Q2 2020 Pretium Resources Inc Earnings Call
All participants please standby your conference is ready to begin.
Thank you for joining us this morning.
Welcome to the press you resources second quarter 2020 conference call.
As a reminder, all participants are in listen only mode and the conference is being recorded.
After the presentation there'll be an opportunity to ask questions did join the question Q you May Press Star then one on your telephone keypad should you need assistance during the conference call you may signal, operator by pressing star and zero.
The conference call today is being webcast slides and available along with a presentation slides on pro teams web site at P. R. E T I V M Dot com.
I'd now like to turn the call over to Mr., Josh the on premise President and CEO. Please go ahead.
Thank you good morning, everyone.
Welcome to our second quarter, 2020, operating and financial results call.
It is with a very heavy hearts that I'm speaking to you today after the tragic loss of one of our employees. This past weekend at Bruce yet.
Our thoughts are what the employees family and loved ones and also with every member of the Brett Young families.
The isolated incident, a cure during maintenance at the support facility on the surface.
We are fully cooperating with authorities and the investigation of the incident.
The safety and well being of our employees is my most important priority.
Although this was an isolated incident it reminds us of the critical importance of safety and all aspects of mine site operations.
Okay.
On today's call I will comment on our operational highlights for the quarter. The current status of our cold Winter response, and our progress returning back to normal operations.
Joining me on the call today is our CFO, Tom <unk>, who will review the financial highlights of the second quarter.
Following that I will provide an update on our exploration plans this year.
At the end of my prepared remarks, they've France, our vice President operations, well joined the call for one last time to address your questions on the results from the second quarter.
Before I discuss this quarter's performance I would like to emphasize that no quarter got bretts young is considered a success unless it there is a complex safely.
With that in mind, I would like to acknowledge our hardworking and dedicated team.
Despite the additional challenges presented by the Cold and then they make we came through with solid gold production this quarter and a record high free cash flow.
Okay.
Before we began no doubt our statements contain forward looking information then future oriented financial information based on certain assumptions.
I refer you said the cautionary language included in our news release as well as the management discussion and analysis for the same period.
These are available on our website and have been filed on SEDAR. Please note. All dollar amounts mentioned on this call our in U.S. daughters, unless otherwise noted.
[laughter] degree with Jack mine continues to be profitable in the second quarter, we produced more than 90000 ounces of gold keeping us on track to achieve our annual production guidance.
We generated a record high free cash flow of $82.7 million and ended the quarter with healthy cash balance of $124.7 million.
Operations have continued through their coal that 19 pandemic under the guidance and directives provided by the authorities.
We have taken significant steps to mitigate the spread of Kobin 19 and to protect our staff their families and communities.
Kobin 19 did not have a direct impact on second quarter gold production there were certain mine site activities were delayed.
There were no interruption, so the supply chain and increased inventory levels have been established.
We continue to monitor the situation and well continue to evaluate the potential for longer term impacts the mine production.
During the quarter other precautionary measure to increase available liquidity the company drew down a $16 million up revolving not the revolving portion of the loan facility.
The Brucejack mine achieved a major milestone early in the quarter, what the production of its 1 million Council. The production of 1 million ounces of gold and less than three years. Some start up is a significant achievement for depression team many of them I've been what the projects since exploration and construction.
We are working to continue the successful operations that brucejack for the benefit of our shareholders employees and the communities and northern British Columbia.
Subsequent to the end of the quarter, we were pleased to announce that that's a good day has joined Chris Young as Vice President and Chief operating Officer.
Patrick Scary era of more than 25 years on the global mining industry include successful leadership roles as well as extensive experience in the technical and operational Rose I.
I have personally known Patrick for over 20 years, and I'm delighted to have them on our team.
We look forward to working with Patrick as this brought knowledge of the mining business. The technical experience will be instrumental as we continue to drive Fritz him success.
Turning to operations on slide eight and the second quarter, a total of approximately 327000 tonnes of ore processed equivalent to a throughput rate of 3596 times per day.
During the quarter to mail operated below their permitted leveled up 3800 tonnes per day due to scheduled and unscheduled maintenance focus on lateral development and stope availability.
The mill feed grade averaged 8.9 grams per tonne gold for the second quarter of 2020 above the estimate that 2020 guidance range.
Over the quarter approximately 353000, the wet tons of ore mine, we continued our lateral development at the targeted rate of approximately 1000 meter per month.
Over the first half a year, we produced approximately 173000 ounces of gold and we continue to expect to meet our full year 2020 gold production guidance of 325 to 365000 ounces of gold.
For the remainder of 2020 production is planned to continue at an average rate of approximately 3500 tonnes per day.
Two planned shutdowns and an increased focus on the waste management from accelerated lateral development.
The average annual gold grade is expected to range between 7.6 grams per ton and 8.5 grams per tonne at an average gold recovery of 97%.
[noise] all in sustaining costs were 950 dollar per ounce of gold sold for the first staff up 2020.
Annual financial guidance as has been updated to include cost for Coven, 19 protocols, which are expected to remain in place for the remainder of 2020 as well as additional diamond drilling cost Accordingly, we have adjusted our basic guidance upwards by about 55 dollar per ounce to arrange up 900 within 60 to one.
1100, and then $20 per ounce of gold sold.
Free cash flow for the first half of 2020 was $124.6 million and all are already reaching our full year forecast of 100 $270 million.
With improved gold prices, our free cash flow forecast for 2020 has been increased or a range of $205 million to $275 million based on an average gold price of 1800 dollar per ounce.
[noise] foreseeable 2020 production guidance remains achievable, assuming there is no significant impact on operations at the Brucejack mine due to the Kobin 19 pandemic.
We always line a number of initiatives, we believe will help us optimize our stope design and improve overall performance.
Our first priority remains increasing mine access as we progress with 2020 lateral development will continue to focus on opening to mine.
The increase developmental will improve access the reserves and enhance opportunities to blend material from multiple areas supporting more consistent production.
These efforts will benefit from scaling back our mill throughput to 3500 tonnes per day on average for the remainder of the year.
Moving to slide 12, a reverse circulation drilling programs started earlier this year to increase the data density to enhance mine planning improves stope designs and ultimately optimize gold production.
As a result of Goldman 19, released at the restrictions the RC drilling program was delayed the program was introduced in staggered phases with the first drilling operation at the beginning of the second quarter.
As the equipment that personnel became available a second and third our Seadrill, where commission and commence drilling towards the end of the quarter. A total of approximately 22000 meters of RC drilling work completed during the quarter.
Infill drilling to improve reserve definition I had the mining was put on all at the onset of the coven, 19th and they make at the end of the first quarter in order to limit nonessential personnel at Bruce Jack.
By the end of the second quarter Diamond drilling activity at the reason with for Diamond drill onsite targeting reserves proximal to mine infrastructure to build stope inventory and provides flexibility for near term mining.
And fill diamond drilling in the second half of 2020 as planned to progress west toward the Bruce stack fault zone and intended to support mining in the first quarter of 2021.
Now I'll turn the call over to Tom to review, our financial performance for the second quarter of 2020.
Thank you all and good morning, everybody.
We continue to track record a positive cash flows and profitability again this quarter as we have every quarter since achieving commercial production on July 1st off 2017.
For the quarter, we realized gold price of selfie hundred $38 per else an increase of 32% over the second core of 2019.
With additional ounces of gold sold we saw hunter or 1% increase in earnings the mine operations and a 170% increase in adjusted earnings.
The robust gold environment enable us to generate strong free cash flows, which increased 141% over last years second quarter.
Turning to slide 16.
During the quarter, we sold 96047 else local compared to 85953 ounces of gold in 2019.
Despite comparable gold production for the quarters, there was a difference in Seoul else's due to the timing of production and subsequent sales the $419 per else increase in average realized gold price contributed to the 47% inquiries and total revenues of $166.6 million versus a 130.
<unk> point $2 million in 2018.
Production costs increased $23 to $196 per ton meal compared to the second quarter of 2019.
The increase was primarily due to the coal that 19 protocols.
In March.
Impacting employee salaries and travel costs.
And costs associated with his departure of a senior executive.
These two discrete items accounted for $20 per ton.
Turning to slide 18.
Cost of sales, which includes production cash cost depreciation and depletion royalties in selling costs averaged 1100 $9 per ounce sold for the quarter versus 900 sell me for 2019.
Depreciation and depletion expense increased in the quarter by approximately $100 for us as a result of the up either reserves, we reported in March 2020.
Total cash cost averaged $749 per ounce sold for the quarter versus 700 to for 20 lysine, reflecting the incremental cost of pull that lighting.
Continuing the sole robust earnings, but mine operations of $60 million in the second quarter compared to 29.8 million in 2019.
After deducting our carpet DNA cost, we generated operating earnings for the quarter of $55.2 million compared to 25.5 million in 2019.
We had lower interest and finance expense of $4.7 million compared to 8.8 million in Q2 2019 due to the lower outstanding Lobell, and a lower LIBOR rate relative period.
Lastly, we incurred $17.9 million of taxes during the quarter.
Consisting of 1.6 million of cash taxes related to the BC mineral tax and 16.3 million related to deferred taxes.
Significant increase in a deferred taxes compared to 2019 as due to more ounces of gold sold at higher prices.
Our effective tax rate continues to be impacted by the translation of our Canadian denominated BC minimal tax pools.
As we have reported in the past, we currently pay BC merrell taxes at the minimum rate of 2% not 30% as we draw down a significant tax pools.
Based on the update a life of mine and current gold prices, we do not anticipate any cash taxes for federal and provincial income taxes for three to four years thereafter anticipate pay taxes at a rate of 36.5% on mine operating earnings.
The earnings for the quarter $32.3 million or 18 cents per share versus 10.4 million or six cents per share for 2019.
We adjust our earnings for items, we believe or not reflective of the underlying operations of the company. These are non cash items, consisting primarily of deferred income taxes and accretion on convertible notes.
The adjusted earnings were $49.2 million or 26 cents per share for the quarter compared to 17 million or nine cents. This year in the second quarter of 20 like team.
Turning to slide 21 for the quarter, we generate a record $92.1 million of cash flow from operations. Just continues to trend a positive cash flow from operations since startup in mid 2017.
After deducting cash used in investing activities, we generated 82.7 million of free cash flow or 44 cents per share.
We began the quarter were $40.6 million generated 92.1 million of operating cash flow do 60 million on our revolver and received six $1 million from stock option exercises.
This was offset by $19 million debt service and 9.7 billion spend on capital expenditures. We ended the quarter was $124.7 million in cash.
On slide 23, we show a more detail or in our all in sustaining costs.
For the first off in 2020, we sold 176508 ounces tracking within our guidance range for the year.
Basic totals 167.7 million for the six month, which includes 4.7 million for additional employee salaries and travel costs related to the coal that 19 protocols in the second quarter.
Basic was not $50 per ounce of gold of gold sold for the first half of 2020.
Hey, guys for the full year has been updated to include costs have continued coal the protocol to the end of 2020 in cash costs and additional infill drilling in sustaining capex.
Got it increased to a range of 962 1100 $20 per ounce of gold sold.
The increase of 50 to $60 per else is due to cold weather related costs of approximately $40 per ounce and increased drilling accounts for approximately $20 Strauss.
Free cash flow for the first half of 2020 was 124.6 billing at an average realized price of Sixsix hundred $77 for us.
Was improved gold prices pre cash flow guidance for the full year as we increase by $105 million to a range of $205 million to $275 million base on the gold price of $1800 thrills for the rest on the year compared to the original guidance using a gold price of 14 50 per.
Yes.
We continue to benefit from the high gold prices and we will focus on preserving liquidity, while we operate under the coal that 19 uncertainties.
Now back to do Jacques.
Thanks, Tom.
In addition to infill drilling and RC drilling of the defined mineral reserves, we plan to drill 25000 meters are resource expansion is really.
Resource expansion drilling is expected to expand their current mineral resource it at the value of the kings, adding gold ounces to the life of mine.
There is opportunity to expand beyond the currently defined mineral resource out where previous drill programs I've indicated the continuation of high grade gold mineralization.
Here on Slide 25 is a section view looking either at the underground development.
The new Diamond drilling highlighted with the Blue drill lines is planned to continue to then the art toward the west so on and it will target inferred resources and previously intersected mineralization outside of the current mineral resource shop.
Stepping further out we have over 12000 square kilometers of mineral claims and the Golden Triangle NBC. Their Brucejack mine is at the top left of the property.
The 2020 regional exploration program on the company's bottles or claims is currently underway with true and equipment mobilized to cite the exploration program is evaluating several this thing zones that have the potential to host SK Greek style Vms deposits and high grade have to thermal relates a goal systems the pro.
Primary focus up the 2020 program is the basics all located approximately 14 kilometers north east a boost Jack the assay has received from drilling days Xone and 29 gain show the high grade celebrate plus copper to follow up on the encouraging results of the 2019 program 10000 meters of drilling is plan.
2020 program will also include about 3500 meters of drilling at the coupons on the hanging lasers on and that he snowfield.
The grassroots exploration program will continue through the summer and then also include soil sampling prospecting and the regional mapping.
We believe the best value for our shareholders is to continue to invest a portion of our cash flow in exploration at our existing claim package.
Before opening the lines for questions. Let me review the highlights of the second quarter, we continue to capitalize on the favorable goal that environments with adjusted earnings of $49.2 million equivalent to 26 cents per share.
We generated a record high free cash flow of $82.7 million and we ended the quarter with a healthy cash position of $124.7 million.
To sum up we have successfully navigated an unusual quarter and at this time, we remain on track to achieve our 2020 production and a revised cost guidance.
Thank you that concludes the formal presentation I will now I'll turn the call over to the operator, we'll open the lines for questions area.
Thank you we will now begin the question and answer session to join the question Q You May Press Star then one on your telephone keypad, you will hear a tone acknowledging your request. If you are using a speakerphone. Please pick up your hands that before pressing any keys to withdraw. Your question. Please press Star then too we will pause for a moment as colors.
During the Q.
Our first question comes from Heiko.
H.C. Wainwright. Please go ahead.
Hey, guys. Thanks for taking my questions.
Great quarter nice to see the stock up 25% nice to see the current gold price environment there.
Yes, I go where Ah we agree it's a good time to be in the gold business.
Yes. It is speaking a current gold pricing have you seen the pressures in regards to a labor supply is at this point are you hearing anything cost twice in the Bush is booming in the distance yet anything that maybe you can probably a little bit the color on.
I will now at this time, we haven't heard anything specific on on on that front.
The only increase we have seen to our costs a as Tom mentioned is the there related to coal via the.
And the fact that we're accelerating drilling but.
Nothing else.
Yep.
And building on what you just said I mean, just just going by your full year production guidance, there and the revised on saving cost guidance.
He was awful lot of cash this year, which is a wonderful problem to have obviously.
I mean, what point should we expect protium to return some excess amounts to that so it's a cat shareholders buyback or dividend or should we more expect to see an acquisition is zero gold price, where you think we might even experience something like that already this year.
I think as we mentioned ER and in particular, Tom mentioned this in a we want we continue to be two ought to be careful and ER and sure do we have sufficient liquidity in case, we would have an outbreak with a quote due to the colvin pandemic.
So we're being very careful right now we're also starting to look at our plans for 20 2021, we're gonna be working on that we still have some infrastructure work to do around.
The shack no there's still some construction work to be done a we're looking at different that investment to optimize that improved cost like electric equipment, and and and other things. So we definitely in the second half of this year, we're going to have now it's time now at the start to work on our budgets for next.
Here and we we've been having discussion internally and that the board level too with this now with this gold price if it stays where it is you're correct, Michael we're going to be generating a lot of cash and we want to do the best we can further shareholders and I will analyze all opportunities and decide what what.
What is the most.
Efficient way of use our cash.
Probably it's something that some that we want to deal with at some point a because we still have significant amount that that's on the balance sheet, then I as I mentioned to others in the past by I would prefer to have less that's on the balance sheet. So there's a bunch of different competing.
Demands for for our cash and will be a balancing all those in the coming months and well probably be able to give you. Some some more color on what we expected due at the end of the third quarter are definitely at the beginning of next year.
So I'll take that to me, yes, you are cognizant of that and yet still probably in the price where things may happen. When you might tell us about it next quarter. When this cold it thing hopefully as most prevalent anymore.
Thank you Sarah.
That would be fair I go but ER. Unfortunately.
I think we're gonna have covidien, our backyard for a while I don't think next quarter is going to be resolved, but.
Hopefully something if we're going to have a scientific breakthrough here, but.
We're like I said, we're preparing for their worse and hoping for the best.
It's a good strategy in life. Thank you very much and keep doing what you did this quarter.
Thank you Michael.
Thank you.
Our next question comes from always hobby of Scotia Bank. Please go ahead.
Thanks, operator, hijacking team and congrats on a good quarter and thanks for taking my questions.
Jack just starting off now you've been with Greg Im now for about four months.
Maybe you had a chance to get down to site as well.
Any can you provide us with any thoughts you have on current operations and or improvements that youre looking at to bring over the next coming months.
Yes. Thank you if they say yeah I was that site.
Since I started there was a site that three times and I'm going back on Monday, I'm, taking a Patrick that any with me next week and then we're going to be at site to.
We do have very extensive visit there. So I have spent quite a bit a time.
And.
As I mentioned in at no in the past I think they are highlights of my initial visits or that the quality of the infrastructure in particular the Mel.
The mail isn't very good Mel I can produce a lot of tons and the recoveries are good and things are going well in that on the processing side of things.
I was very impressed with how the team is managing to roll them to place here and I think it's the first time I do have to deal with our role than a laser and it's definitely a significant challenge so good job being done by the team there and environmental.
Social license to operate that's very very well done the definite challenge at a broker stack as is the underground knowledge of the ore zones. So that's that's why we have decided to accelerate diamond drilling.
We need to do more work to understand the geology, that's going to be an area of focus.
Another area of focus as a optimize that productivity at the mine a there is a ways to to improve.
Now that we're doing and one one of the main.
Got a target that I have is to increase.
Lateral development increased stope availability.
And and advance our knowledge of the ore zones to be other better prepared for planning and better prepared for optimizing the mind sequence. So that's.
Those are the areas or we're going to be focusing on but I'd like to point out that.
Due to the tragic events, we Ah we experienced last weekend, one significant area of focus that I already they have but we're going to step it up a notch here as on the safety side of things.
We're not the and the business of injuring people then we're going to be spending a lot of time and effort in the coming months.
To get back on track to make sure that we do everything very well and they're profitable manner, but first and foremost very safely.
And just on on didactic that but thanks for that but by the way in them and just on that I mean.
In terms of.
Underground development, you guys I had a.
1000 meters per month.
Good control drilling I believe you did about 20 to 2000 meters of drilling in Q2.
Is that you see that you need to do a lot more development or more grade control drilling together manage on.
Dilution and still but availability and all that good stuff.
Yeah, I think we would like to see our development to be a anywhere at 10% to 15%.
I, 10% to 15% higher rate than what we're doing right now.
We had very good performance in the month of June and then the month of July we're very happy to see that were trending in that direction. So we want to keep it up there and ER and now the drilling side, we want to continue to as we develop that one of the challenge that we have a basis.
Because of the the development we have to catch up on development, we don't wallet always out available stopes. The goal to go and production drill them as we open up new areas. We are going to continue to accelerate our production drilling to build up inventory.
And we believe it side, we're going to be in a much better position by the end of Q2 beginning of Q3 next year.
Okay, that's great.
I'll leave it there and maybe elect a other participants to ask questions. Thanks.
Thank you.
Our next question comes from Anita Soni CBC World market. Please go ahead.
Thank you for taking my question good morning, Josh.
So just following up on this question with regard to the development and you just mentioned that by the end of Q2 and beginning of Q3 of 2020, why you think you're going to be any good position I have several availability Brady I was just trying to get some color on.
The stopes you have.
Level is the inventory sufficient for.
Next year.
Some issues in the past where.
There was some mix messaging about.
The availability of stopes, that's going to concern about actually delivering on your guidance.
Yeah, I think right know a anita where we're in that I would say a decent position much better than where we were and I'll, let Dave meant that talk about this but we're in a much better positioned than we were last year, but I'd like to see this improved again, so thats why I think over the next four quarters, we're gonna.
And intensify our drilling to increase our this the number of stopes over the artist total tonnage of inventory that we have drilled off.
But we're not in a bad situation then we're definitely not where we were Dave do you have about Youve got as thanks, John Good morning, and eight are never yes, we have buildups and as Jeff mentioned since mid last year Weve and on the last call I did state were about 170000 tons of inventory in front of as we now have a 186 as of the end of June.
All of which is probably 75000 that is it can be good access to go out there in Mont it straight away. So we have been building up we need to keep in mind. We've also ramped up tonnage through that period and delivered more tons in Q4 last year. One this year was always going to be difficult, but I think the field, except that it now where you know what we see.
Moving forward to build this up a little more raise and what we've done it too so I think what a much better steak and with the various Ken.
So just running so just roughly 180, that's basically about a half a quarter.
Inventory available.
Hi, My calculation.
Yeah, that's about it anytime we have that's where we are in ITI <unk> I'd like debt by the end of might enter Q2, beginning at through three nextera I'd like to be about that all two and a half the three months of inventory on hand.
Okay, Alright second question I think there was a mention about cost.
With.
Craig the departure at the senior Executive could you just point out give me a little bit more color on that.
Exactly where that.
And secondly, somewhat related the increases that you're talking about with.
Colgate related costs can you.
Relate them to the.
The breakout that you have on slide.
23, I see overall, there's a 20 million dollar increase but I'm just trying to parcel out like where did the increased drilling cost go where did the increased cobot cosco.
Everything.
Was it all personnel.
Tom.
Hi, Anita.
With respect your first question.
The the cost so, which we disclose approximately a $1.6 million U.S. and not so.
For our VP ops.
The costs or in mind gene a cost.
Well look at.
The per ton the slide so where that is with respect to all the covert increases and the increased drilling.
It's in two spots.
The call the costs on slide 23.
Thats, primarily in the cash cost lie.
And the additional diamond drilling that John spoke about.
In the sustaining capital light.
Thats why you see that we've moved up.
Those costs, so by about $8 million on both fronts.
For the year on cash costs, and 8 million on the sustaining capital expenditure line.
Okay.
And then just in terms of.
The good quality could you give us a little bit more color on I know that Q.
But it was an isolated incident, but just trying to get an understanding of.
How are you know.
What happened.
It doesn't have any future applications at this stage.
I need to you will understand that the we were not in a position to provide any details at this time. The incidence is still under an investigation I, we're conducting our own internal investigation, we have the authorities involve in the investigation.
And thats going to take a little bit of time before everything is finalized and the we have.
Correct understanding of everything that's happened it happened on the surface that's not an underground event. It was not in the mail it was outside on surface.
And I had mentioned earlier, it's a very tragic event for us.
We something Thats, we we don't want to repeat and.
Now I'm sure in due time when information is available we might be able to provide more information, but that this time we.
We can't comment.
Okay. Thank you.
And then just going back to the question just doesn't get a map so that's about $5.
We can take off for.
<unk>.
Given the team that's not that's not going abbey.
And then going forward.
We think there's a discrete item yes, okay.
And then just in terms of.
Drilling that you've done so far how to.
A question with regards to the one drill rig and then you've added two more at the end of the quarter is that correct.
Well that's on the RC drilling site.
Jumping around on the RC drilling that you've added two more at the end of the quarter how much how much drilling do you think that you'll be able to do per quarter on RC drilling with the new amount of breaks and adopt the level of breaks that youre going forward.
Yeah, Hi, unaided stays here, if I could answer that please.
As we stated on the last call and in the Toronto Technical presentation.
Hi, guys, one and two of the drilling was 27000 meters. So it would pretty much as of today. That's obviously done end of June was 22000, and we also started that was approximately 100000 made is in this year's budget. So as we currently stand.
So theres a fourth assay drill rig coming in it should be commission to the next few weeks. So were on track to drilled by year's end pretty much. The 130 close to 100000 made us.
Okay. So wrapping up the rate then I guess like.
Great sort of Yeah, 30, 35 corridor I guess.
Well be short of 100000 by the end of the year whatever the math is on that that's great.
Sure and I mean does.
This is for grade control, but does it does that help you with the block model going forward is there any plans.
Again next year with the with the additional drilling information that you have the stage outside so any today I think it date.
No I am happy I'm very happy that company made the decision to go ahead with the RC drilling program to have a higher density of data and get more information because that's what we need to understand this ore body.
It it it has not made any impact on the block model. So far because now as you can understand we haven't been drilling much since the beginning of the year, it's really at since the end of the end of June.
That we started to drill in earnest.
So we're still in the early early stage of this program, we're gonna be gathering all the information we're gonna be looking at all this and we'll determine.
Probably towards the end of the year or beginning of next year. If we if we want to maintain adequate.
As is if we want to make some changes alcan, we integrate the data with the block model. These are all the questions that we have right now.
This is a very new process for the company here. This is something new for our team. So we still need to learn now how this is going to help us we're confident that acquiring additional data will be will be valuable, but again, it's it's a bit Nevada and experiments so far and they will.
The new to learn.
What what.
What information and what type of information would it we're going to get out of this program and how we're going to answer read that an hour modeling and planning and are there other design activities.
Yeah, I understand why isn't the RC versus Diamondrock falls right.
To be some you know well since data.
Yeah, and the collection of the sample so okay. Thank you that's it.
Thank you anything.
Our next question comes from Joseph Reagor of Roth Capital Partners. Please go ahead.
Oh, Hi, Jonathan team, Thanks for taking my questions and congrats on a great second quarter.
I guess first thing on the grade and second quarter 8.9 grams. A you know is above the range for the year was that a surprise to you guys or was that mine sequencing thing that you expected this to be the best quarter, the you're on a grade basis.
Uh Huh, that's a good question Joe.
You mentioned in the Bath and I think everybody told you.
We're going to continue to have variability in our grades and then theres quarters, that's going to be a little worse than expectation and others that there'd be a little better.
I would say this second quarter was not significantly better than what we expected, but at a little bit there was a little better or maybe the next quarter, we'll be at quarters will be a little different I want to make sure that we are we also continue to understand that.
It's not because we had a good second quarter that the we have everything under control and we know everything about the geology.
So going forward, we may continue to experience variability, but like I said in the past that I'm I'm much more I'm confident in that and what we're doing and I'd. Let me Dave can add a few words, there if I could add there thanks, Chuck and good morning, Joe.
If you go back and have a look the 43, one I won from February and a 2020 mine plan were tracking along exceptionally close to it. So yes, there's going to be variability from day to day month to month quarter to quarter, but I think that's a point worth noting here that we're tracking along on the bottom on plan and this is pleasing to see from my perspective.
Okay fair enough.
Kind of an accounting item.
Yeah. So far this year the depreciation on a per ounce sold basis, it's been a bit elevated from last year I'm.
Turning to let's call it three twentyish announced or so.
What do you guys see there going forward can we expect that to come down as you have a you know extension of mine life or additional resources drilled out or is that elevated level expected to continue.
Hi, Joe.
Well it all depends on on whether the though we increase our reserves. So if we have successful drilling results and we increase the reserves.
We always treat those increases prospectively and then we would adjust our our depreciation depletion calculations. Accordingly. So currently is just based on what we know today based on the most recent the reserve report we published Buck in early March.
Okay Fair enough and then John you mentioned, a snowfield at some point during the call.
Interesting project, especially in current market conditions, but not really what protium does as far as type of ore body and and type of deposit in future potential production is there any ability to carve that out and maybe vended out to two a different company that could look at that.
You know that maybe.
You know interested in all the metals not just the gold.
Joe I now my focus since I started was really Bruce Jack.
I had a very very brief conversation with the exploration team I think on my second the weak on the job the Dolby above the the project and that's about its and I haven't spent a lot of time looking at it. So that's something in the future we're going to be thinking about but.
At this point no I don't have any specific comment to meet the to make around snowfield.
Okay Fair enough and then on the regional exploration in general should we expect.
You know continued updates with the earnings results or do you think you guys might you know separate that out as a individual press release when you guys get some results there.
And timing wise or Joe, it's always difficult to say, but.
I I'm told that up there we drilled until a though and then on the month of September a and then we have to get their rigs out that takes Oh, Hi mine, Montana half I'll get to get the resolve to analyze them so possibly by a when we do the earnings call for through a dream. We may have some information too.
On.
To to publish at that point.
Okay Fair enough I'll turn it over thanks, guys. Congrats again.
Thanks.
Our next question comes from Bhakti Pavani other lines Global partners. Please go ahead.
Thanks, Jack Andy Thank you for taking my question.
And on the quarter.
Oh.
Question on the on the development.
You are planning.
Oh.
None.
And given the uncertainty that encore bed. In addition to reduce Christensen capacity, so 3500 tonnes per day.
Two things that Luqman. Please.
The good man portable oh unprecedented shutdown due to colder.
Yes, I think with a with that level of an advance now we and I, we mentioned that on the last call in that and ER and at the onset of goal there that we had to adjust the you. We know we were short on manpower and we had to adjust so we had that little dip in development, but we've recovered from there very nicely and at the current rate.
Yes or no.
Where we are at the thousand meter plus per per month. We're in good sit in a good situation I'd like to be able to accelerate that that little bit a little bit more and no definitely because we have more developments, we produce more waste. So we have more ways to move around.
On the mine, so that is causing a little bit a bottleneck on how much or we can move. So we have two we have to balance all things, but we're working right now on plans to improve our ability to move to move more material and.
I think we're going to be in very good.
Very good place early or very early next year and maybe towards the end of this year to go back to our 3800 ton per day average production rate going forward.
Hi, good enough.
Just just from a follow up you said you know you would like to increase.
Given.
What's kind of though.
Great.
Hi, Jim given the situation.
I think for the short term a 1100 or maybe 11 on 50 would be a would be where we we now would be ideal I, but like I said you know if we're able to maintain a more than a thousand per month, we're going to be good shape I'd like to see things move a little faster but.
As long as were above a thousand were good then ideally a thousand 1100 would be a would be a good number for us.
Perfect. Thank you for the Carla.
My second question is what the leap caching.
Oh free cash flow generation Gardner Oh.
Yes.
Maybe just kind ofi and I'm trying to understand the national yet.
Cash.
Yeah, well and the second a in the second half as I mentioned earlier.
We're going to continue to be very prudent and very careful because you know where a single asset company and if we act. We had if we were to experience an outbreak of Ah Coven 19 at site.
Good shut down our operations of the outbreak was significant so we're going to continue to be very careful.
And we're going to continue to monitor this situation and look at what we're going to be doing where the cash I as I mentioned earlier, we still want to we want to do a lot of drilling a there is a infrastructure work that we have to do a we have projects that we want to move forward to improve.
Operational efficiency in the mine are we're looking at electric equipment or so all these things are require cash so didn't know we're gonna be managing that very carefully.
We have a significant amounts of debt on the balance sheet, but right now and then all the coupon on that that is a fairly low due to the overall a LIBOR rates. So we're we're in good place, where we are right now and we'll address that address that as we go.
Okay. Thank you little much.
Thanks.
Thank you back.
Our next question is a follow up from a list of Scotia Bank. Please go ahead.
Hi, Jack will more than one more question for me. This is a follow up question from Joel.
You were talking about guidance for the gives about 7.68 0.5 grams per tonne you guys have done or about 8.3. During the first six months now I mean, yes, but there's obviously a great viability within this mine, but I mean are you expecting great to be lower in the second half I mean, I mean are you getting any sort of indication.
From the grade control drilling that you've done.
In Q2, how you don't second half is gonna shaping up.
We continue to ER to be prudent Oh base as you can imagine because I know, we we don't have the full understanding of all the geology and everything. So we continue to believe a with confidence that the grade will be between 7.6 and 8.5 Gram per tonne as Dave mentioned words.
We're happy hour tracking here compared to the revised mine plan that was published in March or at the end of February we're tracking well with that we continue to have good results. So you saw first quarter results were good in the second quarter results were good well continue to see good.
Performance. So we we continued to be confident but we want to be careful we want it continues to be careful we don't want to set an expectation there that we can't meet so we continue to believe that 7.6 to 8.5 Gram per tonne is the appropriate to range.
Perfect. That's it for me just appreciate that.
Thank you have it.
Our next question is a fall from Anita Soni of CNBC World markets. Please go ahead.
Hi, Thanks, So just two questions the shutdowns that you have.
Can you give an idea like the duration and.
Which quarter or when they happen and secondly in terms of the tax tool that you. How can you give us an idea of how much.
In a dollar amount be available tax pools, you have and when you mentioned.
That's a it would be about three or four years.
36% what was the gold price assumption that he.
So I'll start with the first part of your question.
So our shutdown is a schedule right now for the month of November and we're planning for seven to 10, they shut down it's a major Ah modifications, we have modification, we have to make to the crusher the underground crusher.
So theres a lot of work to be done around there and we'll take this opportunity to do other work in the mail and whatnot, but.
The focus area is the underground crusher.
And I guess had seven to seven days, if it goes very well and 10 days if it goes not so well. So that's that's what we're shooting for right now I, let Tom answer your tax question would because that's not my.
My forsake.
Okay.
It's also Anita there are multiple tax pools that though we are drawing down.
I just hate to give you any specific numbers, but let's let's say the exited the maybe in the order of over $1 billion.
Generally when we say current gold prices or the last time, we looked at this so we rented at around 18 Hunter dollars per also with the new life of mine.
So as as we spend.
As we spend the capital dollars the goes into those pools, and we do AMOLED against the earnings so.
The us sort our best estimate at this point.
Three three plus years.
Before we pay the income taxes.
Okay. Thank you.
Yeah.
This concludes the question and answer session I would like to turn the conference back over to Mr. paid on for any closing remarks.
Thank you area. Thank you everyone for dialing into our earnings call. This morning, we appreciate all the comments on the questions.
I will conclude this call the same way I started it by saying that while our company delivered good results. This quarter. We also suffered a devastating loss with the feasibility of one of our employees.
This is the most tragic reminder of the importance of safety in all aspects of our operations.
You have my personal assurance that safety is and will remain my top priority.
I look forward to updating you in the coming months and I wish everyone. A good balance of your day and a great weekend. Thank you.
This concludes today's conference call you may disconnect your lines, thanks for participating and have a pleasant day.
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