it on the call today, we've got a.
Equinox warm in the money that would come into treasury by December at very high probability on that right now that would take us above that level.
Not to mention other other assets I, yet I guess, you just way to say as we feel very strong that we're going to fully backstop that dividend or reserve find a over there over the balance of the year again.
Great. Okay. That's good.
Thats It from me thank you.
Thank you next question is from Josh Wolfson from RBC capital markets. Please go ahead.
Hi.
First offer for Jack could be not looking at that project and the capital that's required.
In the context aware gold prices are and where the into the new dividend level is it seems like excess cash flow would be still pretty high so.
Knowing that the current permits still alive 70, 510 today why not consider looking at advancing that project.
Tolerated rate again, just kind of looking at the capital requirements gold price today.
Good morning, Josh Good question sure we have the permit to 7500 tonnes per day, we going to push.
The actual phase one to see to see where we can reach this it's completed what we had already bought some equipment for phase two mostly on the gravity circuit.
So we're looking into installed music with men.
Yes, we have to premise they convention for 75 that might continue to increase most of the recovery, it's already I, but I thought that the truth book also it will be difficult to events.
It's more than that because the permit.
We have to wait for it and then the construction of fees to the so much. We can do you know we have to order a meal, we have time to right size of them. It's one that we have to to complete the feasibility study we have to look at the crushing also capacity and that that take some lead time long lead time to order disease. These equipment. So.
You can bet that we're going to try to push filled to debt to a ball 7000 at least one though and see all girls, we can get to that 75, but to advance phase two faster we're limited by the permit one and then the ordering of the equipment and installing there.
Okay. Thank you.
And when you're looking at the the melodic underground ramp that's that's now been approved.
Is there any ability to use this ramp for future production and would you be that position could do that may be and they certainly is two years time.
Well, we'll see what we're continuing to study shorter map will be an exploration around but at the same time potential production ramp and then I already mentioned that are Kermit gave us the option to do $40 and done enough of a walk samples. So you can bet, we going to go.
Derived aramco, we'll see the three zones the school lease an uptick and Odyssey during the next couple of view of developing.
Trend or Apple starts in Q4, and like I mentioned that right now we're doing I know.
Overburden excavation, we asked them to last couple of around into portal installed a portal take a few more around and they continue to fully.
But the board already for the excavation it will start in.
The fall or in the the winter. So we have to be ready for that it will take at least to use to develop that trend to be ready. So yeah. This potential that some of the production might come in 2023 2024, we're not there yet we're studying first priorities.
To drive that Rem and drill from underground so with that.
We mentioned it will open the big Big Unfortunately, due to drill over 40000 meters from underground and it will be a lot cheaper than drill very long hole from surface desk. The main goal right now is to go underground establish a.
Diamond drill baby to drill Easco deposit debits going all the time.
From the underground.
Got it and maybe one last question looking at the London lifting.
Which is I guess it could have a surprise and you would be reached 80 habit advantage I guess being one of the first North America. The company's there what do you see is being.
Either under appreciated are not properly appreciated.
Current listings that the second the secondary listing would be able to.
You know to surface value from.
Well, we're very happy with the dual listing we have here in Canada in the U.S., but we have quite a lot of shareholders coming from the UK and Europe and then we spoke with them about about this and also our board of director of the director.
The it in the by our executive Chairman Peter If this will discuss about this now for a long period of time, we spoke with people and it makes sense we.
We got we got told by our actual shareholder and potential.
Shareholder in the UK and some of them as you might know cat own shares of companies if they're not listed in the in the country in UK. So that's another advantage its will screen.
And many phones and then people that are not invested in business gold.
To invest in Yemen, and then like you said, the who will be want us to first a major comping utilities. There and then we had very positive comments since we read the announcement and before that with the.
Our actual shareholders and then the people we submit in the past few months.
In London.
Great. Thank you very much.
Okay.
Thank you next question is from Jonathan to from Berenberg. Please go ahead.
Yes, thank you very much growth.
And congratulations on a good quarter just a question around the restrictions in Argentina, and Brazil have you got any you could have timelines from the governments in governments in it.
In Argentina ramp how restrictions will be eastern what's your expectation on over the next quarter in half the return to the full operation there and in terms of Brazil, obviously, the type of situation seems to be BYOD or even worse than was previously there have you had any sort of official communications around.
Greg restrictions being imposed in what cost. So you should we achieved the temporary suspension in standby close another koby cost for the next quarter in the second Hall.
Hi, Good morning, good afternoon, Jonathan the four if I start with Argentina, So Argentina, we think.
No traveled restriction will stay for the rest of the year.
We will be able to bring more people unless we will have more cap capacity.
Should.
We assume that it it will continue to improve but travels restriction will will stay in place probably at least will Q3 and pulled out of the two for so we don't anticipate.
That is going to get worse.
Probably get better, but if not then we know what will be able to do with the that people were bringing more and more people need to each shift change we're doing.
We are quite good in the process right now that we need to permit for all the employees. Each 14 days were doing a shift change and it's getting better and better and then we we even move some of our employees from other provinces. The problem is to move from auto provinces to Santa Cruz and as we mentioned many times over 30.
Percent of our manpower is becoming from.
Coming from outside of Centrica within some of.
These people that's key roles.
The mine on blasting and stuff like that so we even move people.
Temporary with their family incentive accruals in portable this year due to make sure that travel restriction is not becoming a bigger issue in the future. So we only see an improvement going forward in Argentina.
On Brazil in Brazil is like Canada us any other country.
Provinces and then it depends where you are in Brazil. So if you go to.
I will follow.
Cds like that.
Infection rate is high once you go to by either where we are it's really the and then you can look at this statistic. It is very reasonable and into town of Genco Beano, where we are we had only a couple of cases and then they came from outside of the town, where the don't ask what's still the breakdown of.
80000 people living there it's been limited we had no cases at the mine. So sold business is running it isn't basically almost no impact.
The small impact you saw in coal that Flotek will be now is this some restrictions like I said case from outside but people that needed to come to decide that could income that generate some some of that some cost, but Don Jack will be now and you can assume that phenomenon. There will be no cost, we don't see anything going here.
Bad in Brazil.
For afford a deck will be not like I said, where we are so remote location no issues and then the status. They also that's no problem, it's more where you have big Germany deep big cities, that's it seems to be or bigger issues.
Thank you.
Thank you next question is from Richard Hatch from Berenberg. Please go ahead.
Thanks, very much and good morning, and congrats on the quarter net high dividend.
Two questions. The first one is just on I will recap Allen Bradley.
Just with regards to the feasibility study.
Next year I'm, just lost PFS Capex was around the 2.4 billion numbered and genius debits missed the talk around any opportunities to.
The change that how do you feel about that number is there any.
With that and then there's just one is done was just on the on the potential for increased production in the second half and update you guided bringing talks about how Cerro Moro you'd expect the street better grades to come through from say jacket payment benefiting from street as well.
Anything else Wes kind of dragging out of that where we can expect to see onto it I'm not jumping grades just as we.
The next couple of quarters. Thanks.
Good morning, good afternoon Richard.
Good question. The first one of the on that Gorica, Yes, we mentioned on the Prefeas study. It was for 2.4 billion dollar or group led by Gerardo Fernandez.
Was that the leader for the company on that that study. This study the fee study will be completed late next year. As you know we had delays because of course with 19.
Regarding death, and also being able to do some drilling on the.
On the and on the project, but we got the permit now so it works should start soon.
We have indentify many opportunities with the pre feed study and then we thing.
The we'll see.
I can't see to will be for for less than $2.4 billion, but we have already increase the reserve resources at site.
By mining so would that will be up loss for the project. There was lot of opportunities to reduce costs on the conveyor on the trading on the meal on different areas. So so we'll see you into final number comes but yes, there are opportunities to reduce debt to that capex as you know we owned 56% of that.
Capex, we'll see what will happen in the future.
On the second half guidance, we said and I said many times during the presentation.
Im confident that we going to do better than what we guided in April.
Just right now we need to take the time to properly assess.
What it will be sure several moral I was clear just a few minutes ago, it will get better it but it will still be challenging so don't expect that several moral will achieve the guidance that we said in April even achieved that guidance will probably be lower.
But all the others you saw Q2, you mentioned that all four of the other operation did a lot better even minera, Florida, where we were expecting to be just on budget. Because there was some restriction there I'm traveling so people from outside of Alley.
The mine is that all in all the other town around we have employees. They couldn't come to work now to cap. So it was a it happened during the end of the second quarter, the where it all into come back to work. So despite there was some.
Travel restrictions to mine achieve way better than planned.
The Big difference I think in the second half, where we will see an increasing guidance. It's all these four mines, especially Canadian Malartic I should mention because we did the for shutdown. We mentioned in April that we we are located about eight to 10 days for the shutdown at Uh Huh.
That uptick.
To to happen because of restriction again on the amount of people, we were able to to bring at the site. The first.
Shutdown, we did in July so early this month went a lot better than planned also so we gained approximately two to three days of production. So assuming around the six to seven days of shut down instead of Stan.
So that brings another two to three days more per quarter of production for Canadian Malartic and then as I mentioned, many diagnostic is producing about between 15 onto into 2000 ounces per day.
So.
That will help into production at metastatic Jack will be no you like I mentioned before because as tonnage and grade was also better than plan on in Q2, and then what assuming Q3 in Q4 will probably be to same so jacoby novel produce more opinion outstanding two quarters Q1 in Q2 so.
We're assuming that it will be better and and then Florida's should be.
Also a bit better, but similar to what we've seen achieving at least the guidance for the year. So.
If three are above what we said in April.
So I feel good about the same.
Several mobile a bit lower than globally, and we should be higher it's too early to see a number like you can feel in my voice and what I'm, saying, we're very confident that will be better so will come.
This quarter in Q3, we won't wait until the end of the water.
To put the annual guidance so stay tuned.
We will announce into coming weeks revised guidance for 40 amount now for the rest of the year bolt on production and on costs, we already mentioned at the cost will be lower.
And we establish a target already with will come with a production.
Thanks Daniel.
That's.
When you get good today.
I can just one follow up and teapot sort of rice at first one's just on the economics and potential to it sounds like I said just can you just remind us from the tax.
Well not one and then secondly, just on the on the working capital and just to build in the second quarter actually just expect to see any income to fly back a cash from working capital movements in the second huh.
Jason Yes, you're right you're wearing I addressed through the two questions. There I guess on the on equinox pretty straightforward.
No not tax not no tax impact on on those monetization.
Yeah, We've got we've got shelter corporate level could those for the sales and.
As I said, it's got a yeah expiry date on the would put the warrants in January it's.
No we're $2 in their money right now from a property, probably only perspective, I probably tag that at about.
75% probability if you look through the math from an option perspective, so high probability those that cash as we can come into treasury and it's not just the.
At $81 million now we do also all the residual equinox position like $20 million as well so some significant value there from a working capital perspective, I think it was.
No we wouldn't look back to the started year, we would've been flat in Q2, so again, another colgate impacting the first that.
Just very straightforward with the reduction in overall mining activity everything slows down in your basically not turning over here.
Invoices is faster you're you're paying them. So that's the primary impact here. We just saw that outflow and then similar effects from from Q1 in terms of.
Eating up 18 to supply is building up inventories over the balance of the year.
I will become conservative and say, it's going to be flat lot profile over over the balance of the here.
Great. Thanks. Thanks.
Thank you and the last question is from Jackie principal asking from BMO capital markets. Please go ahead.
Thanks, very much for taking my call I just wanted to follow up on that question, Josh asked earlier on Malartic underground.
I know you said you said then maybe.
Production could come to generally 2020 320 24, if then ramp is finished.
Full fully.
Instructed until 2022 are you talking about basically just.
Production from that exploration ramp for a couple of years.
Well, you're looking at other options like a shaft is that sort of the way you you guys you're thinking about developing the underground right now.
Hi, Good morning, Jackie Thank you for the question good question.
Yeah like.
I mentioned the main targets right now is to derived around four exploration sure. We can use their ramp in future. We were studying that right now what we can do with you all know for east Goldie, we going to need a shot.
So that will take a few years to do this study for that than an order the equipment to start to shaft sinking the biggest advantage of their ramp also after exploration will be to use that ram too.
Raise the shop instead of sinking issues.
As many of you probably know raising a chef is a lot less costly, let more efficient than than sinking or share. So that will be a purpose into future. This is what we're studying.
The the underground production if it started in 2023 in 24, we don't know yet is like I said, we're doing this study Bush will short if we have them develop.
Access to these zones why not mining some of them.
Production will be a lot smaller than a shot for sure but any tons that you can come from underground will be better grade Andy the open pit to we're studying also potential a little bit other open pit on surface. We have to use finance property. We had some success on on exploration on surface or.
Studying old area, where there was mining before so there's so many things going on right now with with metastatic that can change into future.
We're focused on.
Driving that ramp down.
I'll now turn to use it at some point.
Two to two.
Produced from underground.
No really need because the hope and bids can supply the mill for the next seven years, but anything is coming from undergraduate underground can extend the than mine life of the you have been bid. So this is all in this study.
This is very good potential to to use it and do it.
Assuming what we know from Austin, our partner if this potential to bring higher grade ore on surface.
Hello.
Hi, good cost we are we going to evaluate this and then at the right time to do it so.
This quarter and next quarter, we going to continue with this study that pretty well that's been studied at our group in metastatic is doing our technical service, we're quite impressed by the job they're doing at the mine.
We mentioned already before and and we hope this quarter, we going to come with.
An exploration update that message that will show a growing of resources at the school the and that will be put into our PD study done internally and then help us to make decisions. So don't be surprised before the end of this year or with the release of the year end that we come with.
Very good plan on are we going to develop the underground.
Mine, all we poured planning to gold mine underground what will be the timing for for everything.
Okay that sounds great. So I guess when you're when you're looking at designing the exploration ramp.
Got all of this in mind, so where are the ramp should goal in order to help facilitate things like raising their shops in the future that's sort of all part of the designing it yes.
It's all part of the design, so so like I said before.
Before to Josh we have already started discussion of overburdened. So we know exactly when the weather event portal will be a and the next few months. This is what we going to do prepare the portal install trailers on surface.
We got Lucky there our partner just close at mine last year.
Those of us that.
So we do we will be able to use the surface and swift infrastructure they had their to install.
To the.
The project.
To go underground. So so this has already started as soon as it was approved the mine was waiting for their approval from the partners to go ahead and do it so.
There there are moving fast.
And then again the rapid will start in Q4 and then.
Sure, it's going to go well in advance pretty good in the in the coming months.
And if I could just maybe to ask one other on really quick one I just around the same topic can you just mentioned that there is there's a lot of information that you're hoping to put out either later this year or with the Q4 earnings result in the MD any say theres a further update in this third quarter. So is that something do you expect something in the.
The intermediate I guess timeframe to put in something a little shorter and then add more extensive update like you mentioned a little bit later this year or early next year thats or that the idea.
Well I think in the short term it will be exploration success on exploration.
We got to news, we told you a September last year, when we announced the discovery. We came back in February we would to an increase.
Resources on each school the as you all know we closed for the announcement of the resources in February we have to close a drilling.
October so we drilled from November up to now so we have a lot more.
Information on on the school the as we have drilled for the past.
Nine months. So so this will meet the main and main topic is the increase in resources at these goldie. It's it's quite impressive within you would really we have extended does own on many direction.
We have our target is to bring some of this into.
You know.
Indicated resources by the end of.
This year also so the news will be mostly focused on exploration, but also giving some detail on our plan on the short shorter term. So what is our plan with their wrapped into next couple of years, and then maybe indicate that type of a shaft and stuff like that but this deferrals.
Do you won't be completed, but we'll have a pretty good idea. So this is the in term probably announcement and with the Q4 result in February we will see what our partner what we can see more where we know already that we never these higher resources and pulled out even some indicated so.
It will come in in the in February and April next year.
Perfect. Thanks, so much for the color that's really helpful. Thank you.
Thank you and the last question is from Tianya Jack Simmons.
From Scotia Bank. Please go ahead.
Hi, good morning, everybody.
Just wanted to ask Danielle and Joe from.
On your your dividend policy, you had that Tom 50 to 100 dollar gold equivalent ounces that.
We'd like to pay out.
Do you need to see to increase that lateral.
Good morning Tanya.
Good question, you'll see us all related to that to that reserve fund. So we ask bill now.
That reserve fund to be able to pay that seven cents per.
For sure. This is all we see it with increased cash flow from the operation.
Sure also with the increase in metal prices that bring us more cash flow than anticipated. So thats reserve foam is building at it is building and we know quite well the capital that will need to spend it's very small project will be enough. We know roughly what it will be in may.
Uptick in the next to seven years, and big capital will be even not that big for the two companies when we speak to it together. So we this is all we manage it we know what we don't have any debt repayment until 2022, so we manage all jayson against.
More but because is the one doing it but.
But as we reached target on debt to Reserve Fund and then we reached target on putting aside money into would be down the debt in 2022 with the capital investment in need and then next few years. This is all we decide so with with our board that we saw that.
We have reached a deed money to be able to pay that seven send this is why we have decided to to go ahead.
And then the next time, we going to do it just because we have reached a next level.
To see okay, if it's eight sand or whatever the number it's because we have the reserve phone invaluable, we see our planning or target our no cash coming into our treasury to see oaky now we can be that that that you amount and then we made it clear very a year ago with was our target and then were.
Following on that target I'm happy that we have almost reached affos, our our target so.
Thats why them quite good and quite impressive.
Okay. So is it safe to assume that I mean, you have all of you have all proceeds coming in by year end companies Warren.
Well continue to add to cash in addition to be higher gold price in the free cash flow generation.
It appears you said you know what your capital spending is going to be and the next couple of years from that could be in Canadian malartic, which really are eurone.
Expansionary capital so it could be something that you can quickly get to your upper limit on the $100 Paramount and then continue to fall back cash income can you know made that adjustment.
Okay, Great ma'am.
Reggie than you'd want to put some color on euro yes, I think it's a fair statement. Daniel you know, we start with making sure that dividend sustainable a nearly that first and foremost backed up by.
What we would consider on an unencumbered cash flow and that's that's cash flow that we we generate and it doesn't have a home we don't have a lot of capital intensity over the next numbered years. So we can invest in the business.
Really.
Hold onto that cash flow in the company in the outlet for that unencumbered cash is going to be is going to be the dividends I think it just gives are not much more confidence that we can put a reserve fund didn't like in places like we have end.
The the Monetizations of Dan.
Theme I guess over the last number of years, though at the company that's going to going to continue on that we hobbies.
Maybe just the options in the portfolio to monetize in two to increase the level of that reserve fund so.
Yes, we think that $100 is his line of sight over the next couple of years here.
Okay, and maybe just one other question Daniel I guess.
I know that Paul Im going to like football probably cost right.
$6 million small I'm, just kind of trying to understand what do you believe are the cost that are going to be totally unrelated but that has led to the business that we are gonna have to pay till our cost structure.
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Yeah, maybe Daniel we.
As I mentioned I think it's.
We've got an idea, but obviously that you're going to the.
To be driven by the Pat Corydon, we're going to do it all goes right things to make sure. We've got the protections in place I think the highest intensity of that spend has been early on here.
We have learned how to calibrate that spending most appropriately. So it's going to go down you know we were $19 million.
Across all categories in than in Q2, and I think conservatively I'd say over the next couple of quarters.
It will be third.
Third maybe a little bit more than not in terms of total cost associated with covidien. If its round in the costs are going to stay around as well so that's going to be clear.
Yeah I was just more interest that you now from from me now looking at the bank.
I was going to be some cost I know I think if you divide the category into like 6 million, which are like coal that like the other one north Carolina and send them back nine up cobot comp I know there not a large number I'm just wondering what do you believe.
Some of these costs that I guess kind of all right now that the business. Yes, I think we started before anything get a cost over the longer term would be low single billions of dollars. So I think it right.
Something very manageable, but b.
We see opportunities to offset those those costs and I think there's still early days to implement some of those lessons learned in the business, but I think full stop will offset it you know you look at something even.
Moving to the in the Geo ratio in shorter term at more than complicated for any great corporate cost for us I think that's kind of the.
Unique task given the exposure to silver in this place and we've been waiting for some time to see lot.
No that mean reversion in that gold equivalent ratio, we think that times upon us.
We should.
Have a pretty favorable tax impact to our business because of that and that will more than covered that corporate cost a multiple times over.
For the for bottom line is that the totally confident to be net minimal and the overall.
Yes, I think thats very fair attending yes, okay. All right great. Thank you so much.
Thank you there are no further questions registered at this time I'll turn the meeting back over to Mr. receipt.
Thank you operator, so thank you everyone for joining US today, we hope you enjoy the rest of your summer and we look forward to updating you on our third quarter result in October these take care and Stacey. Thank.
Thank you and have a good day bye bye.
Thank you. The conference has now ended please disconnect your lines at this time, we thank you for your participation.