Q2 2021 Pan American Silver Corp Earnings Call
Being recorded after the presentation, there will be an opportunity to ask questions to join the question queue. You May Press Star then one on your telephone keypad should you need assistance during the conference call you may signal on the operator by pressing star and zero I would now like to turn the conference over to surrender the Sac.
<unk> Vice President of Investor Relations. Please go ahead welcome to Pan American Silver's second quarter 2021 conference call media and other participants on the call are invited to participate in listen only mode.
We released our results after yesterday's market close and a copy of the news release MD&A and presentation slides for today's call are available on our website.
Not material in today's call contains certain statements and information that constitute forward looking statements and information. Please review the cautionary statements included in our news release and presentation as well as the risk factors described in our most recent form 40 F and annual information form.
Joining the call today from Pan American, our President and CEO, Michael Steinmann, Steve Busby, Chief Operating Officer, Rob Doyle, Chief Financial Officer, Martin of law firms Senior VP technical services and process optimization, and Chris Emerson VP business development and geology on.
I will turn the call over to Michael for a brief overview of the results before opening the call for questions.
Thank you for joining us today to discuss our second quarter results.
It produced four 5 million ounces of silver and 142300 ounces of gold in Q2.
Silver production was reduced by the ventilation constraints at La Colorado mine sequencing at Dolores into higher goal with lower silver grades as well as the timing of heap Leach sequencing at Dolores and true window, and COVID-19 related protocols, which limit the workforce deployment levels.
The ventilation constraints at La Colorado have been impacting silver production for the past 18 months following some ventilation infrastructure failures.
Previously reported we have completed construction of our new primary ventilation of 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 of Luckily errata debt re establishes 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 of ventilation flow rates will be similar to the levels. We had in 2019.
During Q3.2021, we plan to rehabilitate two other key ventilation races, which will further increase overall ventilation the flow rates to 50% higher than 2019 levels.
In early 2022, we also expect to advance the early construction of.
Our refrigeration plant for the eventual its current deposit 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 likelihood of mine and development of the scar on deposit.
Our board yesterday approved the new concrete lined ventilation xr's chassis for the eastern portion after luckily or out of mining area and the bus the northern at Charleston used car on deposit.
We believe this will be of robust durable solution for ventilation through the challenging ground conditions that exist in the area of debt mind, providing added insurance against future premature ventilation infrastructure of failures.
This shaft can be extended in the future to provide ventilation of infrastructure development.
Of the deepest current project.
We estimate the cost to construct the $5 five me the diameter and 560 meter deep shaft to be approximately $47 million it.
It should be completed in early 2023.
Gold production in Q2 of US 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 the lower central window the.
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 while we adjust the mining metals on ground support system to adapt to the wider or expansions in this section of the mine plan and.
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.
Rock pile of approximately 857000 tons of these fine grained material during Q2.
The equivalent to 23% of the all remind during the quarter, which will be blended with the coarser ores to the mind 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 share 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 of 2021.
Silver segment cash costs in Q2 of $12.71.
And all in sustaining costs of our $16.36 per silver ounce sold.
The cash costs reflect lower silver production lower gold byproduct credits from the move of the Lauder, saying through the cold segment in 2021 and.
An increase in treatment and the refining charge due to increased contribution from concentrate minds.
And an increase in royalty.
Merrily at San Vicente mine.
Silver segment, all in sustaining costs included $4.19 per ounce of sustaining capital.
Which includes increased spending on the critical ventilation work at La Colorado.
Coal segment cash costs in Q2 were $857 and the all in sustaining costs per 1001 other than $63 per gold ounce sold.
The cash costs reflect the benefit of the move of Dolores into the gold segment and the current mine sequencing at La arena, resulting in higher throughput and grades.
That were partially offset lower grades at Bell Creek, and the increased waste mining rates on door stockpiling of chat window.
The Covid pandemic continues to impact our operations.
The protocols, we are maintaining to protect health and safety continue to hinder our work force deployment levels, reducing normal throughput rates by about 5% to 10%.
The risk proportionately affecting our underground mines.
These protocols also incur additional costs and delay execution of certain projects from 2020 into 2021.
During the first half of 2021, we have seen higher unexpected cost escalations in energy of wages and consumables along with the stronger Canadian dollar. However, does appear to have leveled off in July of 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 and we are encouraged by the high levels of vaccination that are occurring in many of our operating jurisdictions.
Vaccination programs are of course critical to combating this virus.
In 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.
Through the distribution of 2 billion doses of COVID-19 vaccines to of low and middle income countries by the end of 2021.
Turning to our financial results revenue in Q2 totaled $382.1 million.
Revenue has been impacted by a $45.1 million buildup in the range and concentrate the inventories and the $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.
The inventory buildup made up the majority of the $37 million use of cash from working capital.
The whole thing in 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 distinct.
This includes the sale of noncore assets totaling $14 million.
We sold a portfolio of royalties to Maverix and received non refundable deposits for the sale of the Waterloo exploration stage assets.
The Waterloo transaction closed in early July when we received an additional $22.7 million, which will be recorded in Q3.
Also retained the 2% net smelter royalty on any future production from this asset.
Net income was $71.2 million of 34 cents per share in Q2, driven largely by strong mine operating earnings of 100 on $3 million.
Adjusted income in Q2 of US 46, $6 million or 22 per share.
Based on the strong operating cash flow in Q2, our solid financial position and improving outlook for our operations, we announced the 43% increase to the quarterly dividend to <unk> 10 cents 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.
Good luck of the other we're continuing with the work to provide a preliminary economic assessment for the current deposit late in 2021.
Which will include an updated resource model.
I'd ask about two pre consultation meetings have now been held as part of the I L. O 169 consultation process for the mine.
The third meeting originally scheduled for July 17, 2021 has been postponed to August of 2021 due to the COVID-19 situation in Guatemala.
The main agreement reached during the first two meetings is the requirement to prepare cultural on spiritual impact study of to ask about the mining project.
We are encouraged that the court mandate the dial on one six non consultation process has started the broad participation.
But we are unable to provide any timing on the consultation process for a potential restart of the basketball mine that's the day.
Sales of the process have not yet been determined.
At the other Navidad project of 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 the bill that would have prohibited mining activity and the entire province.
Of.
After yesterday's market close we also reported out of our estimated mineral reserves and resources as of 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 of us reduced by 50% due to the COVID-19 restrictions.
Although we completed the planned exploration program for payments and the lack of of artist current.
A lot of every replaced 141% of the ounces mined extending mine life by another year.
Mine life of cells of extended by another year of attendance to the discovery of 200 of 9000 ounces of gold of new mineral reserves.
Placing 147% of ounces mined.
At La Colorado, Nevada relation of restrictions impacted the exploration activities. However, the recent improvements of the ventilation circuit will allow us to ramp up exploration drilling at this long life mine, where we have over 100 million ounces of silver mineral reserves and 100 of 92 million ounces.
Of inferred resources, including the large scar on deposit.
For the 12 months period, ending June 32021, Pan American's producing mines to replace the 8 million ounces of silver mineral reserves and 98000 ounces of gold mineral resource.
Total reserves were impacted at a 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.
Based on the geological interpretation cost estimates and cutoff grades.
The reclassification of the La Bolsa project from mineral reserves to resources reduced gold mineral reserves by 315000 ounces and silver mineral reserves by four 5 million ounces.
<unk> is a non core project debt the company intends to divest.
Pan American holds one of the lots of silver mineral resources and reserves in the world.
And with that I would like to open the call for questions.
Okay.
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 of Cowen acknowledging your request.
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The first question comes from Tyler Langton with JP Morgan. Please go ahead.
Morning, guys. Thanks for taking my questions I guess the start could you talk a little bit about sort of the impacts from COVID-19 that youre sort of currently seeing on.
Especially at the sort of like Colorado, and Banacci, all sort of now maybe versus a quarter ago, and then you get the hit your guidance I mean, do you need sort of pace of restrictions from Covid sort of.
The new to ease of just trying to understand the 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 will 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 the evening of restriction in the straight line every quarter with the first on impacted the quarter. In Q1.2022 of course life is not going in straight lines, we know that and so I think we saw the bigger impact for showed envious of.
And still in Q1, and maybe some of them at the beginning of Q2, we definitely see strong improvements now with Covid.
No quite quite impressive vaccination rates in most places where we are we work. So I think it will just follow the similar trend than than everywhere else in Latin America on 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, there's clearly related to the vaccination rates, where you 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 the restrictions.
At that point right now, we're probably roughly around 20 per cent to our work force in Mexico, perhaps as much as high as 40% down in Argentina. During the first half of the year, we did indeed.
It was the very sensitive time for us and we did see lots of cases coming to our data that we had the turnaround and we had high levels of of people that had to stay off of the work force. So it was it 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 just to round it up we see probably around the.
$7 million cost.
Per quarter right that we assumed at the beginning of the year.
And that really covers all of our work testing quarantines are the additional transportation of land and so all of the the added call. It cost of the C. So I think we're pretty much on track on that side, what we assumed at the beginning of the year.
Okay, Great. That's helpful. And then just I guess, what the Colorado and the you know the ventilation blockage now that's the past I guess could you talk a little bit about <unk>.
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.
The costs, improving as well just kind of any color there would be helpful.
Yes, sure Tyler and the.
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 increase.
<unk> and what we find is this the set of ground that we have really starts to degrade without higher heat and humidity.
Humidity and that's what that's what failed in the sprays as well. We're also seeing you know challenges in the developments from the similar extent. So what we realized is we do have some catch up to do on short Caribbean. Our developments just like we've shocked accretive raises to recover those so right now in our.
Forecast what were what were projecting out is kind of of progressive 10% to 15% call. It increase in throughput each quarter going forward from where we were in Q2, and maybe of 10% to 20% improvement in churn in silver grades each quarter as well as remove and open up and get ahead on the.
Element into that higher grade area. So that's 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 of Steve and team on.
Thanks for taking my questions today.
Maybe my first question is on Dolores.
As we talked about it in the last quarter.
You know, 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 stabilizing the area of the Leach pad between pad, one and pad three could you maybe give us an update on that.
Yes, we're now into the rainy season in Mexico. So have you started the stacking.
Stacking some of that higher grade material and how has the impact of recovery.
Yeah. Good morning Cosmos, Thanks for the question.
Yeah. 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 at the high grade as processing through the plant quite well relative to the leaching kinetics where yard.
We are addressing or we have been addressing the design and construction challenge trying to try the valley fill leach pad three to the to the previous Sidehill Leach pad. One there were reconstructing from the original mine finders build.
We've had the limit leaching and some of those areas until we could build some buttressing and place some liners in a way that assures the stability in that area because its a very challenging geometry with some of the steep terrain in that area. So it is restricted our ability to the leach in that area and that in turn.
Gross 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 designer and expect to re.
Reactivate the leaching in that area in the next few months or so and that'll 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.
Kind of line of placements in the handling of of the Peg solutions coming through the connection between the valley fill in the old Sidehill heap the mine finders that bill.
And as of now in terms of the impact yes.
Just to add one more thing, yes, the great detail of that Steve gave us, but obviously, the dolores going on and on and then and.
Stacking of ore already for many years on the heap leach or does the <unk>.
<unk> is getting sick on think herself a its.
It's kind of take long on a longer obviously at the.
Got the Golden silver out there.
The test of time, just the time that it takes big because of the thicker on a more material there but the.
Sure Steve Obviously, Steve included the dull and as soon as planning on forecast.
Of course fully understand.
And that leads well into my follow up question here.
I work it out in terms of the ounces stacked versus the ounces produced.
Net quote unquote of recovery of 65 per cent per silver <unk> 59 per cent for gold for Q2, silver actually improved from the first half averaging 59, 6% the gold has.
Stayed about the same.
Shall we.
We expect that to improve in the second half.
Yeah. That's certainly the goal will be the quicker to improve its it's our faster Leach times. So those inventory builds affect gold more than the effect of the silver because of the long Leach kinetics of the silver so yeah, it's definitely a timing thing so let's quicker to be the the.
The inventory and it's quicker to reduce the inventory then the silver so that's what you're saying there.
Perfect.
And then also at Dolores as well you know going through your reserve resource update yesterday.
So all of that the Dolores reserves decreased.
Year over year.
Maybe if you can comment on that if my numbers on correctly. It looks like you know in terms of tonnage of decreased by about 9 million tons.
I think in the 12 month period, you stacked about seven.
7.6 million tonnes. So it seems like you know on some tonnage might be missing was there any kind of modeling changes and I'm on a more positive and is this just is that just a function of not enough drilling due to COVID-19 impacts and can you apply more else's here.
Yeah, Hi, Chris.
Chris here.
Great.
When we look at the reserve depletion, yes, you've got the the depletion from production, but the.
You're absolutely right I mean, we had some increased costs across the underground. So we lost some reserve there and also the stockpiles, we had some low grade stockpiles, which due to re handling costs and positioning has on there.
They were actually flipped out of.
Out of reserve, so you're correct in saying that the you know net net there was a decrease more than just production and that that really we're seeing those slight changes attributed some to the cost et cetera.
Yeah, if I could add onto the Cosmo we did we did sterilize the low grade stockpile that was up in the north part of the property that goes back to the date of Martin Finders again, there was it was of marginal stockpile of all along but we deemed the sub marginal now because of our latest estimates as Chris said for the Leach pad the handle.
On cost, but also the leach pad construction costs of those tons have to absorb so it's it's a it's a stockpile on the far north and dependent on prices it could come back in and it just got a long haul the to get around the the pit and.
On the cost for the constructing the pad that it's got to absorb.
Of course.
Maybe moving on to a lot of Colorado.
And thanks, Steve for giving us the guidance in terms of you know what to look forward to in terms of Q3 and Q4, but I just wanted to be a bit more specific here.
Did about 14.15 tons per day in Q2, I believe and it sounds like as Michael mentioned of flow rates in terms of the ventilation could get back to the levels 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 you actually get back to that kind of throughput is that what you're targeting and also in terms of grade of plywood you know to do the math behind it I think.
You wouldn't need over 300 Gram per tonne grade in Q3, and Q4 to get to your guidance is that what you're targeting for grade as well.
Yes, the Cosmo relative the throughput.
Our current forecast does not anticipate us averaging at the 2000.2100 tons of day through any of the quarters going forward or like I say, it's kind of of 10% to 15% increase over Q Q3 will be over Q2, and then another 10 to 15 for Q4 over Q3 and that sort of.
Catching up on the development I was mentioning that we face relative to the 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 out of reserve grade going into 2022, those are factored into our forecast.
That's great to hear.
Then at La Colorado, you know reading that are they on the delay in concentrate transport of La Colorado.
That was strong 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 and you know in terms of helping you on on getting to guidance.
Does that include it as part of Q1 production or is.
Is it going to come in in Q3 Q4 production on when the sale well one of the shipment of the concentrate actually happens and then in that case of would actually help you in terms of our product higher production of the second half.
Morning, Cosmos, Rob Doyle here, Yeah, Oh, I'll take that one.
Yeah, I mean, firstly, it's it's a what's been delayed as revenue.
We report production as as we produce them. So the delay with the people really had is is around the commercialization of debt production and in in the Atlanta, Colorado.
Colorado as well as elsewhere, we we had run into some some pandemic related logistical challenges.
Yeah, you've seen from a balance sheet that the inventories of finished production increased by about $45 million over the first half of the year and and the concentrate shipments really out of La Colorado have had been constrained by delays in shipping and container availability is.
Is the key factor that we've struggled with a day, we are seeing that normalize in and have a very robust.
Pipeline of of shipments.
In Q3 and into Q4, so we do believe that there is inventory levels will normalize over the over the balance of the year and on top of that we've also had some delays in dore shipments specifically there was a.
The particularly large shipment out of show window in Peru debt was was withheld because of some complications around the elections in Peru.
In June so debt.
That was delayed and will come into revenue in a in Q3. So it are these are all simply timing issues in and will come out through revenue in the course of time and of course cash flow too.
Uh-huh, great. Thanks, Rob and then.
Maybe one last question just on your window here since.
You brought the itself.
You talked about Leach kinetics here and Michael mentioned part of it was the stockpiling of the fines of blending it with you know some of the coarser or later on part of that it sounds like it was also due to the stacking of higher grades towards the end of the quarter.
We're about a month into Q3 now are you happy with what you're seeing in terms of Leach kinetics in terms of recovery I guess in that context, absolutely worked out the recovery or the ratio of the ounces stacked vs. Produced here it was 59% in Q2 versus about <unk>.
<unk> five per cent in the first half of them could we see that in Peru.
Back to the mid 60 level or even to I guess some of the technical report numbers of 70% or do we need the.
Question on agglomeration to get to the 70%.
Great question Cosmos [laughter]. This is what we're studying 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 of net result, as we do.
Half the slower application rates down in some sections of that heat, which do reduce the kinetics and come up with the kind of the numbers you were 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 your its a bit challenging when all of 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 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 of 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 of that fine or buy by blending of those high of rate as we can.
With the coarse ore and offsetting that was slower kinetics through reduced application rates. So that's what we're doing the nuts. That's what we're forecasting going forward. We do believe this disorder ultimately has very high recoveries in excess of the 70% that debt we have in the in the studies.
Before we've seen much higher extraction rates and expect to get there and that's what we're trying to evaluate and understand the model, that's really of kinetic timing point, and whether or not we need the agglomerate and whether or not even more than the glomeration. We feel we still have the leach at lower application rates in half.
<unk> 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.
The there's a number of ventilation raises at la Colorado.
From surface of 345 of course, I think theres another race to provide ventilation day candle area of 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.
The.
It's done.
Yeah, It's Martin weapon here.
So in terms of the the surface of 345, that's the one that was plugged the bottom and we call that the Hema Los Reyes.
So that's the one that was cleared the gist just recently.
That's one raise we have the another one called La Libertad, which goes from surface to.
Below 400 meters.
Dan.
That one we had of failure in our just close to getting that completely rehabilitated now in Q3.
We fully shepherding in August actually the surface to $2.20 level of portion of that raise and then we're doing two other it raises the bypass that the then deeper.
Another key ventilation raise for US is the cordless derailleur of which is in the Australia portion of the mine to remember of kind of La Colorado has.
Two principal parts of the nine one's called kind of out of here in the other is called La Australia.
So last failure actually.
In the early part of the Q3 towards the end of Q2, sorry, it towards the end of.
Q1 in the early part of Q2, we were able to take that one out of the.
Out of service and.
Fully shock treated all of the away from surface down on again, it's just over 400 meters deep.
And I'm, sorry, if I Miss spoke a little bit there we were able to do that in the in June July.
So those of the three principal ones. We also have intake ramps.
And and intake shaft the intakes are the.
The El Aguila shaft, which are which.
We have of about 200000, CFM of and take care of coming in that one we have the companion of ramp which are which we used as an exhaust route well we had the failures in the mine and its now reverting to being and intake airway and so there's going to be the refrigeration plant on the top of that that's going to be <unk>.
Biding tool are by the end of the year and the we also have the sense of men ramp. So that's kind of the and it is a very complicated and the second this is a very large nine that spread laterally over a big long distance and as a medical Steve of both mentioned are you would have heat and humidity that we have.
The they would have to deal with when we're designing the ventilation flow through all of those areas.
Okay.
I could just yeah.
Yeah.
The call had mentioned in his conference, but where you have approved this new shaft, we're gonna call the San Geronimo shaft further out to the east right in the heart of kind of of this high grade zone that we cherish so much and we saw the opportunity I mean, the scar and deposit of deep seeded deposit clearly we're going to.
I have several ventilation shops going into the deposit regardless of the mining method that we need we see the opportunity to start to advance the shaft two the two ultimately access and provide access and ventilation into the scarring deposit but in the meantime provides us all.
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 going forward it should be completed.
Towards the end of 2022 into 2023, we are of 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'll be of on insurance policy should we need another exhaust system of this more he's taught or where the fully lie on.
Concrete shelf, that's $5 five meter diameter.
Okay, Steve Yeah, I guess, that's what I'm getting at is I'm, just trying to understand the risk it's encouraging to hear the sand drawn on the an insurance policy of sorts.
So 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 Oh.
It's very unlikely that you would see this happen again in the future.
We're very we're very pleased with the shot creating the advances of Martin described on these raises were able to the Robotically get shot Crete and of these races. Now short Creek seems to be the key thing and raises and developments in sealing off the set of ground of where you're from the heat and humidity, where it starts to the.
Degree.
There are risks with that we're not you know this is we haven't really.
Done this for a long period of time, yet to see how all of that chart crude's 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 and the him.
Emilio share after we got up to six inches of shot credo and fully on that on that wall and we haven't seen any degradation of that today, we feel pretty good about it but we're feeling really good to have on this insurance policy going forward too.
Okay, Thanks to the and so with the with the ventilation restored once the reason again that you can't get back up the 2000.2100 tonnes per day I think just to expand on one of the previous caller had asked.
No it it deals with the development because of the ventilation restrictions, we not only restricted mining production, but also of development and and ground supporting and are the same kind of degradation. We saw on the raises we've been seen in some of the developments, particularly out of the east. So we do have a better.
Up on there and that's why it's going to ramp up over the next six months or sort of walk back to the 2000.
Okay back up to 2000, Okay, that's great and time.
And then just final question, so the la Colorado resorts deferred the yearend was there a reason not to include it in the resource update last night.
The current resource more than a year old has been a lot of drilling on the target.
Curious to see how it the dancing.
Yeah. The only reason we didn't included there there's been some great infill drilling in there and we're really feeling good about that scar on deposit.
We also are coming out with the Pea a towards the end of this year. So we thought it's best just to wait for that P. A so we have of full understanding of that in the resource before it's released.
You can imagine there's a lot of technical work going on right now on on mining methods on ventilation on the access of the area.
On processing et cetera, et cetera of other P. E. All of that will ultimately impact obviously, well, they're not got that reserve stage, yet, but that will still impact our resource on how we see that's gone on being developed on so it's the prudent way to wait a few of them or month for debt for that the resource update and include debt or writing the P. A.
Fair enough, okay, well, thank you for that Michael and Steve.
Good luck in the second half of that's all for me.
Thanks.
Okay.
The next question comes from John Tumazos of John Tumazos, very independent research. Please go ahead.
Okay.
Okay.
I don't want to repeat thank you the.
Earlier questions, but the the resource and reserve report.
Sort of reach the right 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.
Got it.
And it was the big effort just to produce as much as you produced.
And some of the reserve calculations and updates.
We're of west pressing than production.
Yeah.
Maybe maybe next year the.
We'll get a little more data and the.
Then secondly.
It looks like the processes are moving.
So out of Molla and ship boot.
Which is better than things where for the last several years.
The.
I guess, it's impossible to predict how long the process will take.
Whether it's one year more of two years more.
At least there is communications and engagement.
Which is better than nothing I'm just.
Yes.
A fair summary of where we are.
Trying not to put too many words in your mouth.
Yeah.
Good morning.
Yeah, I mean, we know that there wasn't big impacts on Covid to our operations in Latin America, I mean of us.
Last year, you know, we have been shut down by the by governments all across the continent of and when the epidemic started.
And of course that had the Alta on impact of our exploration efforts from probably more so than to our production because of.
The logic step is when you when you think you of a company of it one of the largest of reserve base in the world.
The logic stop us too.
Give priority to our production when you have interruptions like we saw from COVID-19 or 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 the half 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 at the very property down 50% on on the drilling and of course, we had loss state of yoga the lessons.
You've got less loss intercepts in the got lost less.
The reserve increases on a replacement.
You're very well I'm sure you saw that the still put the full drill programs up.
Our payments on debt Lorraine.
It was easier to do and we.
We replaced more than a year the era of production in both sides. So very very good news and obviously shows you that when you span the efforts on the drilling are you you got the results out of there, but we really felt last year that in many many of our assets by way of long very long life reserves ahead of us that we can.
As of Saturday can take a slight reduction on our reserves and prioritize our production. So that's that's the.
Probably enough for the for the reserves I think.
Obviously the you.
You know, we'll be open to give much more detail on does much more detail in there and in the press release the crush put out this this morning.
On Guatemala to vote I think your your analysis. This is fair and right the other processor.
In Guatemala is moving with free consultation meetings.
I think the the the meeting debt that was supposed to happen in and July has been moved to August due to Covid restrictions, which are still very very strong on begun in Guatemala.
Obviously, we all have to make sure that there's this meetings are held in a in a in the safe environment on safe manner.
But the 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 car.
Current quarter is during the crisis.
Even escondida cut their production forecast of a couple of hundred thousand tons.
Because they were behind on waste stripping.
Uh huh.
I know you haven't introduced guidance yet for 2022.2023.
We cannot understand.
<unk> 'twenty and 2021 mishaps.
Lower output.
Placer of one time factors.
Do you think you can get back.
The 2019 output or original 2020 guidance.
In 2022.
Or are there are so many things to get right.
Won't be until 2023 of 2024.
We get back to where.
The trend was two years ago.
Well the.
Remember, we when we gave the guidance for 2021 we mentioned their debt our first quarter that we assume no COVID-19 the impact.
All of US the first quarter of 'twenty 'twenty, two Oh, we didn't change that outlook, but I mean part of time time will tell of how this pandemic evolves as I sat the and in prior conference calls I I don't have a crystal ball, how that evolves on the behalf the.
And they will react to the reality here, but so far so far I would say so good.
See how it's going on but the you know that new variants stares fares.
Behavior of that virus that the.
We don't know yet and don't understand anvil see but with the information we have right now on the vaccination rates, we see right now I think theres a very good chance that we can go back to kind of more normal rates and on and less restrictions on and less.
Controls on protocols etcetera due to Covid add on we had this year, but a small walk us celebrate far away ready to you know to make further statements on on Max T S behavior of the pandemic.
So the underground development the way.
Stripping.
The capex evolution of such that it's possible.
The next year, you're at seven to seven 5 million ounces of silver per quarter.
A little more than 150000 ounces of gold per quarter again.
Well look I sort of said, it's pretty early to make this this calls of it didn't go through the bunch of thing yet that on the off the.
And the numbers I haven't obviously seen the numbers for the forecast all I'm, saying is that if everything continues like we see right now on the pandemic side, which.
Should be able to kind of go back to our normal throughput in our normal numbers on.
And obviously very high on the list the Steve mentioned at La Colorado, When we got back to normal throughput and on kind of a normal grades there as well.
Michael that's very good there's other companies that already say.
They're so far behind that.
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 costs the per unit cost per.
Her ounce rather at the tenant.
The slight increase in.
Throughput relatively flat.
Quarter over quarter grades, but the the cash costs ticked up about 5% of what was driving that.
Yes, the loss and Steve here.
One of the drivers was just the exchange rate.
<unk> 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 the Bell Creek I mean, it's the required a lot of re drilling of of holes that of that have moved out to the drill and lot more support more elaborate support going in there. So there's additional costs are true as well.
Move down the levels and get into these transverse stopes, it's going to it's going to relax out as well going into the second of huh.
Do you see any input on that.
Any impact on the grade attendance because of what's going on at the Bell Creek and I don't mean for this year I mean, just going forward.
Yeah of 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 a higher grades as well.
Okay got you.
Now turning to Argentina, I was surprised to see the.
Gold reserves will gold and silver reserves at Joaquin actually ticked up so 13 of 15% respectively.
What.
What's driving that and then similarly with the pretty substantial decline of codes Jose was that all driven by.
The completion or the other factors driving of that large declines of coast.
Yeah, Hi, Hey, listen why.
The team, we were actually able to get four of five drill holes into the into the deposit and I'll see if we've got a lot more information geologically from the development et cetera of Mark Heaney, and we're actually able to upgrade some areas and thicker areas. So that was a net net win some very limited exploration of that we're able to do at Viking.
The coffee, while we did deplete through production also again, we have a lot more geological information from development from actually being nobody from so that was a slight change to the geological model as well and we're obviously keen to.
I can 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 environment on TL operation, including Lockheed Cosan and what's left of the original net adds Yao.
Posit alert.
And where it's coming from the side of 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.
Yeah loss on a.
As you know of walk in both Joaquin and COSE. They have been from the beginning on two kind of satellite deposits very high grade, but very very small on limited in size on.
Really I think nothing nothing has changed the obviously of Steve as Chris mentioned to me of constantly gaining a bit more information with the development of production there and so that will move reserves, a little bit up and down but I would not expect to see there of major you.
That's the difference two hour of reserves here going going forward. So I think you're out of poverty about right with your estimate on timing of battle on debt, we would make in our big discovery, but that's that's how it looks like right now.
Okay, Great and then on.
On Dolores of course, we've already discussed the.
The decline in the <unk> and the reserves there are quite a bit but.
Just thinking about that asset as well.
I mean is that is that of three year life of mine life asset or you guys see potential to extend that mine life there.
Longer term.
Yes, the loss in Steve here, we'll be mining there through at least 2024 in the 2025, perhaps but no. It's a it's driven on the open pit in the open pits in the economically constrained pit. There's there are some pretty steep.
Rugged terrain to the west there that we just can't afford the strip anymore. So we're not really seen 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 my mind wise, we're moving into 2024, maybe a little more but then the processing will continue on the leach the trickle down on leaching will go on quite a while of given the 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 of 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 out to that longer term is it a strategic imperative to keep the gold production sort of at these levels or are you guys comfortable seeing more sort of more silver production and replace the gold production on.
The kind of like at a five five the 10 year view.
Well look at the at the end, it's obviously of dictated by geology and I think the law. This is a very good example, where over time the deposit moved from a silver deposit with gold to the gold deposit with silver and that's obviously reflected.
And our accounting for it in the remember at the beginning of to get removed it over into the gold gold sector that sounds away from the silver my access because of as much of our goal for the rest of the lives of our comment and so it is really dictated by by geology.
You know I'm I'm I'm looking at that.
That free cash flow and profitability of assets.
And this 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.
The place reserves again by more than a year of payments on that.
A lot of Ana are you know the very important assets to us for sure on there the develop the very very nicely.
When we did the purchase model actually we are kind of assumed debt loraine and I will be done by 2021 I believe and not an OE even added another year. So you.
Gold production will continue and I'm very happy with that.
Yeah Lorraine is the been an amazing assets for you guys. Okay look we're almost at the top of the hour. Thanks. So much of those are good answers. Thank.
Thank you for your time and all of 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 and it was 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 the 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 mine and I guess I'm specific of what you're referring to.
<unk> been agile and Timmins are you confident that you can sort of day.
Get the production up pretty significantly in the second half where should we be thinking about some of the other mines I guess sort of pulling the wait for it.
Some of those assets to get the consolidated guidance.
Ryan It's 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 the with that said I do think today, we anticipate we will see timmons, we will see San per cent the Manhattan.
Ill 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.
One of the advantages of having many different minds is the one on ones having trouble generally we have another one doing well, we do expect the purchase reasonable.
Got it okay. Thanks for clarifying that Steve the 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 that on.
On September 9th at 11, a M. Eastern time, we will be hosting now our second animal calls to discuss the Pan American's environmental social and governance approach. So please if you have time save the date under an on call in watch watch for further information, we'll put out the press release with the with the call in detail.
Etcetera on there you will also be able to find it on our website. So looking forward to the talk to everyone hopefully at that at our ESG call on the on and if you kind of make it that it will be prerecorded I'm sure on available later on.
And no talk of US lay at the at the end of Q3 and show the rest of the summer everyone and 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.
Okay.
Okay.