Q2 2021 Pretium Resources Inc Earnings Call
I refer you to the cautionary language included in our news release yesterday as well as the management discussion and analysis for the same periods.
These are available on our website and have been filed on SEDAR. Please note. All dollar amounts mentioned on this call are in U S dollars unless otherwise noted.
Our top priority continues to be the health and safety of our employees contractors and neighboring communities.
Last year in an effort to renew our safety culture, we launched an extensive company wide to health and safety program.
Here on the fourth slide is a rolling 12 month loss time injury frequency rate and our total recordable injury rate.
Excellence in health and safety is a journey with ups and downs and we are determined to maintain our efforts to emphasize the importance of safety and ensure it is at the forefront of everything we do.
Despite the challenging start of the quarter, we were able to produce just over 83000 ounces of gold as.
As a result, it was another profitable quarter, and we generated just under $51 million in free cash flow.
During the quarter, we made a voluntary debt payment and repaid the remaining $38 million on the revolving portion of the loan facility.
We ended the quarter with a cash balance of approximately $202 million and with that we have reached a key turning point, our cash exceeds our depth.
Subsequent to the end of the quarter, we refinanced our remaining credits facility on favorable terms and increase our available liquidity.
We have several major initiatives underway, such as accelerating underground development and infill drilling and increasing drilled up stope inventory with the intent to improve operations at Bruce Jack.
We're also making significant investments in future growth, which includes construction of upgraded Cam facilities are modern assay lab and integrated GOR shack extensive resource expansion and near mine exploration drill programs are in full swing with drill results expected through the remainder of the year.
As you are aware a COVID-19 outbreak was declared at Bruce Jack during the first quarter.
Following the outbreak additional procedures were established including continued testing of all employees and contractors.
A vaccination program as also been ongoing at Bruce Jack under the guidance of BC Norton health as.
As of this week, 99% of our Bruce Jack workforce as received their first dose of the vaccine and 64% have received their second dose.
We will continue to closely monitor the situation and provide updates as appropriate.
It is a reminder, that Colgate remains a risk and could have a significant impact over a short period of time.
I will now turn the call over to Patrick to provide an overview of our operations for the second quarter.
Thanks.
Turning to operations on slide eight in the first quarter, we process approximately 330000 tons of forward through the mill equaling to about 3600 tons per day.
This was the new awards or Google produced on returns will be as a.
Over the last three effect of the Covid outbreak along with scheduled shutdown.
Total pollution goes for the first quarter of <unk> 214 per ton dollar per tonne milled an increase from the second quarter last year.
The Scotsman cruises slowly due to the strong Canadian dollar.
Change in the actual group increased production goes by about $22 per ton.
The level of drilling and higher diesel flows at <unk>.
$6 per ton compared to the second quarter 2020.
The cost increase was partially offset by a $9 per ton reduction in COVID-19 related costs.
Turning to slide nine as you can see where quarterly rate of underground development sort of been on an upward trend quarter over quarter. The onset of Covid Paulo, where progress in the first quarter of 2020, and then in the first quarter of this year, our <unk> development was impacted by the Covid they'll bring upside.
In the second quarter, we increased our reports.
Unfortunately underground would welcome and achieve the root of our Brookstone view 1150 meters per.
Per month.
We will continue to advance development of this route to get back in line with our 2021 plan.
Also as noted earlier, the second quarter began with some challenges, including the COVID-19 outbreak and performance issues with several stopes.
We expect these factors drove a negative impact.
Both our gold production and grade.
However.
Even with the challenges at the beginning of the quarter. We produce total loans of gold. This is less than 4% below the midpoint of our guidance range for the year.
The mill feed grade averaged <unk> <unk> per tonne and the recovery rate was 97, 4%.
<unk> performance improved towards the end of the quarter and as a result, there was 7700 ounces of gold remaining of the circle, which is a longer than usual for us.
Based on our production forecasts, we remain on track to be within our full year <unk> guidance range.
To enhance our understanding of the deposit and improve the productivity.
Geo production, we continue to preauthorize, increasing the drill data, we collect diamond drilling advanced for the quarter was nine diamond drills on site.
More than 50000 meters of Diamond drilling was completed in the quarter for a total of 90000 meters. This year drilling will continue on and exited agreed.
As we pursue our target of one of them 95000 meters for the year.
Turning to slide 12, we have maintain an accelerated rate of underground development to increase access optimized production and improved blending and afford to buy those quarter to quarter fluctuations.
The increase of government ready to expand our access to new areas of the deposit and other was to build an inventory of drill of stopes.
At the end of the second quarter, we added more than.
316000 tons of drilled off stope inventory.
This is a 15% increase from the previous quarter.
Our target is to have about 400000 tons of drill a stove ready to be blessed by the end of the third quarter of 2021. This.
This is roughly equal to a full quarter of production.
Given the <unk> hub break in the first quarter. This is an ambitious goal.
But we still believe that there is attributable to <unk> by the end of the.
The quarter or early in the fourth quarter.
Slide 13 shows a section view of the underground development looking north until this year mining have been limited to only two months risen a dual JAK.
Earlier this year, we began production from the lower arisen on the ETE level through the second quarter. We continued to advance development and began mining from the 200 and the <unk> 20 level of the fault zone.
It has been a major objective for our team to <unk>.
Significantly expand our access on their own and we R&R activity operating from five distinct mining area.
Our customer driven capital expenditure projects began to significantly ramp up in the second quarter as the weather improved and <unk> expansion capital expenditures include construction of a permanent camp and project to support and improve and to improve the efficiency of operation.
Replacement of minor condition that was required to ensure consistent quality of facilities will also the employees and thats just with employees retention.
The wildfire camp, which has since returned at the entry of the mine sites along the $2 seven a new 25 person camp was construct and is now commissioned and occupied.
And they both count located along the access road surface amendments and serves as a transfer point for access into the Liza rule.
A new 100 person count is in the final stages of construction and is expected to be commissioned and ready for occupancy in the third quarter.
A full swing is being added to the main guzek camp and a second time to improve the whole cushion in our stores. Your income is also under construction for a combined 324 new rooms.
Building modules are currently being laid with the commissioning and its been expected in the fourth quarter. This will bring the total number of rooms across the bulk of the Bruce Jive nine properties to 775 beds.
To support growth and improve the efficiency of operation and USA lab and core Shack. We're also build within the mines the mill building.
The core shock has been commissioned and is now in operation.
<unk> is in the final stages of commissioning.
The U S alone without the capacity to test 200 samples per day. This will significantly improve the turnaround time when as a result and is also expected to improve cost efficiency.
Now I will turn the call to <unk> for an overview of our financial performance. Thanks Patrick.
Our financial results were strong once again in the quarter.
Our results were higher than the first quarter of 2021, but lower than the comparable period of 2020, partly due to the very high level of gold sales during that quarter.
For the second quarter of 2021, we realized an average gold price of one $804 per ounce an increase of nearly 4% over the second quarter of 2020.
Revenue decreased to $152 million or approximately eight 6% primarily as a result of lower ounces of gold sold.
And in the second quarter of 2021, we sold approximately 84600 ounces of gold.
EBITDA in the quarter was $72.6 million.
Net earnings were <unk> 16 per share and adjusted earnings were <unk> 15 per share compared to <unk> 19, and <unk> 18 per share respectively in the comparative periods.
The decrease in net earnings was primarily attributed to lower revenues, partially offset by a decrease in interest expense and a decrease in deferred income taxes due to lower pre tax earnings.
Turning to slide 18, we once again generated significant cash flow from operations of $73 million for the quarter and had strong conversion to free cash flow of $50.7 million free cash flow was directed to debt reduction as we have committed to do.
Total capital expenditures in the quarter on a cash basis, including sustaining and expansion capital was $22.3 million.
Liquidity continued to grow in the quarter to over $400 million as of June 30, and we ended the quarter with approximately $200 million of cash.
As Jack mentioned during the quarter, we voluntarily repaid the entire remaining amount of $38 million under our revolver and subsequent to the quarter and refinanced our credit facility.
We ended the quarter with bank debt of $100 million in convertible notes also of $100 million.
Turning to slide 19, all in sustaining costs in the second quarter of $1099 per ounce sold were higher than the comparative period in 2020, but remain within our guidance range for the year for.
For the first six months of the IRR ASIC is $1053 per ounce.
The increase in ASIC relative to Q2.2020, as a result of higher sustaining capital investments for increased rates of drilling and development as referenced by Pat.
Higher production costs, primarily due to the strength in Canadian dollar and lower sales in the period.
The impact of the strengthening Canadian dollar during the second quarter of 2021 increased all in sustaining costs by approximately $85 per ounce of gold sold compared to the comparable period in 2020.
Turning to slide 20.
The strong financial performance at <unk> continues to provide for meaningful debt reduction.
And as you can see we have consistently reduced debt over recent years, while also reinvesting in the mine.
Earlier this week, we announced an amended credit facility with our lending syndicate unimproved terms the.
The four year committed facility increases the size of our revolver by $50 million and reduces the quarterly repayments under the term loan to $5.9 million from six from $16.7 million.
Lastly, we remain on track to achieve our 2021 guidance you may recall that in the first quarter Conference call. We commented, where we were trending on our capital expenditure guidance ranges.
Released in January.
We said we were at the low end of our sustaining capital and at the high end of our expansion capital guidance at that time.
With seven months of the year now completed we're amending these guidance ranges. However, there is no change in the aggregate total capital expenditure guidance, we've lowered our guidance range for sustaining capital by $10 million due to reduced activity levels in the first quarter as a result of the COVID-19 outbreak as well as to reflect some updated timing of expenditures over the balance of the year.
We've increased our guidance range for expansion capital is also by $10 million due to increased cost of important materials detailed engineering thing being completed and construction activity is being well advanced and to a lesser extent the strengthening of the Canadian dollar.
I would like to reiterate once again this quarter, the second and third quarters, typically see higher levels of capital expenditures.
Due to the summer construction season, it boost GAAP with expenditures, peaking in the third quarter.
Regional exploration activities, which also take place in the summer months are expensed under our accounting policy that we adopted in January and also peak in the third quarter.
With that back to you Jack.
Thanks, Matt.
Let me now turn to our exploration activities for 2021.
The summer near mine exploration program was initiated in mid June with two drills positioned on surface.
Program is focusing on the trend of highly altered outcrop that extends four kilometers from the hanging laser zone to the northwest to the bridge loan to the southeast.
To follow up on the successful discovery of <unk> Mall style gold mineralization that hanging laser in 2020, our drill program was initiated in early July to delineate the high grade gold card doors, and thus far our grade epidermal style veins.
Hanging laser is located approximately four kilometers from the Bruce Jack mine and is easily accessible in the summer using existing exploration trails.
In addition to drilling the near mine exploration program includes the high resolution magnetic survey MTN IP geophysical surveys soil sampling and prospecting.
The 2021, Bruce Jack definition and expansion drill programs are anticipated to total approximately 195000 meters of drilling comprised of reserve definition and resource expansion drilling.
Our resource expansion drilling programs continued to successfully intercept high grade mineralization immediately adjacent to existing underground infrastructure and continued to highlight the potential to extend beyond the valley of the kings deposit.
Are these programs at the end of the quarter seven drills were operating with three the rail is working on the definition program and four drill testing the expansion potential. This is in addition to the two drills that were active on surface for near mine exploration.
Resource expansion drilling continued through the second quarter with 24000 meters completed within the North block and 10.80 level zones in early July to drill from underground were repositioned on surface to complete a 13000 meter resource expansion drill program at <unk> Hill.
The bridge loan 11000 meters of underground resource expansion drilling is expected to start in late August.
Slide 25 shows a planned view of the valley of the Kings deposit with the drill results from the North block phase, one and two as well as the results from the 10.80 level phase one drill program.
And at any level of program conducted from one of the lowest mining levels at Bruce Jack Mine intersected high grade gold mineralization up to 200 meters below and 200 meters east of the current mineral resource shell with intercept as high as 1600 grams per ton gold over one meter.
Phase two of the 10 <unk> level of resource expansion drill program is in progress and was initiated to infill between the initial drill fan and target the visible gold mineralization to the east.
We also announced phase two drill results from the North block that was conducted to test. The extension that are not of the north block zone to the northwest.
Phase II program continued to encounter <unk> Goldman <unk> up to 450 meters from the current resource shell.
Phase III of the nerve block program was recently completed to infill between the existing drill fans with assay results spending phase four of the program is now being initiated the test the area immediately to the northwest of the current drilling.
With the objective of operational improvements and following it through a thorough testing process. We have committed to purchase seven battery electric haul trucks to replace our fleet of 12 diesel power underground haul trucks.
One battery electric truck is currently in operation with the remainder to be progressively dispatch by 2023.
Mobile combustion of gasoline or diesel contributed to roughly 68% of the greenhouse gas emitted from operating the Bruce Jack mine in 2020.
After the rollout of this multi year plan, we forecast a reduction of approximately 24% or 6900 tonnes of carbon dioxide equivalent annually from the implementation of this initiative.
Looking ahead to the rest of 2021, we remain committed to safety.
This includes continuing our COVID-19 safety protocols to minimize the potential for another outbreak at site.
We are determined to continue to deliver consistent results and we remain on track to achieve our 21 objectives.
Based on our production forecast, we anticipate meeting our annual production guidance.
We expect to generate a significant amount of cash this year, which we have already in part deployed to reduce the debt.
We have now reached a key turning point, our cash exceeds our depth.
Our underground develop development now provides us with access to five distinct mining areas.
We are nearly half a quarter of drilled up stopes in inventory.
Our capital expenditure projects are progressing well and our resource expansion drilling programs continue to six fully intercept high grade mineralization.
Youre drilling results are expected to be released continuously throughout the rest of the year and we will continue to and will contribute to an updated mineral resource and reserve we plan to release in the first half of next year.
We have also launched our near mine exploration program with the intention to expand on resources in close proximity to the Bruce checkpoint.
We are really pleased with the hard work of our team and we look forward to reporting back on our progress.
That concludes the formal presentation I will now turn the call over to the operator, who will open the line for your questions area.
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 hear a tone acknowledging your request.
You are using a speakerphone please pick up your handset before pressing any Keith.
Withdraw your question. Please press Star then two we will pause for a moment as callers join the queue.
Our first question comes from Heiko Eli of H C. Wainwright. Please go ahead.
Hey, there thanks for taking my questions Hope you guys are all staying safe.
Good morning Heiko.
I've got a question about the chart you have on page nine year presentation.
Accumulative underground development appears to be growing up in a fairly straight line, which I guess is the whole premise of this chart.
Conceptually how much longer can you keep up more or less linear growth in underground development before you hit some sort of barrier where you have to then showed further from infrastructure underground for favorable or I assume there is no scientific in direct answer to this but I mean, it's just a matter of quarters years decades.
Never.
Thank you for your question April.
As we mentioned in the past our objective is to accelerate the development performance in order to open up the mine open up new mining areas for flexibility and lending, but also open up the mine for two established drilling platforms.
At the current rate of development.
It would be difficult to increase even more so at the 1100.
Meters per month, we're we're at a good rate right now.
Again.
Again based on current.
Our reserves and we would continue to develop at this rate for maybe a year year and a half and then it is going to come down very quickly, but as we said in the past and we're very confident we're going to find additional resources.
And we're going to have to open up these areas. So we will see what we get from the exploration program this year, but.
No no we are because of the.
The results, we're getting so far from the drilling I expect development right to continue to to be at the higher level for a few more years.
Got it.
The risk.
Getting another answer along the lines of as we mentioned over the past all options are on the table.
Just thinking about loan I mean, your balance sheet is healthy and it's getting more so by the day, you've recently refinanced a loan facility of the firm. Meanwhile shares are below $10 and this includes the 10 plus percent pop here today.
Earlier on the call you mentioned debt reduction is what we've committed to do but I got to ask it.
What point in time and I assume the board when you were discussing this in pretty much every meeting at one point in time with everyone be willing to start some sort of small share repurchase program.
And I guess, if you can really answer that question directly.
I'll just ask for future plans for capital.
Yes.
As we mentioned in the past.
Our priority was.
They reduced the depth and we continue that and as we said in that path as well until the convert is behind US we will not be.
Spending a lot of time and energy thinking about.
Dividend or share buyback so our hour.
Convert matures in March 2022.
I think.
When we come back from first quarter and the first quarter 2022 results. That's that's when we're going to we're going to be in.
Starting to think about this.
<unk>.
I have a feeling it would be a decent profit shares if that helps and then just one quick clarification. How much is left to be spent on the chemical and Bruce camps as of today. Please.
Or the profile of expense without throwing around $62.2 million Canadian dollars. So.
So probably around the 50% of book.
Perfect. Thank you guys very much I'll get back in queue.
Thank you Michael.
Our next question comes from <unk> Habib of Scotiabank. Please go ahead.
Thanks, Operator, hi, Jack and Matt and team and thanks for taking my questions.
Bob.
Jack Quinn.
Quick question from my end just on the.
Regarding the Q2 performance I believe you started talking about it in my call dropped so I apologize.
Beat this but you had said Q.
Q2 was impacted by performance issues with some of the stopes.
Can you give us.
Some color as to what's changed to the positive in mid Q2 to achieve the grade guidance.
I don't know if.
It's when we talk about the grid variability of Bruce.
<unk>.
And again that the first the first two loans in the quarter, we were right in line with what we're planning.
In the third quarter, we added a stope.
One we have two newly won will made a huge difference.
Both of the nugget effect of the ore body.
We have the.
I agreed.
For the last two weeks of the month and it was mainly impact positively the provision it's mainly the difference here.
We are in.
When we have a full slate.
As we explained to you previously we apply and Wayne Goldberg to our reserves and in the Plannings on both we are cutting stoltman thermal grade because we are afforded variability and in this case, we have a huge and really positive.
Okay great.
The improvement in the grade one scope and it's what means the difference at the end of the month of June.
When we are having and producing I agree like this we are slowing down the learning process to make sure that we can improve the recovery.
And we have a lot of gold in the Golar <unk> <unk> business, we increased the inventory at the end of the month, because we're not able to deploy it.
<unk> 8000.
<unk> ounces of Golden, but something as well that is correct.
Yes, it's one of those.
Got it got it okay.
So then going into Q3.
Moving into Q3.
In terms of all the drilling that you have in front of <unk>.
Production I believe now you're sitting at about three months of drilled stope inventory.
Congratulations thats pretty good to see.
So how do you see Q3 kind of setting up isn't going to be fairly similar to what you saw in Q2.
We're expecting in Q3, and Q4 more or less what we've learned in terms of the guidance.
Slightly better.
Got it.
Moving a little bit to the sustaining cost quickly.
Based on your guidance range.
Sustaining costs were lower in the first half despite lowering the guidance for spend by sustaining capital by $10 million.
Do you still see a catch up of these costs in the remaining quarters of the year.
Matthew Thanks for your question, Yes, we do we do see a.
Catch up I think in Q3 as I mentioned, we have.
Our peak spending period both for.
Expansion capital, but also to a certain extent the sustaining capital. So you can see that rise a little bit in Q3, and we're very comfortable with that 40% to $45 million range for the year.
Okay perfect.
I still have one more question, but I'll jump back in the queue and taking.
Taking my questions David.
No.
Thank you.
Our next question comes from Wayne Lam of RBC. Please go ahead.
Hey, good morning guidance.
Just curious in terms of the costs related to safety measures and Covid on ground.
Just wondering how things have been progressing post the outbreak and.
Will those.
Increased safety costs kind of be factored into the mine plant coming up.
It's Matthew here yet.
The COVID-19 costs are trending down.
We did have COVID-19 costs.
Around about $22 per ounce in the quarter.
This per ounce of ASIC and in this quarter.
And in Q2 of 2020, when we were in the eye of the storm. It was very it was $50 an ounce. So that is trending down our guidance calls for.
I think in our guidance, we've disclosed for the year ASIC costs for Covid would be approximately $5 per ounce.
We're still comfortable with that we may be a little bit higher than that but it is a very very small number.
I think as Jack has mentioned previously.
We're now in the state where most of the industry is taking those cost savings.
Into their future plans and at some level, so that will be part of our budgeting process for next year.
Okay, great. Thanks, and then.
I was just wondering back on the grade.
For the quarter, if you might be able to provide some detail on kind of the monthly grade profile are or how it was trending prior to that I guess, one stope and.
Just given the prior commentary.
Was there a significant positive reconciliation versus the block model in that on that one section.
And I'm just wondering if you might be able to provide more detail on that.
When.
As Patrick mentioned.
<unk>.
As you will remember at the at the end of the first quarter. When we had the first quarter results. We guided that we guided we indicated that we would be at the low end of the.
The range of the guidance, so closer to 80000 ounces per.
Per quarter.
We were tracking right on that forecast for the first and second month and then in the third month. We had this one stope that gave us a big bump.
So we had a significant increase in the month of June and mainly that as Patrick mentioned that increase game not during the whole month. It was the last week. The last two weeks of the month.
So so that was that was the impact.
We don't we don't do a reconciliation on that.
Monthly basis, because because of the variability of the deposit.
We look at it on a stope by stope basis, it doesn't make any sense. So we look at it on a more global basis.
And that will be able to in order to do our reconciliation like we do every year at year end and will provide the information when we.
When we give our year end results in early 2022.
Okay got it thanks, and then maybe just lastly, just on the fleet replacement.
As you guys replace the fleet over the next couple of years like is there.
Any incremental cost in terms of capital.
In moving to an electric fleet.
But yes. It is included in our program as will we.
The causes including the truck. We are we are not buying the batteries, we will rent the batteries because we don't have the expertise to <unk>.
Also we have some charging facilities, whether it's minor investment and we will use to more or less will be used to reduce dilution to fulfill this demand.
Many of the drugs.
We are expecting a lot from both in term of folks or the quality of the euro to grow the efficiency the drug will flow through in the round.
We already or are we already were operating the vehicles since in partnership with Sandvik since the beginning of December of this year.
The trial is.
First of all.
And in term of all the aspect of health and safety and also the efficiency. So it will reduce it will improve our close mainly because we will redo the manpower.
That's really their vehicles.
The diesel vehicles are homebrew your mining contractors.
But the electrical vehicle will be owned by Hudson, We will know the vehicle going forward.
Okay perfect Congrats on the quarter, that's all for me.
Thank you Wayne.
Our next question comes from Joseph Reagor of Roth Capital Partners. Please go ahead.
Good morning, Jos and team Thanks for taking my questions.
Just.
Maybe one more point, okay, maybe one more point of clarity on the single stope that kind of changed in the quarter for you guys.
Was that stope already drilled off.
Ahead of time, when you guys reported that May 4th fifth like did you guys have some concept that there was a chance of this or was this.
Something.
As you guys did your drilling ahead of time it became more obvious as you got into the third month of the quarter.
Yes.
Usually the deferred.
Initially with two or three months ahead. So it was more of the drilling I don't know when we are signing off from the grid for the stope, probably it was at the beginning of April but however.
All a nugget effective.
If you can you can we are we are.
Drilling pattern when we're doing the definition drilling.
The another different we can it's possible for us.
To us really awfully, but when we are drilling we are lifting the.
Between between rolls on with between the old and between rigs. So we have.
We have a slide drilling pattern because when we are doing the definition of a stope. We have moved the ball component to do this first we have the demand. We are doing also definition diamond drilling we are going after that the development of default because the minute that we all do England drug explained the proposal development as opposed to the access to drill.
We've spoken at length to minimize the cost will be more efficient. So we have all the developments that we recover the chips sampling and we have the geology and offer that to do the definitions. We are using <unk> drilled and we're drilling the opening we have a composite per hole, so it's pretty tight but noise.
Basically.
The grid showed up in the structure of that probably in terms of the store between rings and that's one of them.
It's the nature of this orebody.
Okay. Thanks for the clarity on that and then the second question saltwater adults are both worried because the grid. If we were able to know that we will never say that we will <unk> the objective for Q2.
Sure.
It's the nature of the ore body that was like this.
Okay and then.
<unk>.
Second question.
Some other companies have reported.
They started to see inflationary pressures related to.
Shipping of reagents and.
On the labor front et cetera.
And as you know inflation is a big topic right. Now have you guys started to see inflationary pressure and can you give any color as to what magnitude and how you are planning for it.
Well definitely Joe we've seen we've seen steel.
Steel lumber increases as we started our construction program for the year.
We're monitoring the situation and our supply chain Department is looking at.
Now that we're going to start to work on 2022 budget. Although we're starting to look at what are the assumptions that we're going to take an hour, we're going to deal with that.
I think for us right now.
Joe what is the.
I would say the more challenging aspect of all this is the.
The lead time, where delivery time.
For our supplies that is what worse.
We have some impact on in terms of cost, but they haven't been.
Very significant to date and the big picture, but it's the delivery times that is.
We can see that now things are getting a little more.
Challenging.
But.
We continued like I like it.
Not unusual in the current gold price and copper price contacts that to see escalation. We've seen this in this business before.
We're just going to be making sure that we're careful and when when we're planning our budget for next year, but.
Other than the exchange rate that is impacted significantly in terms of ASIC cost. So we don't see any.
Major impact between now and the end of the year.
Okay and then just.
You mentioned timing on getting stuff is there any.
Materials that you guys need to get on a regular basis that you're concerned about or that theres any risk.
To the supply chain for that you can see right now.
No no we don't.
As.
At the onset of Covid.
The team took the proper proper.
Proper measures and increased our inventories of grinding media regions.
Our other suppliers. So we're in good position right now.
We don't we don't.
We don't see any risk of getting.
<unk>, we're more and more starting to think about the construction plans and projects for 2022.
Ordering steel and all that good stuff.
But overall, we don't see any risk for 'twenty one.
Okay. Thanks, I'll turn it over.
Our next question comes from Anita Soni of CIBC World markets. Please go ahead.
Hey, good morning, guys.
So a lot of the questions I guess.
I just wanted to pick up on one thing that was said but.
You said at the end of the quarter you Couldnt we couldnt.
The goal.
Is that was there.
Or was it just timing.
Well.
Thats the goal when the gold gets into the circuit then it gets out.
At the end then it's difficult to.
There is a cap kept pouring.
Coring capacity, we have everyday but theres also a situation here in British Columbia, right now that is impacting us.
Yeah.
We normally well we transport the dore bars by helicopters and we have any cough. There is normally in the quarters that can carry a certain weight, which I'm not going to disclose but.
A certain weight.
Certain wake up goal than all those other operators now are requisitioned by the government to fight forest fires. So.
We have to operate with much smaller helicopters, which limits the quantity of goal that we can get out. So that's that's that's the one other thing that is impacting our ability to ship ship goes out of sight.
So.
Sure fire situation continues you might see more inventory buildup.
Before you can drive.
I don't think so Paul.
Thank you.
I think our objective is to try to bring it down.
<unk>.
Moreover, over the quarter so to be at the end of the quarter at a more normal level, but again.
I don't know if you follow the situation here in DC, but BCS burning right now so.
It's challenging.
Same thing on Ontario.
Then just my next question I guess, what I saw the credit facility was increased from 390 <unk> within that.
There was a.
I guess, the commentary about being able to capitalize on strategic opportunities as they arise.
I'm, just curious given that you've got $120 million to $170 million youre doing well on that in free cash flow this year.
You're paying down your debt.
Are you looking at diversifying your revenue stream looking at doing an acquisition at this stage.
I think in the past.
And that may be in the latter half of the year and you would start to take a look at.
Maybe broadening your your revenue stream.
Yes.
Comment we made earlier and it is continues to be true.
We wanted to get the operations were in good shape, we always said that now until the third quarter. This year, which we're in right now and I know, we would our focus would be much more internally, but.
Definitely as we get closer to the end of the year, we're going to start to look at what are the next steps for the business.
And.
Having increased our liquidity.
Terms of the.
The refinancing and the cash we generate.
If at all.
Yes.
We're going to be thinking about what we need to do and we're going to be in a better position with the current.
Financial capabilities that we have.
Sure and then the last thing on the capital.
I guess.
We're still referencing I guess or taking a look at the old Technical report, which obviously this year.
The capital is much higher.
On quantum I think it was supposed to be 53 came in at 120 right and then this 2022 numbers kind of like $30 million or so so as we think about 2022.
Should we expect that the cap that youre capital programs fall off this year.
What kind of like go forward number and then what should we be thinking about in terms of.
Inflation on them on.
On the.
Capex side of the equation and then also about $10 million that you didn't spend in sustaining capital.
This year is that going to be pushed into next year. So very long question with many parts.
I'll, let you.
Thank you.
I'll start with the end of your question the $10 million, yes, definitely it's going to move to next year.
That's going to happen.
In terms of Capex.
We're going to be higher than the 43.101 next year, we haven't finalized our budget our budgets for 2022, we're going to start to work, while we're starting to work on it but it's not finalized but it won't be at the same level as this year it'll be somewhat lower.
We're not exactly sure how we're going to end up but it'll be lower lower than this year.
Okay, and then lastly that commitment to purchase electrified vehicles like what's the timeframe on which youre going to be pursuing that project.
Oh, it will be we already have one drug at FERC to allow the second drug will show up in <unk>.
Remember.
After that hold yogurt schedule, one doctor loan to an ROIC.
<unk>, we need to we need to.
Okay, so that should be within our 2022.
Number again, when you're looking at capital right.
Okay and can you give us an idea of how much that was.
So in terms of Taco truck.
Whether a drug is through to one 3 million.
Okay. Thank you that's it for my question.
Okay.
Okay.
Our next question comes from Don Demarco of National Bank Financial. Please go ahead.
Well, thank you operator, Hello Jacqueline team.
My first question pointed.
Appointed drilling off the inventories to tame that production volatility and there was a keystone factored into Q2 that were hearing about but with a strong Q2 in the previous quarters. We're seeing that this production volatility is decreasing.
So is it fair to say that your strategy to drill off the inventory is working.
You have higher confidence in achieving production and grade targets going forward.
Definitely Don you're Bang on.
If you look at our performance.
There is a slide in the presentation that shows compared to the midpoint of the guidance with a high end of the guidance and the low end of the guidance on a quarterly basis.
We've been tracking.
Within 5% and all for a number of quarters now.
And then in our body like ours to be able to do that.
It's quite remarkable and the team has done an excellent job excellent job.
Drilling in advancing the knowledge and yes, I'll now on a stope by stope basis. So we're going to see some up and down and then it's going to happen, but overall I think we are.
What we can say that our production is fairly consistent.
Where as Patrick mentioned, we are expecting the next quarters to be.
More more more or less in line with the guidance that mid range.
No, we think maybe even a slightly higher than that in that mid range, but we're going to be within that band.
As far as we can see so yes, very we're getting at with the five areas that we have opened up with the drilling inventory. We're a lot more consistent and we have a lot more confidence and what is coming in front of us.
Okay great.
Because.
I think the point of it is that.
The market likes to see that hitting the midpoint of guidance in a way and if theres any given quarter that you have low throughput that can be you have the ability to pull levers and offset that with slightly higher grades.
So I'll take that as encouraging and we'll look forward to the next couple of quarters. Just a couple of other quick questions. So can you remind us.
Are you planning an updated technical report and life of mine plan for next year. If so can you just remind us of the timing.
Yes.
Said earlier, Dan we're planning to issue.
Data 43.101 in the first half of next year.
Most probably more in the second quarter than the first quarter, we're still in all debating when we're going to do the cutoff on all the drilling and all that good stuff, but.
For sure it will be out in the first half of 2022.
Okay, great and finally, the convertible debt due in March is it your intention to pay this off with cash and can you also remind us with the level of depth that you are comfortable with.
Sure its Matthew Quinlan here, we are we are planning to pay that off with cash as Jack and I have mentioned in the past we wanted to exit that.
Maturity with a 100 at least $100 million of cash.
On the balance sheet.
So we do have the ability to draw on the revolver to redeem that but given our cash position, we would anticipate funding that redemption with cash on hand with respect to that in the in the past on the balance sheet.
We don't have a specific number but.
For myself Fantast, all believe that lower leverage in.
In a commodity business is generally a good thing and certainly under one turn of funded debt is something that we would be.
Entirely comfortable with maybe even a little bit less than that we're also cognizant, where a single asset producer. So as Jack has mentioned in the past we want to have a lot of liquidity and also cash on hand as well.
Okay. Thank you gentlemen, thats all for me.
Thank you dawn.
This concludes the question and answer session I would like to turn the call back over to Mr. <unk> for any closing remarks.
Thank you everyone and.
Thank you for joining us this morning.
I would like to thank you and and thank the team for the interest in what we're doing here and thank our entire <unk> team and all our partners and contractors and people that work with us for their dedication as we look forward to a very exciting second half of.
2021.
As we continue to execute on our plan and achieve our objectives. So we wish everyone.
Very nice weekend and be safe out there. Thank you very much.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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