Q2 2021 Pan American Silver Corp Earnings Call
Completed construction of our new primary ventilation race from surface to 345 meter level on the higher grade Candelaria East deposit.
But the race became blocked in the bottom 42 meters during commissioning in Q1.2021.
We are very pleased that we successfully cleared the blockage in July shot created on fully commissioned this important ventilation raise at la Colorado that reestablished as quality ventilation into the most valuable portion of the deposit.
Mine development is now underway to enable throughput rates to increase.
The completion of this project along with several other improvements to the ventilation circuit means that over a ventilation flow rates will be similar to the levels. We had in 2019.
During Q3.2021, we plan to rehabilitate two other key ventilation raises which will further increase overall ventilation flow rates to 50% higher than 2019 levels.
In early 2022, we also expect to advance early construction.
Our refrigeration plant for the eventual is currently positive development to further enhance current working conditions in the deep high grade areas of the mine by increasing overall ventilation flow rates to a 180% compared to 2019 levels.
As we look forward to expansion of the lateral at other mines and development of current deposit.
Our board yesterday approved the new concrete lined ventilation xr's shaft for the eastern portion of the local and other mining area and Boston Northern edge often used car on deposit.
We believe this will be a robust durable solution for ventilation through the challenging ground conditions that exist in the area of that mine, providing added insurance against future premature ventilation infrastructure failures.
This shaft can be extended in the future to provide ventilation infrastructure to development.
The deepest con project.
We estimate the cost to construct the $5 five meter diameter, and 560 meter deep shaft to be approximately $47 million, which should be completed in early 2023.
Gold production in Q2 was 142300 ounces benefiting from mine sequencing into higher grades at Dolores and La Arena.
We also had a buildup of 23800 ounces of in heap gold inventory at Dolores onshore window.
We expect most of this will be recorded in production over the second half of the year.
At Bell Creek, we continue to mine at lower rates on grades.
We adjust the mining methods on ground support system to adapt to the wider or expansions in this section of the mine plan.
Expecting increased production rates during the second half of the year.
That's a window as we discussed last quarter. We are in the section of the pit that has more fine grained host rock with higher clay content.
We stockpiled approximately 857000 tons of these fine grained material during Q2.
Trivalent to 23% of the old remind during the quarter, which will be blended with coarser ore to be mined later this year and into 2022 for placement on the heaps supporting higher production during the second half of 2021 in line with our annual estimates.
We're also evaluating the potential of operating the agglomeration plant to process. These fine grained material beginning in late 2022, and 2023, which could increase gold production rates from shop window, but incur additional cost for operating the plant compared to our blending and run of mine heap leaching.
Overall, we do expect a stronger second half of 2021, and we have free affirmed our production guidance as revised in May 2021.
Silver segment cash cost in Q2 were $12.71 and.
And all in sustaining cost were $16.36 per silver ounce sold.
The cash cost reflect lower silver production lower gold byproduct credits from the move of the Lauder seem to the coal segment in 2021 and.
An increase in treatment and refining charge due to increased contribution from concentrate minds.
And an increase in royalty from Merrill.
Early at San Vicente mine.
Silver segment all in sustaining cost included $4.19 per ounce of sustaining capital, which includes increased spending on the critical ventilation work at La Colorado.
Coal segment cash cost in Q2 were $857 and all in sustaining cost per $1163 per gold ounce sold.
The cash costs reflect the benefit of the move of Dolores into the gold segment.
The current mine sequencing at La arena, resulting in higher throughput and grades.
But were partially offset lower grades at Bell Creek, and the increased waste mining rates on door stockpiling of channel window.
The Covid pandemic continues to impact our operations.
Protocols, we are maintaining to protect health and safety continue to hinder our workforce deployment levels, reducing normal throughput rates by about 5% to 10%.
So disproportionately affecting our underground mines.
These protocols also incur additional cost and delay execution of certain projects from 2020 into 2021.
During the first half of 2021, we have seen hired unexpected cost escalations in energy wages and consumables along with the stronger Canadian dollar. However, does appear to have leveled off in July 2021, leading us to maintain our cost guidance for the year.
Furthermore, we expect the impact of Covid will diminish over the next two quarters.
We are encouraged by the high levels of vaccination that are occurring in many of our operating jurisdictions.
Oxygenation programs are of course critical to combating this virus.
Q2, we committed our support to UNICEF kind of us give the vacs campaign.
The campaign is aimed at providing global equitable access to COVID-19 vaccines.
Through the distribution of 2 billion doses of COVID-19 vaccines to low and middle income countries by the end of 2021.
Turning to our financial results revenue in Q2, total $382.1 million.
Revenue has been impacted by a $45.1 million buildup in delray and concentrate inventories and a $47 million buildup of heap leach inventories in the first half of the year.
Both of which are anticipated to normalize and improve revenue for the second half of 2021.
Inventory buildup made up the majority of the $37 million use of cash from working capital.
<unk> and operating cash flow of $87.1 million in Q2.
After funding all of the sustaining requirements of our business project capital and dividends.
Cash and short term investments rose to $240 million at June 30th.
This includes the sale of noncore assets totaling $14 million.
Solar portfolio for royalties to Maverix and received nonrefundable deposit for the sale after Waterloo exploration stage, our sub debt.
Waterloo transaction cost in early July when we received an additional $22.7 million.
Which will be recorded in Q3.
<unk> retained the 2% net smelter royalty on any future production from this asset.
Net income was $71.2 million on 34 per share in Q2, driven largely by strong mine operating earnings of $103 million.
Adjusted income in Q2 was $46.6 million.
<unk> 22 per share.
Based on the strong operating cash flow in Q2, our solid financial position and improving outlook for our operations, we announced a 43% increase to the quarterly dividend to <unk> 10 per common share.
This marks the third dividend hike in the past 18 months.
Okay.
I will now provide a brief update on the catalyst in our portfolio.
Luckily or other we're continuing with the work to provide a preliminary economic assessment for this current deposit late in 2021.
Which will include an updated resource model.
At Escobar two pre consultation meetings have now been held as part of the idea of low 169 consultation process for the mine a third meeting originally scheduled for July 17, 2021 has been postponed to August 2021, due to the coverage situation in Guatemala.
The main agreements reached during the first two meetings, it's a requirement to prepare cultural on spiritual impact study of the Escobar mining project.
We are encouraged that the court mandated dialog on six nine consultation process has started with broad participation.
But we are unable to provide any timing on the consultation process or potential restart of day Escobar mine that's the day.
Sales of the process have not yet been determined.
At our Nevada projects the legislature in Chubut, Argentina has not yet voted on the modification to the mining law to allow open pit mining and certain songs of the province, and we do not know when debt build may be debated.
However, the legislature has rejected a bill that would have prohibited mining activity and the entire province.
On.
After yesterday's market close we also reported our estimated mineral reserves and resources.
June 32021.
Silver mineral reserves are estimated at 529 million ounces and gold mineral reserves at $4.2 million ounces.
The exploration program over the past year was reduced by 50% due to the COVID-19 restrictions, although we completed the planned exploration program for payments and <unk> com.
Net Lorena, we replaced 141% of the ounces mined extending mine life by another year.
Mine life is also extended by another year attendance to the discovery of 209000 ounces of gold of new mineral reserves, replacing 147% of ounces mined.
At La Colorado, Nevada relation restrictions impacted exploration activities. However, the recent improvements to the ventilation circuit would allow us to ramp up exploration drilling at this long life mine, but we have over 100 million ounces of silver mineral reserves.
And 192 million ounces of inferred resources, including the largest garnered positive.
For the 12 month period, ending June 32021, Pan American's, producing mines to replace 8 million ounces of silver mineral reserves and 98000 ounces of gold mineral resource.
Total reserves were impacted our chat window from containing gold production of 193000 ounces and the reclassification of 146000 ounces of gold mineral reserves to resources.
Which contributed to a total depletion of 339000 ounces of gold sales.
Based on geological interpretation cost estimates on cutoff grades.
The reclassification of the La Bolsa project from mineral reserves to resources produced gold mineral reserves by 315000 ounces and silver mineral reserves by $4.5 million ounces by.
While both as a non core project debt the company intends to divest.
Pan American holds one of the largest silver mineral resources and reserves in the world.
And with that I would like to open the call for questions.
Yeah.
Thank you we will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad you will share.
Jerry Cowen acknowledging your request.
Using a speakerphone please pick up your handset before pressing any key to withdraw your question. Please press Star then two.
I will pause for a moment as callers join the queue.
The first question comes from Tyler Langton with JP Morgan. Please go ahead.
Thanks for taking my questions.
I guess to start could you talk a little bit balance sort of the impacts from COVID-19 that you sort of currently seeing on.
Especially on sort of like Colorado, and Banacci, all sort of now maybe versus on a quarter ago, and then I guess just to hit your guidance I mean, do you need sort of I.
I guess restrictions from Covid.
<unk> I'm just trying to understand I guess, you know sort of how sensitive you know the guidance is the kind of the COVID-19 restrictions.
Yeah, Hi, good morning, it's Michael I'll start on pass it on for Steve to give you more details on the operations.
As you recall at the beginning of the year, we kind of assumed.
Turning of restriction in a straight line every.
Every quarter.
With the first on impacted quarter in Q1.2022 of course life is not going on straight lines, we know that on the.
So I think we saw a bigger impact for sure and we assume still in Q1 and maybe sell them at the beginning of Q2, we definitely see strong improvements now but.
No quite quite.
Impressive vaccination rates in most places, where we where we work. So I think it will just follow the similar trend and then everywhere else in Latin American and it will get hopefully easier for us, but there's definitely still impacts there and maybe Steve can give us some more details yes, Tyler if I can just add Michael I mean, it's.
Clearly related to vaccination rates, we see just like in North America, if we can get vaccination rates up into the 50% to 60%. We can finally start to relax those COVID-19 protocols and restrictions.
At that point right now, we're probably roughly around 20% to our workforce in Mexico, perhaps as much as high as 40% down in Argentina. During the first half of the year, we did indeed.
It was a very sensitive time for us and we did see lots of cases coming to our data that we had to turn around and we had high levels of people that had to stay off of the workforce. So there was a.
It definitely had some challenges during the first half and we're hoping the vaccination rates as Michael said are picking up a lot and we're optimistic that as we move into the second half we will see the using that we had projected in our current forecast.
Just to round it up we see probably around.
$7 million cost.
Per quarter right that we assumed at the beginning of the year.
And that really covers all our work testing quarantines.
Additional transportation and and so all of the day added call. It cost per visit so I think we're pretty much on track on that side, but we assumed at the beginning of the year.
Okay, Great. That's helpful and then just I.
I guess with La Colorado, and the E on the ventilation blockage no now that's that's passed I guess could you talk a little bit about sort.
Sort of how quickly you know throughput grades and sort of production should improve I guess you know.
Q3, Q4, and then kind of.
You know cost improving as well just kind of any color there would be helpful.
Sure Tyler and a little bit of background, we have realized that a lot of that infrastructure failures that we've seen over the last couple of years, it's really a heat and humidity issue as we mine deeper and further to the east on this deposit, particularly in the high grade we're seeing greater he.
Increases greater humidity increases and what we find is this the citic ground that we have really starts to degrade without higher heat and.
Humidity and that's what that's what failed in those raises.
We're also seeing challenges in the developments.
From a similar extent so what we realized is we do have some catch up to do on short Caribbean and our developments just like we've shocked accretive raises to recover those so right now in our forecast what were what were projecting out as kind of a progressive 10% to 15% call. It increase in throughput each core.
Order going forward from where we were in Q2, and maybe a 10% to 20% improvement in <unk>.
Silver grades each quarter as well as remove and open up and get ahead on the development into that higher grade area. So thats, what we baked into the forecast and we feel pretty confident we can achieve that.
Alright, perfect. Thanks, so much.
The next question comes from Cosmos <unk> with CIBC. Please go ahead.
Thanks, Michael and Steve and team.
Thanks for taking my questions today.
Maybe my first question is on Dolores.
As we talked about it.
Last quarter.
We talked about Leach kinetics, I think at that point in time, you had talked about stockpiling of high grade ore from the rainy season.
And also on stabilizing the area of the Leach pad between pad, one and pad three could you maybe give us an update on that.
I guess, we're now into the rainy season in Mexico. So have you started.
On stacking some of that higher grade material and how does that impact the recovery.
Yes, good morning Cosmos, Thanks for the question.
Yes. Indeed, we were we were successful in stockpiling of high grade during the dry season. So we're continuing to run the agglomeration plant and we are deep into the wet season now so the high grade as processing through the plant quite well relative to the leaching kinetics.
We are we are addressing or we have been addressing our design and construction challenge trying to try the valley fill leach pad three to this to the previous Sidehill Leach pad one that we're reconstructing from the original mine finders build.
We've had to limit leaching and some of those areas until we could build some buttressing and place from liners in a way that ensures the stability in that area because its a very challenging geometry with some of the steep terrain in that area. So it restricted our ability to leach in that area and that in turn.
<unk> grows the heap inventory that's what's happening there currently we've advanced heap loading into the non affected areas. So we expect to move away from building those high inventories that we've seen over the last nine months or so and we're working really closely with our heap designer and expect to.
Reactivate leaching in that area.
In the next few months or so.
And that will start to draw those inventories back out. So it's really just a matter of that it's a bit of a tricky geometry, there and that requires some buttressing and unique.
On the aligner placements in the handling of Av.
The <unk> solutions coming through that connection between the valley fill in the old Sidehill deep mine finders that Bill mhm.
And then in terms of contact here, yes, Michael I'm sorry.
Just to add one more thing.
Great detail, Steve gave us but honestly.
The low risk going on and on and then and.
Stacking on already for many years.
The heap Leach the stack is getting thicker and thicker so.
It's going to take longer and longer obviously to do that.
Got the gold and silver out there.
Just the time, just the time that it takes big because of the thicker and more material there but.
Sure Steve Obviously, Steve included at all and as soon as planning on forecast.
Of course fully understand.
And that needs well into my follow up question here.
I work it out in terms of ounces stacked ounces produced I guess quote unquote, a recovery of <unk> 65 per cent per silver <unk> 59 per cent for gold from Q2, silver actually improved from the first half averaging 59, 6% per gold has.
Stayed about the same.
Should we.
Debt to improve in the second half.
Yeah, that's certainly the goal will be quicker to improve its our faster Leach times, so those inventory builds.
Affect gold more than they affect the silver because of the long leach kinetics of the silver so yeah, it's definitely a timing thing so it's <unk>.
Quicker to be the build the inventory and it's quicker to reduce the inventories in the silver so thats, what youre seeing there.
Perfect.
And then also at Dolores as well.
Going through your reserve resource update yesterday I saw that.
The Dolores reserves.
Creased year over year.
Maybe if you can comment on that if my numbers are correct. It looks like in terms of tonnage decreased by about 9 million tons I think in the 12 month period, you stacked about <unk>.
Seven 6 million tons, so it seems like.
On some tonnage might be missing was there any kind of modeling changes and.
On a more positive and is this just is that just a function of not enough drilling due to COVID-19 impacts.
Can you find more LNG is here.
Yeah, Hi, Chris.
Chris here.
Yes.
When we look at the reserve depletion, yes, <unk> got the debt from production, but.
Obviously, you're right I mean, we had some increased cost across the underground. So we lost some reserve there and also stockpiles, we had some low grade stockpiles, which due to rehab cost and positioning.
They were actually flipped out of.
Net of reserves.
Saying that there you know net net debt was a decreased more than just production on that.
That really we're seeing those slight changes attributed some to cost et cetera.
If I could add on to the Cosmo. We did we did sterilize the low grade stockpile that was up on the north part of the property that goes back to the date of mine finders again.
There was it was a marginal stockpile all along but we deemed it submarginal now because of our latest estimates as Chris said for the Leach pad on the handling cost, but also the leach pad construction cost with those tons have to absorb so it's.
It's a stockpile on the far north and depending on prices it could come back in and it just got a long haul to get around the pit and.
On the cost for the constructing the pad that it's got to absorb.
Of course.
Maybe moving on to La Colorado.
And thanks, Steve for giving us the guidance.
In terms of what to look forward to in terms of Q3 and Q4.
I just wanted to be a bit more specific here.
You did about 14.15 tons per day in Q2, I believe and it sounds like as Michael mentioned.
Low rates in terms of the ventilation could get back to the levels in.
In 2019, 2018 on kind of dating myself now, but I remember 2019.
Even though your nameplate capacities 1800 tonnes per day at the mill.
I think you did about 2100 tonnes per day in 2019, almost 2000 tonnes per day in 2018 could.
Could you actually get back to that kind of throughput is that what you're targeting and also in terms of grade plywood to do the math behind it I think you would need over 300 Gram per tonne grade in Q3, and Q4 to get to your guidance is that what youre targeting called grade as well.
Yes, Cosmo relative to throughput.
Our current forecast does not anticipate us averaging at the 2021 on 100 tonnes a day.
Through any of the quarters going forward or like I say, it's kind of a 10% to 15% increase over Q Q3 will be over Q2, and then another 10 to 15 per Q4 over Q3, and that's just catching up on that development I was mentioning that we face relative to grid, yes, we will move up into the three hundreds.
Again, 10% to 20% kind of incremental grade increases quarter over quarter.
And move towards that reserve grade going into 2022, those are factored into our forecast.
That's great to hear.
And then at La Colorado.
Reading that debt.
And concentrate transport at La Colorado.
That was from Q1 and I thought that would have been kind of cleared out by Q2, but I don't think that's the case could you give us a bit more detail on that are we talking about a significant number here.
And in terms of helping you on getting to guidance.
Does that include it as part of Q1 production or.
Is it going to come in Q3 Q4 production on when the sale when the shipment of concentrate actually happens and then in that case. It would actually help you in terms of.
On a product higher production in the second half.
Good morning, Cosmos, Rob Doyle here.
I'll take that one.
Yes, I mean, firstly, it's what's been delayed as revenue we reported production as as we produce so the delay with it we've really had is.
Is around the commercialization of debt production.
In debt.
Nevada as well as elsewhere, we had run into some some pandemic related logistical challenges.
You have seen from our balance sheet debt inventories of finished production increased by about $45 million over the first half of the year.
And the concentrate shipments really out of La Colorado has had been constrained by delays in shipping and container availability is the key factor that we've struggled with day, we are seeing net normalize and have a very robust.
Pipeline of shipments.
In Q3 and into Q4, so we do believe that there is inventory levels will normalize over.
Over the balance of the year.
On top of that we've also had some delays in dore shipments specifically there was a.
Particularly large shipment out of show window in Peru debt.
Was.
Was withheld because of some complications around the elections in Peru.
June so debt.
That was delayed and will come into revenue in Q3.
These are all simply timing issues and will come off through revenue in the course of time and of course cash flow too.
Great. Thanks, Rob and then.
Maybe one last question just on show window here since.
You brought itself.
You talked about Leach kinetics here and Michael mentioned part of it was to stockpiling of the fines.
Blending it with some of the coarser or later on part of that it sounds like it was also due to the stacking of higher grade towards the end of the quarter.
We're about a month into Q3 now are you happy with what Youre seeing in terms of Leach kinetics in terms of recovery I guess in that context, absolutely worked out the recovery on.
The ratio of ounces stacked versus produced here it was 59% in Q2 versus about 65% in the first half.
Could we see that improve.
Back to the mid 60 level or even to I guess, some other technical report numbers of 70% or do we need to be.
Question on agglomeration to get to the 70%.
Great question Cosmos.
This is what we're studying them quite hard right now first off we are because of the fine grain clay ore that we're mining at high rates right. Now we are trying to push those blends as hard as we can out of the heap. In net result is we do have to slow our application rates down in some.
Sections of that heat, which do reduce the kinetics and come up with the kind of numbers you're talking about.
We won't see that.
We won't get back to our normal rates probably throughout the rest of this year, we're still trying to model and understand the distribution of this fine and clay or it's a bit challenging when all you have for the exploration information is RC drilling.
We're just not we're not confidently able to build these kind of lithological models that are so important to us right.
Right now and that's why we're kind of hesitant to say, where we're ready to activate the agglomeration plant in and that'll solve all these problems were not totally convinced that's the right answer yet we're looking at that possibility, but in the meantime, we do try to process as much as a fine or buy by blending at as high a rate as we can.
The coarse ore and offsetting that was slower kinetics through reduced application rates.
So that's what we're doing and that's that's what we're forecasting going forward. We do believe this disorder ultimately has very high recoveries in excess of the 70% debt that we have in the low studies before we've seen much higher extraction rates and expect to get there and that's what we're trying to evaluate.
You can understand and model, that's really a kinetic timing point and whether or not we need to agglomerate and whether or not even with an agglomeration. We feel we still have to leach at lower application rates and have slower kinetics, and what we had with the with the great coarse ore that we've seen in previous years.
Great. Thanks, Michael Steve, Rob and Chris Thanks for answering my questions. That's all I have.
The next question comes from Don Demarco with National Bank Financial. Please go ahead.
Thank you for taking my call operator, good morning, gentlemen.
There's a number of ventilation raises at la Colorado.
From surface with 345 of course, I think theres another race to provide ventilation day candle area, maybe potentially a fully line concrete shop further east could you just list the ventilation raises that you have planned at the mine over the medium term.
Sure.
On.
It's done and on yes, it's Martin from here.
So on.
On the surface to 345, that's the one that was plugged the bottom.
We called out the Hema Los Reyes.
So that's the one that was cleared.
Just recently.
That's one raise we have another one called La Libertad, which goes from surface to just below 400 meters.
On that.
On that one we had a failure in our.
Yes, close to getting that completely rehab located now in Q3.
Sure.
Felicia coding in August actually.
On the surface to 220 level a portion of that raise and then we're doing two other races to bypass that then deeper.
Another key ventilation raise for us is less failure, which is in the Australia portion of the mine to remember.
Colorado has two principal parts of the main ones Corp, Candelaria and the other is called last failure.
So last derailleur actually.
In the early part of Q3 towards the end of Q2, sorry, it towards the end of <unk>.
Q1, and early part of Q2, we were able to take that one out of the.
Out of service and.
And fully shock treated other away from surface.
And again, its just over 400 meters deep.
And I'm, sorry, if I misspoke, a little bit that we were able to do that in.
In June July.
So those are the three principal ones. We also have intake ramps.
And on intake chef the intakes are.
Ah Gila shaft, which are which.
We have about 200000 CFM of intake are coming in that one we have the companion ramp which are which we used as an exhaust route well we had the failures in the mine and its not reverting to being.
And you can take it away so there's going to be.
Our refrigeration plant on the top of that that's going to be providing tool are by the end of the year and then we also have the scent for men ramp. So that's kind of the and it is a very complicated.
This is a very large nine that spread laterally over a big long distance and Michael.
Michael and Steve have both mentioned, we have heat and humidity that we'd have to have to deal with when we're designing the ventilation flows from all of those areas.
Okay, if I could just average.
What Michael had mentioned in his conference, but we have approved this new shaft, we're going to call the San Geronimo shaft further out to the east right in the heart of kind of this high grade zone that we cherish so much and we saw the opportunity I mean, the scar and deposit a deep seated deposit.
Clearly, we're going to have several ventilation shafts going into that deposit regardless of the mining method that we need we see the opportunity to start to advance the shaft.
On to ultimately access and provide access and ventilation into the scarring deposits, but in the meantime provides us I'll call. It an insurance policy against any further infrastructure failures like we've seen over the last two years. So we're really pleased that the projects go.
Going forward it should be completed.
Towards the end of 2022 into 2023, we have a great contractor that was well set up who was able to mobilize very quickly on that so we're pretty excited about that opportunity and that will be.
On the insurance policy should we need another exhaust system of this moist harder.
With a fully lie on concrete share that's $5 five meter diameter.
Okay, Steve Yes, I guess, that's what I'm getting at is I'm, just trying to understand the risk it's encouraging to hear that sand drawn on via an insurance policy historically I'm trying to understand the risks of a potential repeat of what we've seen over the last couple of years with reduced grade and throughput and so on.
Can you comment on that do you think that.
It's very unlikely that you would see this happen again in the future.
We're very we're very pleased with the shock, creating advances of Martin described on these raises were able to robotically sharp crude into these races. Now short creek seems to be the key thing and raises and developments in sealing off the ground on where you're from the heat and humidity, where it starts to.
A degree.
There are risks with that we're not you know this is we haven't really.
John This for a long period of time, yet to see how all of that chart crude is going to perform so that is the reason we're really pushing the shaft is on insurance policy. We we do think it's an important insurance policy, but right now today, we you know I think in.
<unk> share after we got up to six inches of chalk credo and fully on that on that wall and we haven't seen any degradation of that to date, we feel pretty good about it but we're feeling really good to have on this insurance policy going forward too.
Okay. Thanks for that and so with the with the ventilation restored wasn't the reason again that you can't get back on the 2000.2100 tonnes per day I think just to expand on what the previous caller had asked.
Yes, no it deals with the development.
Because of the ventilation restrictions, we not only restricted mining production, but also development and and ground supporting in the same kind of degradation. We saw on the raises we have been seen in some of the developments, particularly up to the east. So we do have a bit of catch up on there and that's why it's going to ramp up over the next six months.
Sure so back to the 2000.
Okay back up to 2010, and that's great and time.
Just a final question so the la Colorado resorts deferred to year end was there a reason not to include it in the resource update last night I mean, the current resource more than a year old has been a lot of drilling on this target.
Curious to see how it to dancing.
The only reason we didn't included there has been some great infill drilling in there and we're really feeling good about that scarring deposit, but we also are coming out with the pea towards the end of this year. So we thought it's best just to wait for that P. So we have a full understanding of that new resource before it's released.
As you can imagine there is a lot of technical work going on right now on mining methods on ventilation on access of the area.
On processing et cetera, et cetera for the PGA all.
All of that will ultimately impact obviously.
Got that reserve stage, yet, but that will still impact our resource on how we see that's gone being developed on so it's the prudent way to wait a few more months for debt for that resource update and include debt right into <unk>.
Fair enough, okay, well, thank you for that Michael and Steve and.
And good luck in the second half that's all from me.
Thanks.
Yeah.
The next question comes from John Tumazos from John Tumazos, very independent research. Please go ahead.
Yeah.
Yeah.
I don't want to repeat the earlier questions, but to the resource and reserve report.
Sort of reads like you didn't drill a hole in the last year, which I know you did.
Is it fair to just summarize.
The challenges of producing in Latin America with the Covid epidemic.
Significant.
And it was a big effort just to produce as much as you produced.
And some of the reserve calculations and updates.
Suppressing than production.
Maybe.
Maybe next year.
We'll get a little more data.
And then secondly.
It looks like the processes are moving.
In Guatemala and ship boot.
Which is better than things where for the last several years.
Yeah.
I guess, it's impossible to predict how long the process will take.
Whether it's one year or more two years or so.
But at least there is communications and engagement.
Which is better than nothing.
Got it.
It's a fair summary of where we are Michael I'm trying not to put too many words in your mouth.
Yeah.
Good morning.
Yes, I mean, we know that there wasn't a big impact from Covid to our operations in Latin America.
Last year in <unk>.
It's been shut down by by governments all across the continent on when the epidemic started.
And of course that had also on impact to our exploration efforts from probably more so than to our production because.
The logic step is when you when you think you accompany that.
The largest reserve base in the world.
The logic stuff too.
Priority two hour production when you have interruption like we saw from Covid and not to do the exploration.
It doesn't really you know.
Make it make a big.
Difference if he if he deplete a little bit of the reserves for a year like this but have less people on site and give us that give priority to production and that's what happened in the past that's why we mentioned in the report that we move on.
Down 50% on on the drilling and of course with low state our yoga lessons, you've got less loss intercepts in the net loss loss.
Our reserve increases on a replacement.
You're very well I'm sure you saw that vs still put the full drill programs up.
Our payments on debt Lorraine alright.
It was easier to do on.
We replaced more than a year to year of production in both sides. So very very good news. Obviously shows you that when you spend the efforts on the drilling you got the results out of there, but we really felt last year that in many many of our assets, where we have a long very long lives.
Service ahead of us.
That they can as I said, we can take a slight reduction on our reserves and prioritize our production. So that's that's a per.
Probably enough for the for the reserves I think.
Obviously, though.
They'll be open to give much more detail that's much more detail in the press release that Chris put out this morning.
On what in Milan to vote I think your analysis.
The analysis this is fair and right the other processor.
In Guatemala is moving with free consultation meetings.
I think the the meeting debt that was supposed to happen in.
July has been moved to August due to Covid restrictions, which are still very very strong on big in Guatemala.
Obviously, we all have to make sure that this meetings are held in a safe environment on safe manner.
But they're moving ahead and on.
Progress will be reported to us as they move ahead.
Michael if I could.
Follow up on the first point of keeping up with production.
We all understand that most of the mining companies.
Had to divert workers from exploration.
From Capex.
From waste stripping in underground tunnel development just to produce the current quarters during the crisis.
Even escondida cut their production forecasts a couple hundred thousand tonnes cost.
They were behind on waste stripping.
I know you haven't introduced guidance yet for 2022 on a lot of 2023.
If we can understand.
'twenty 'twenty and 2021 mishaps.
Lower output.
Plus or one time factors.
Do you think you can get back.
2019 output or original 2020 guidance in 2022.
Or there's so many things to get right.
It won't be until 2023 or 2024.
That we'd get back to where the.
The trend was two years ago.
Well.
Remember, we when we gave the guidance for 2021, we mentioned their debt our first quarter that we assume no COVID-19 impact.
The first quarter of 'twenty 'twenty two.
We didn't change that outlook, but I mean time will tell how this pandemic evolves as I sat in.
On prior conference calls I I don't have a crystal ball, how that evolves on behalf too.
I know react to reality here, but so far so far I would say so good.
We see how it's going on but you know that new variants third dose.
Hum.
Behavior of debt virus.
But we don't know yet I've done on newsstand anvil see but with the information on behalf right now on the vaccination rates, we see right now.
There's a very good chance that we can go back to kind of more normal rates and.
And less restrictions on.
And lastly on.
Trolls on protocols etcetera due to Covid add on we had this year, but.
Now I'll walk us Thats Televisa far away ready to to make further statements on last year's behavior of the pandemic.
So the underground development.
The waste stripping.
The Capex evolution is such that it's possible.
But next year, you're at seven to seven 5 million ounces of silver per quarter.
Total more than 150000 ounces of gold per quarter again.
Well look as though it's pretty early to make this call as we didn't go through the bunch of thing yet on that.
The numbers I haven't obviously seen the numbers for the <unk>.
Forecast on.
All I'm, saying is that if everything continues like we see right now on the pandemic side, we should be able to kind of go back to our normal throughput on our normal numbers on <unk>.
And obviously very high on the list as Steve mentioned net La Colorado, when we got back to normal throughput on kind of a normal grades there as well.
Michael that's very good and there's other companies that are already say.
So far behind that.
They lowered multiyear forecast so that's that's actually better than a lot of people can fight the battle.
Thank you.
The next question comes from Lawson Winder with Bank of America Securities. Please go ahead.
Hi, guys. Good morning can I ask you about the.
Cash cost per unit cost per ounce, rather at Timmins, so slight increase in <unk>.
Throughput relatively flat.
Over quarter grades, but the debt.
Cash cost ticked up about 5% what was driving that.
Yes, Lawson Steve here.
One of the drivers was just the exchange rate.
We had seen an increase in the Canadian dollar strength during the quarter. It has backed off since then so we're we're feeling better moving into Q3.
But also addressing some of this geotechnical stability that we've been dealing with down in Bell Creek I mean, it's a required a lot of re drilling of holes that have that.
Moved after they drill and lot more support more elaborate support going in there. So there's additional costs or too as we move down the levels and get into these trends versus stopes, it's going to it's going to relax that as well going into the second half.
Do you see any input on.
Any impact on grades attendance because of what's going on at Bell Creek and I don't mean for this year I mean, just going forward yes.
Bell Creek clearly is our is where we get the best grades.
So we are anxious to get throughput rates up at Bell Creek, which will help produce at a higher grades as well.
Okay got you.
No.
Turning to Argentina, I was surprised to see that.
Gold reserves will gold and silver reserves at Joaquin actually ticked up 13% and 15% respectively.
What.
What's driving that and then similarly with the pretty substantial decline in coast Jose was that all driven by.
Depletion over the other factors driving that large declines at cost.
Yeah, Hi.
Why can't we were actually able to get four or five drill holes into the into the deposit and I'll see if we've got a lot more information <unk>.
<unk> from the development et cetera, marketing and we're actually able to upgrade some areas from thicker areas. So that was a net net win based on.
Some very limited exploration that we're able to do at <unk>.
Coffee, while we did deplete through production.
So again, we're a lot more geological information from development from actually making everybody from so that was a slight change to the geological model as well.
And we're obviously keen to get back in there and assess and review as we as we gained more geological information from development.
Okay, now that's great and on that point.
Hi, how are you guys now thinking about the the mine life.
In Argentina, so the entire amount on TL operation, including Lockheed Cosan and what's left at the original net adds yell.
Deposit.
And from then on my numbers I mean, it's still looking like it's pretty much end of life.
In less than three years are you still thinking it thinking of it in those terms and.
Or could it be expanded or could it be less.
Yes.
As you know a walk in both walking it goes they have been from the beginning on two.
Two kind of subtle lives deposits very high grade, but very very small on limited in size on.
Really I think nothing nothing has changed obviously as Steve Chris mentioned you may have.
Constantly gaining a bit more information with the development of production there and so that will move resource a little bit up and down but I would not expect to see there are major.
This difference to our reserves here going going forward. So I think youre, probably about right with your estimate on timing.
Battle on that we would make an hour bake discovery, but that's that's how it looks like right now.
Okay, Great and then just.
On on Dolores of course.
Already discussed.
The decline in the reserves there are quite a bit but.
Just thinking about that asset as well.
I mean is that is that a three year life mine life asset or do you guys see potential to extend that mine life there.
Longer term.
Yes, Lawson, Steve here, we'll be mining there through at least 2024.
The 2025, perhaps but no.
It's driven on the open pit in the open pits on economically constrained pit. There is there are some pretty steep.
Train to the west there that we just can't afford to strip anymore. So we're not really seeing a lot of upside on exploration. There there is a bit underground.
But the undergrounds pretty small relative to the open pit. So I think mine mine wise, if we're moving into 2024, maybe a little more but then the processing will continue on the leach the trickle down leaching will go on quite a while given.
That slow kinetics on the silver on that thing.
Okay, that's great Steve and then just maybe one final question in terms of how you think about the gold production strategically going forward. So obviously, it's been a huge contributor to the company for Tahoe acquisition.
To be it will be for a couple of more years, but sort of looking at that longer term is it a strategic imperative to keep the gold production sort of at these levels or are you guys comfortable seeing sort of more silver production and replace.
Gold production on.
On kind of like on a five five to 10 year view.
Well look at the on its obviously dictated by geology and I think the law. This is a very good example.
Over time, the deposit moved from a silver deposit with goals to a gold deposit with silver and that's obviously reflected.
In our accounting for it and they will remember at the beginning to get removed it over into the coal gold sector and debt.
Away from the silver my access to cost as much of our goal for the rest of the livestock comment on so it's really dictated by by geology.
I'm I'm I'm looking at.
Free cash flow on.
Perfect ability of assets.
And this gold assets did very well for us on I mean, the fact that we have been able to replace even in a difficult year.
Replace reserves again by more than a year at payments on debt.
La Arena.
Theyre very important assets to us for sure on the developed a very very nicely.
When we did the purchase model actually via kind of assumed debt loraine and I will be done by 2021 I believe and not on a we even added another year or so.
Gold production will continue and I'm very happy with that.
Yes, Lorraine as debt been an amazing asset for you guys. Okay look we're almost at the top of the hour. Thank so much those are good answers.
Thank you for your time and all the best enjoy the rest of your summer.
Thanks Lawson.
Once again, if you have a question. Please press Star then one.
The next question comes from Ryan CASM. Please go ahead.
Hey, guys.
I think most of my questions have been asked so I'll just ask one quick one.
Good to see the guidance was reaffirmed it looks like obviously, some mines are tracking higher than others and you talked in pretty good detail about la Colorado in the second half of the year.
I guess my question is would you say that the reaffirmation of guidance should we be thinking about that more on a consolidated basis or are you reaffirming guidance for each.
Each mine and I guess, I'm, specifically, referring to San.
<unk> financial in Timmins are you confident that you can sort of day.
The production pretty significantly in the second half where should we be thinking about some of the other mines I guess sort of pulling the weight.
For those assets to get to consolidated guidance.
Yeah, Ryan Steve here.
Good question generally, yes, I would say for sure. It's consolidated gives us a little more breathing room, absolutely and there will be pluses and minuses I have no doubt about that with that said I do think today, we anticipate we will see Tim and we will see San per cent a minute.
Yeah, I'll kind of move up a little bit in the second half we do anticipate that.
So we think generally they will meet the guidance, what we set out per each individual mine, but but certainly we're really targeting the consolidated basis to give us. There are you know this.
It's one of the advantages of having many different mines is the one on ones having trouble generally we have another one doing well we do expect our approach is reasonable.
Got it okay. Thanks for clarifying on that Steve that that's all I had.
This concludes the question and answer session I would like to turn the conference back over to the presenters for any closing remarks.
Thank you operator, and thanks for everyone, calling in today I, just would like to remind everyone on the call debt.
On September 9th at 11, a M. Eastern time, we will be hosting now our second animal calls to discuss Pan American environmental social and governance approach. So please if you have time safe to date and and call in what's worked for further information, we'll put out a press release with the with the call in detail.
It's a touch around it you will also be able to find it on our website. So looking forward to talk to everyone hopefully at that debt our ESG call on the on and if you can't make it that it will be prerecorded I'm sure on available later on.
And we'll talk obviously at the end of Q3, and so the rest of the summer everyone stay safe. Thank you very much.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
Okay.
Yeah.
Yeah.
Okay.
Yeah.
Yeah.