Q2 2020 Pretium Resources Inc Earnings Call
[music].
All participants please stand by 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 to 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, an operator by pressing star and zero.
The conference call today is being webcast slides and available along with the 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. shopping on press hymns 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 with the employees family and loved ones and also with every member of the Brechin family.
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 in all aspects of mine site operations.
On today's call I will comment on our operational highlights for the quarter. The current status of our covered the response and our progress returning back to normal operations.
Joining me on the call today's our CFO, Tom you, 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 trends, our vice President operations will join 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 at Brett Tim is considered a success and that's it theres accomplished safely.
With that in mine I would like to acknowledge our hardworking and dedicated team.
And despite the additional challenges presented by the Covance pandemic, we came through with solid gold production this quarter and record high free cash flow.
Before we began note that our statements contain forward looking information and future oriented financial information based on certain assumptions.
I refer you to the cautionary language included in our news release as well as the management discussion and analysis for the same periods.
These are available on our website and have been filed on SEDAR. Please note. All dollar amounts mentioned on this call our in us dollars unless otherwise noted.
The Bruce 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 the pull with 19 pandemic under the guidance and directives provided by the authorities.
We have taken significant steps to mitigate the spread of Govan 19 and to protect our staff their families and communities.
Coven 19 did not have a direct impact on second quarter gold production there were certain mine site activities were delayed.
There were no interruptions to the supply chain and increased inventory levels have been established.
We continue to monitor the situation and we'll continue to evaluate the potential for longer term impacts the mine production.
During the quarter as a precautionary measure to increase available liquidity the company drew down $16 million up revolving up the revolving portion of the loan facility.
The Brucejack mine achieve a major milestone early in the quarter with the production of its 1 million pounds of both the production of 1 million ounces of gold in less than three years. Some start up is a significant achievements for the from team many of whom I've been with the projects since exploration and construction.
We are working to continue the successful operations at Bruce Jack 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 Thats got a has joined Prettejohn as vice President and Chief operating officer.
Patrick's carrier of more than 25 years on the global mining industry include successful leadership roles as well as extensive experience and technical and operational roles 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 it is brought knowledge of the mining business and technical experience will be instrumental as we continue to drive for some success.
Turning to operations on slide eight in the second quarter, a total of approximately 327000 tonnes of ore reprocess equivalent to a throughput rate of 3596 tonnes per day.
During the quarter to mail operated below the permitted level of 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 goals for the second quarter of 2020 above the estimated 2020 guidance range.
Over the quarter approximately 353000 wet tons of ore were mine. We continued our lateral development at the targeted rate of approximately 1000 meter per month.
Over the first half of the 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 announced ounces of gold.
For the remainder of 2020 production is planned to continue at an average of rate of approximately 3500 tonnes per day due to 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%.
All in sustaining costs were $950 per ounce of gold sold for the first half of 2020.
Annual financial guidance as 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 costs. Accordingly, we have adjusted our basic guidance upwards by about $55 per ounce to a range of 960 to one.
Thousand $120 per ounce of gold.
Free cash flow for the first half of 2020 was $124.6 million and alert already reaching our full year forecast of $100 million to $170 million.
With improved oil 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.
Foreseeable 2020 production guidance remains achievable, assuming there is no significant impact on operations at the Brucejack mine due to the coven 19 pandemic.
We also 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 through 2020 lateral development will continue to focus on opening the mine.
The increase developments 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 program started earlier this year to increase the data density to enhance mine planning improved stope design and ultimately optimize gold production.
As a result of Govan 19 related 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 and personnel became available as second and third our Seadrill, We're commission and commenced drilling towards the end of the quarter. A total of approximately 22000 meters of RC drilling were completed during the quarter.
Infill drilling to improve reserves definition ahead of mining was put on all at the onset of the coven 19 pandemic at the end of the first quarter in order to limit non essential personnel have Bruce Jack.
By the end of the second quarter Diamond drilling activity at the resume with for Diamond drills on site targeting reserves proximal to mine infrastructure to build stope inventory and provides flexibility for near term mining.
Infill 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 to call over to Tom to review, our financial performance for the second quarter of 2020.
Thanks, and good morning, everybody.
We continue to track record on positive cash flows and profitability again this quarter as we have every quarter since achieving commercial production on July Onest 2017.
For the quarter, we realized gold price of $738 per else, an increase of 32% over the second quarter of 2019.
With additional ounces of gold sold we saw a 101% increase in earnings for 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 ounces level 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 reductions and subsequent sales to $419 for LCD increase in average realized gold price contributed to the 47% increase in total revenues of $166.6 million versus 130.
$18.2 million in 2019.
Production costs increased $23 to $196 per ton meal compared to the second quarter of 2019.
The increase was primarily due to the call that 19 protocols.
In March.
Impacting employee salaries and travel costs.
And costs associated with his departure of a senior executives.
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 Selman for 2019.
Depreciation and depletion expense increase in the quarter by approximately $100 for us as a result of the updated reserves we reported in March 2020.
The total cash cost averaged $749 per ounce sold for the quarter versus 700 to for 20 lysine, reflecting the incremental costs of cold Lake team.
Continuing the sole robust earnings for mine operations of $60 million in the second quarter compared to 29.8 million in 2019.
After deducting our carpet DNA costs, we generated operating earnings for the quarter of $55.2 million compared to 25.5 million in 2019.
We had lower interest on plan as expense of $4.7 million compared to 8.8 million in Q2 2019 due to the lower outstanding loan balances and a lower LIBOR rate relative period.
Lastly, we incurred $17.9 million of taxes during the quarter.
Assisting a 1.6 million of cash taxes related to the BC mineral tax and 16.3 million related to deferred taxes.
This significant increase in our deferred taxes compared to 2019 is 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 to the path. We currently pay BC merrell taxes at the minimum rate of 2% not 30% as we draw down our significant tax pools.
Based on the update a life of mine and current gold prices, we do not anticipate in cash taxes for federal and provincial income taxes for three to four years.
After you anticipate paying taxes at a rate of 36.5% on mine operating earnings.
Net earnings for the quarter $32.3 million or 18 cents per share versus 10.4 million or six cents per share for 2018.
We adjust our earnings for items, we believe or not reflective of the underlying operations of the company. These are noncash 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. This continues to trend of positive cash flow from operations and 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 operating cash flow do 60 million on our revolver and received six $1 million from stock option exercises.
This was offset by $19 million of debt service and $9.7 million spent on capital expenditures. We ended the quarter was $124.7 million in cash.
On slide 23, we show a more details on our all in sustaining costs.
For the first half of 2020, we sold 176508 ounces tracking within our guidance range for the year.
Basic totals $167.7 million for the six months, which includes 4.7 million for additional employee salaries and travel costs related to the coal that 19 protocols in the second quarter.
It was nice $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 call. The protocol to the end of 2020 in cash costs and additional infill drilling in sustaining capex.
The guidance increase to a range of 962 1100 $20 per ounce of gold sold.
The increase of 50 to $60 per else is due to colder 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 million at an average realized price of Sixsix hundred $77 per ounce.
Was improved oil prices free cash flow guidance for the full year has increased by $105 million to a range of $205 million to $275 million fees on the gold price of $1800 per health for the rest on the year compared to the original guidance using a gold price of 14 50 per hour.
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 define mineral reserves, we plan to drill 25000 meters of resource expansion drilling.
Resource expansion drilling is expected to expand the current mineral resources 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 App indicated the continuation of high grade gold mineralization.
Here on Slide 25 is a section view looking ease at the underground development, the new Diamond drilling highlighted with the Blue drill lines as plan to continue to then the art toward the West Zone, and we'll target inferred resources and previously intersected mineralization outside of the current mineral resource shot.
Stepping further out we have over 12000 square kilometers of mineral claims and the Golden Triangle NBC that Bruce Act mine is at the top left of the property.
The 2020 regional exploration program on the company's bottles. Our claims is currently underway with true and equipment mobilized to site.
The exploration program is evaluating several this thing zones that have the potential to host Eskey Creek style Vms deposits and high grade heavy thermal relate that goal systems.
The primary focus of the 2020 program is the Ace Xone located approximately 14 kilometers north east of Brucejack.
The assay is received from drilling the Ace Xone and 29 gain showed high grade celebrate plus copper to follow up on the occurring results of the 2019 program 10000 meters of drilling is plan.
The 2020 program will also include about 3500 meters of drilling at the coupons on the hanging later zone and the east Snowfield.
The grassroots exploration program will continue through the summer and will also include soil sampling prospecting and regional mapping.
We believe the best value for our shareholders has 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 continued 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 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 Aereo.
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 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 color.
During the Q.
Our first question comes from HEICO ULAE of 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 goes where we agree it's a good time to be in the gold business.
Yes. It is speaking the current gold pricing have you seen any pressures in regards to a labor supplies. At this point are you hearing anything cost twice in the Bush's booming and the distance yet anything that maybe you can probably a little bit of color on.
I will now at this time, we havent heard anything specific on on on that front.
The only increase we have seen to our costs as Tom mentioned in his the there related to coal via the.
And the fact that we're accelerating drilling but.
Nothing else.
Yes.
And building on what you just said I mean, just just going by your full year production guidance. There on the revised on saving cost sky and you're going to produce awful lot of cash this year, which is a wonderful problem to have obviously.
I mean, what point should we expect premiums to return some excess amounts that suits shareholders buyback a dividend or should we more expect to see an acquisition is zero gold price, where you think you might even experience something like that already this year.
I think as we mentioned and in particular, Tom mentioned this in a we want we continued to to be to want to be careful.
And.
And sure do we have sufficient liquidity in case, we would have an outbreak with the full 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 going to be working on that we still have some infrastructure work to do around Brucejack now there's still some construction work to be done.
We're looking at different that investment to optimize that improved cost like electric equipment and and other things so.
Definitely in the second half of this year, we're going to have minimal. It's time now to start to work on our budget for next year 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.
Again for the shareholders and.
We'll analyze all opportunities and decide what with what is the most.
Efficient way of use our cash.
Probably some that some that we want to deal with at some point.
Because we still have significant amounts of debt on the balance sheet than 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 app.
Demands for our cash and we'll be app balancing all those in the coming months and we'll probably be able to give you some.
Some more color on what we expect to do at the end of the third quarter or deficiency at the beginning of next year.
So all take to to mean, yes, you are cognizant of that and yet still Prolia list price, where things may happen. When mitel is about it next quarter. When this coal that thing hopefully as most prevalent anymore.
Is there off.
That would be fair ico, but unfortunately.
I think we're going to have covered in our backyard for a while I don't think next quarter is going to be resolved, but.
Hopefully something ask we're going to have 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 hobbies Scotiabank. Please go ahead.
Thanks, operator, hijacking gene and congrats on a good quarter and thanks for taking my questions.
So Jack just starting off now.
With that you've now for about four months.
Maybe you had a chance to get down to sites as well.
Any can you provide us with any thoughts you have on current operations and oral improvements that youre looking at to bring over the next coming months.
Yes, Thank you have asap, yet that site.
Since I started there was a site that three times and I'm going back on Monday, taking Patrick that any with me next week and then we're going to be at site to.
To do a very extensive visit there as I have spent quite a bit of time.
No and.
As I mentioned in at 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. The glazier and I think it's the first time I do app to deal with our role than a glacier and it's definitely a significant challenge so good job being done by the team their environmental.
Social license to operate that's very very well done the defendant challenge that Bruce Jack is is the underground knowledge of the ore zones. So thats. 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 on another area of focus is optimize their productivity at the mine.
There's ways to to improve.
Now that we're doing and one one of the main.
That 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 mine sequence. So that's.
Those are the areas that we're going to be focusing on but I'd like to point out that.
Due to the tragic events, we 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 is on the safety side of things.
We're not the in 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 that Jack 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 to.
Meters per month.
Controlled drilling I believe you did about 20 to 2000 meters of drilling in Q2.
Is that enough 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.
Yes, I think we would like to see our development to be anywhere, 10% to 15% 10, 10% to 15% higher rate than what we're doing right. Now we had very good performance in the month of June and in 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.
And on the drilling side, we want to continue to as we develop that one of the challenge that we have oasis.
Because of the the development we have to catch up on development, we don't while always app available stopes. The goal to go and production drill them as we open up new areas. We are going to continued to accelerate our production drilling to build up inventory.
And we believe it we're going to be in a much better positions by the end of Q2 beginning of Q3 next year.
Okay Thats great Bracken.
I'll leave it there and maybe I'd like to other participants to ask questions. Thanks.
Thank you.
Our next question comes from Anita Soni.
Hi, BC World market. Please go ahead.
Thank you for taking my question good morning Joc.
So just following up on it will be this question with regard to the development can 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.
Perhaps help availability Brady I was just trying to get some color on.
So you have.
Level is the inventory sufficient for.
The next year.
Some issues in the past, where there was some mix messaging about John about the availability of stopes not concerned about actually delivering on your value.
Yes, I think right now Anita where we're at now 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 that's why I think over the next four quarters, we're going to.
And densify, our drilling to increase our this the number of stopes over the are the total tonnage of inventory that we have drilled off.
But we're not in a bad situation than we're definitely not where we were Dave do you have about Youve got as thanks, John Good morning, and major Nova and yes, we have built up soon as Jeff mentioned since mid last year Weve and on the last quarter did state were better 170000 tons of inventory in front of as we now have 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 deliver more tons in Q4 last year. One this year was always going to be difficult, but I think the field is set and now way what we see.
Moving forward to build this up with a little more raise and what we've done it too. So I think we're in a much better steak and with the various again.
So just running so.
Roughly 180, that's basically about a half a quarter's worth and inventory available.
Hi, My calculation.
Yes, thats about it anytime we have.
Thats, where we are and I I'd like to have by the end of.
Mike a into Q2 beginning at through three next year I'd like to be about that all two and a half to three months of inventory on hand.
Okay, Alright second question I think there was a mention about.
With.
Increasing liquid departure at the senior executive could you just point out give me a little bit more color I'm not.
Exactly where that.
And secondly, somewhat related increases that you're talking about with.
Colgate related costs can you.
Late them to the.
Thank you have on slide.
23, I see overall, there's a 20 million dollar increase but im just trying to parcel out like where did.
Increased drilling cost go where did the increase cobot cosco.
Everything.
Was it all parse out into it.
No.
Hi, Anita.
With respect your first question.
The the cost so, which we disclose approximately a 1.6 million all use and thus so.
For our VP offs.
The costs or in mind gene a cost.
Well look at.
The per tonne slide so where that is with respect to all the coal with increases in the increased drilling.
It's in two spots.
The call the costs on slide 23.
So primarily in the cash cost lie.
And the additional diamond drilling that Joc spoke about.
It's in these sustaining capital light and Thats why you see that we've moved up.
Those costs, so by about $8 million on both fronts $8 million for the year on cash costs and 8 million on the sustaining capital expenditure line.
Okay.
And then just in terms of.
The full poly could you give us a little bit more color on I know that Q.
Got it was an isolated incident, but just trying to get an understanding of.
How.
What happened.
It doesn't have any future applications at this stage.
I need to you will understand that we.
We're not in a position to provide any details at this time the incidence is still under an investigation.
We are conducting our own internal investigation, we have the authorities involving the investigation.
And that is going to take a little bit a time before everything is finalized and that we have.
Correct understanding of everything that's happened it happened on surface, that's not an underground event. It was not in the mail it was outside on surface.
And I can mention earlier, it's a very tragic event for us.
We add something Thats, we we don't want to repeat and.
I'm sure in due time when that information is available we might be able to provide more information, but that this time we.
We can't comment.
Okay. Thank you.
Then just going back to the question just does that give them up so that's about $5. Upon on the Gionee, we can claim cost for.
In terms of senior executive in the team that's not that's not going to be rolling in going forward.
We think the 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.
Added two more at the end of quarter.
Correct.
Well that's on the RC drilling site.
Yeah on the RC drilling that you've added two more at the end of the quarter how much how much drilling as you think you able to do you per quarter on RC drilling within you announced a breaks in is that the level of rate going forward.
Yes, hi, unaided stays here, if I could answer that please.
As we stated on the last call and in the Toronto Technical presentation.
He is one and two of the drilling was 27000 majors. 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 his indices 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 we're on track to drilled by is in pretty much. The 130 closed 100000 made us.
Okay. So wrapping up the rate then I guess like.
Greg sort of yes, 30 35 corridor.
Well be short of a 100000 by them.
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 at this stage.
So I need today I think it date.
Oh I am happy I'm very happy the 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 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 going to 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.
How can 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 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 are confident that acquiring additional data will be will be valuable.
But again, it's it's a bit Nevada and experiments, so far and we need to continue to learn.
What 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 end to read that an hour modeling and planning and other other design activities.
I understand RC versus Donovan troubles, right, there's going to be some losses data.
Yes, and the collection at the sample okay. Thank you that's occurring.
Thank you anything.
Our next question comes from Joseph Reagor of Roth Capital Partners. Please go ahead.
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. You know is above the range for the year was that a surprise to you guys or was that like a mine sequencing thing that you expected this to be the best quarter the year on agreed basis.
Ah that's a good question Joel.
As I mentioned in the path and I think everybody told you.
We're going to continue to have variability in our great and then all theres quarters, that's going to be a little worse than expectation and others that there'll be a little better.
I would say this second quarter was not significantly better than what we expected, but it a little bit was a little better.
Maybe the next quarter, we'll be at quarters will be a little different I want to make sure that we are we continue to understand that it's not because we had a good second quarter that 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 confident 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 on one from February and the 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 thats a point worth noting here that we're tracking along on the bottom line plan and this is pleasing to see from my perspective.
Okay fair enough.
Kind of an accounting item.
So far this year the depreciation on a per ounce sold basis, it's been a bit elevated from last year I'm.
All right, let's call it three twentyish announce 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 with though we increase our ore reserves. So if we have successful drilling results 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 back in early March.
Okay Fair enough and then.
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 different company that could look at that.
You know that maybe.
Interested and 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 thats something at in the future, we're going to be thinking about but.
At this point.
No I don't have any specific comment to meet them 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 the timing wise.
Joe it's always difficult to say, but.
I I'm told that up there we drilled until that down and then on the month of September and then we have to get their rigs out that takes a lot I don't know mine month, and a half will get to get the resolves analyze them. So possibly by when we do the earnings call for through Dream, We may have some information too.
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Two to two population 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.
Hi, Thanks second thing.
People, taking my question.
Right.
Question on the on the development trade.
Do you want planning thousand games.
Last night.
And given the uncertainty that on coal bed. In addition to reduce processing capacity since 1500 density.
Do you think that less than three Oh, good man portable oh unprecedented shutdown typically.
Yeah, I think with that with that level of an advance in a 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 a little different development, but we've recovered from there very nicely and at the current rate.
We are now at where we are at the thousand meter plus per 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 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.
I think we're gonna 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.
Right I didn't know just that's kind of a follow up you said you know you would like engines.
Moving forward that what's coming up so I.
Right.
But I.
Given the situation.
I think for the short term or 1100, or maybe a havent on 50 would be a would be where we we now would be ideal, 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 we're goods and ideally a thousand 1100 would be would be a good number for us.
Perfect. Thank you for the Oh.
Oh My second question is what they need okay.
Oh free cash flow generation Gardner Oh.
Oh My God.
Maybe just I know, if you're not playing to understand the nationally.
Cash.
Yeah, well in the second or 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 if we had if we weren't to experience an outbreak of Colvin 19 at site that could shut down our.
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 gonna be doing with a cash.
I as I mentioned earlier, we still want to we want to do a lot of drilling.
There's a infrastructure work that we have to do.
We have a projects that we want to move forward too.
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 going to be managing that very carefully.
We have a significant amounts of debt on the balance sheet, but right now I know the coupon on that depth is a fairly low due to the overall.
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 a little much.
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 we'd guidance for the gives about 7.68 0.5 grams per tonne you guys have done or about 8.3 doing for six months now I mean, yes, but there is obviously grade variability.
Within this mine, but I mean are you expecting agreed to be Gordon 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 going to 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 with confidence that the grade will be between 7.6 and 8.5 Gram per tonne as Dave mentioned words.
We're happy out we're tracking here compared to the revised mine plan that was published in March or at the end of February we're tracking well would that we continue to have good. The resolved. So you saw first quarter results were good the second quarter results were good were continued to see good.
Performance.
So we we continued to be confident but we want to be careful we want to continues to be careful we don't want to set that expectation there that we can't meet so we continue to believe that 7.6 to 8.5 Gram per tonne is the appropriate the range.
Perfect. That's it for me just appreciate that.
Thank you have it.
Our next question is a follow from Anita Soni F.C. RBC World markets. Please go ahead.
Hi, Thanks, So just two questions the shutdowns that you have.
Can you give an idea of like the duration, and you know which quarter or when that will happen and secondly in terms of the tax pools you. How can you give us an idea of how much.
Dollar amount be available tax pools, you have and when you mentioned that it would be about three or four years.
During the full 36% what was the gold price assumption that E. Thanks.
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. The shutdown. It's a major ER 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 got this opportunity to do other work in the mail and whatnot, but the the focus area is the underground crusher and I guess at 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.
Let Tom answer your tax question would because that's not my.
My forsake.
Okay.
It's also need to their multiple tax pools that though we are drawing down.
I just.
To give you any specific numbers, but let's let's say the in 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 we rented at around 18 Hunter.
Dollars per also with the new life of mine.
So as we spend as you know as we spend the capital dollars the goes into those pools and we draw mold against earnings.
Earnings so.
The us sort our best estimate at this point.
Three three plus years.
Before we pay the income taxes.
Okay. Thank you.
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 in 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 they integrate 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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