Q2 2021 Gold Resource Corp Earnings Call

Okay.

Thank you for standing by this is the conference operator, welcome to the gold resource Corporation's second quarter 2012.

And 1 conference call.

At this time all as a reminder, all participants are in a listen only mode and the conference is being recorded.

After the prepared remarks, there will be an opportunity to ask questions.

I would now like to turn the conference call over to and Wilkinson.

20th President Investor Relations and corporate Affairs.

Please go ahead.

Thank you Holly and good morning, everyone.

And on behalf of the gold resource team I would like to welcome everyone to our second quarter 2021 results conference call.

Before we begin the call there.

There are certain housekeeping matters I would like to cover.

Please note that certain statements to be made day by the management team are forward looking and nature and as such are subject to numerous risks and uncertainties as described in our quarterly report on form 10-Q, and other SEC filings.

On the call today.

If I step Allen from Europe, President and Chief Executive Officer Kim.

Kim Perry Chief Financial Officer, and Alberto <unk>, Chief operating officer.

Following Alan and chance to.

Prepared remarks, all 3 will be available to answer your questions.

This conference call is being webcast for those of you joining us on the webcast.

And we can download a PDF copy of the conference call slides from materials chat under the ask a question tab.

The event will also be available for replay on our website later today.

Yesterday's news release issued following the close of the market and the accompanying financial statements.

And MD&A and contained in our 10-Q and have been filed with the SEC on Edgar and are available on our website at Www Dot Gold resource Corp Dot com.

Also please note that all amounts mentioned in this call are and U S dollars unless otherwise stated.

I'll now turn the call over to Alan.

Thank you Ron and good morning, everyone.

I would like to thank the participants for taking the time to join us and to welcome Alberto <unk>, Our new Chief operating officer to the call.

Following my opening remarks, Tim Perry, our Chief Financial Officer will describe our financial results.

And then.

And provide you with a picture of our plans for the balance of 2021 and a few closing remarks, and then we will be.

We're able to take your questions.

Before discussing the operating results I want to note that our operations team continues to demonstrate their ability to be nimble and adaptive operators.

<unk>, all while focusing on excellence environmental social and governance practices.

Notwithstanding and excellent work culture. There were 2 lost time incidents with the non David Gold mine during the second quarter.

While these incidents did not result, and serious injury measures are ongoing.

I've read in force adherence to safety protocols and to strengthen the safety culture.

Accordingly, a series of programs are underway to improve the overall culture of safety.

Turning to our infrastructure projects.

We made significant construction progress on our filtration.

Plant and dry stacked tailings project, which is targeted for completion in Q3.

As we've noted the dry stock tailings will accelerate reclamation and certain areas of the open pit mine provide.

Provide efficient storage of tailings and.

And importantly, reduce water consumption is approximately 80%.

Going to the process water will be recycled and available for use.

Okay.

During the quarter, we completed 156 meters of underground development and the <unk>.

Northern and southern exploration drifts.

From these exploration trips, we completed over 3400 meters of Diamond drilling.

And 12 drill holes.

Surface drilling on the Gila project is ongoing with 2069 meters of diamond drilling and 2 bowls.

Exploration activities were focused on the switchback vein system, which extends for over a kilometer strike length and remains <unk>.

And.

Both along strike and down depth.

And as well as parallel structures this system.

Notably the Sandy vein system, which is located between the switchback and our reach the systems.

Exploration drilling mainly targeted expansion and delineation of the principal.

So with that theme to define additional resources.

As well and step out drilling on the parallel sandy system of gains for resource expansion.

Drilling is also targeting strike extensions of the Arista system beyond the current mine plan.

We have also renewed.

And our focus on near mine exploration with surface surface geological mapping and rock chips sampling and the Cerro Colorado areas, notably in the vicinity of the Akela and open pit.

And as well the surrounding area with additional drilling planned for these areas and the second half of 2020.1.

Turning to the second quarter operating results I'm pleased to report that gold resource sold approximately 5700 ounces of gold 270000 ounces of silver.

365 tonnes of copper 200 tons of lead and $3.200 tons of zinc.

During the second quarter, we processed ore and average rate of 500 tons per day compared to 19 <unk> hundred 50.

And 2020.

While it was lower quarter over quarter. It was consistent with our mine plan for the year.

The paste plant continues to provide.

Substantial efficiencies by returning the returning of processing waste to underground workings as backfill.

During the second quarter, we process store with average gold and silver grades 10, and 11% higher respectively from the same period last year.

Overall base metal grades were lower during the 3.

And at June 32021, as a result of.

From a change and the mine plan and necessitated by challenging ground conditions encountered and the first quarter.

We are happy with these challenges and overcome and our mine plan is back on track.

With that I'll turn the call over to Kim.

Discuss our financial results.

Thank you Alan and good morning, everyone.

We closed the quarter with a strong balance sheet, consisting of just over $30.5 million cash and no debt.

Cash from operating activities was $9.3 million for the quarter and working capital from continuing operations.

With nearly $32.6 million at June 32000 and toward.

For the second quarter, we reported net income of $1.3 million net income is a result of just over $38 million and revenue.

Net revenues reflect a 12% decrease and concentrate treatment charges, which are netted.

And against concentrate sales.

These treatment charges for the 3 months ended June 30 were $2.9 million a $609 per base metal tons sold compared to $3.3 million or $864 per base metal tons sold for the same period 2020.

This decrease is large.

Dependent on the spot treatment charge market services, Inc, which can be volatile.

Total production cost of $19.5 million for the 3 months ended June 32021 were 84% higher than the production costs of $10.6 million for the same period 2020.

This increase was primarily related to the increase in production.

Volume.

Additionally, there was a $1.2 million dollar impact.

And then related to the Mexico, the Mexican Labor Law reform.

Finally during the 3 months ended June 32021, we were impacted by a 13% price increase and consumables used and the operations and a 5.

Reduction increase and about and the volume of diesel sales.

The increased diesel consumed relates to increased power consumption, primarily from the diesel generators for the filtration plant and underground deflation.

Yes.

The Dawn David Goldmine total cash cost was 713 per ounce.

And total all in sustaining cash costs were $12.50.

Is it <unk>.

Excuse me $12.80, this is Africa product credits we.

We expect these cost is significantly lower and the second half of 2021 and maintain our full year guidance of total cash costs of between $2.10, and $2.25 for gold.

Gold equivalent ounce and total all in sustaining cost between 800 and $900 per Baltic went out.

With that I'll turn the call back over to Alan.

Thank you Tim.

Management continues its focus on unlocking the value of the mine existing infrastructure and.

And our large property position.

And providing growth to our shareholders.

Accordingly, we invested $11.2 million and infrastructure and exploration and then Don David Gold mine.

And our process plant, we completed metallurgical testing and initiated design and engineering, but tailings re grind circuit, including procuring certain parts.

And equivalents.

The project and Fortunately has been delayed due to longer lead times and expected and this project is now expected to be complete in early 2022.

The new circuit is expected to increase gold recovery.

Covered by between 6 and 10%.

Please note it is unlikely.

Full amount of $9.8 million for underground development.

We will expense and 2021 as a result of the mine sequence changes made during the first half of the year.

In closing we remain on track for full year guidance with exception of developed and capital as previously discussed.

As we expect to see improvements and grades and the second half of the year.

We have already seen encouraging and affirming results in July as we are back in the solar day thing.

With the expected second half results, we are well positioned to have more than $50 million and cash by the end of the year and a free cash.

Likely to yield greater than 15%.

This along with our dividend yield substantially outperforms our peers.

I also want to repeat Tim's comment that the company has a strong balance sheet, which provides us with flexibility for growth and exceptional returns for shareholders.

Thank you all for taking your time to listen in and this concludes our prepared remarks I'll now turn the call back over to the operator for any questions that may arise.

Ladies and gentlemen, the floor is now open for questions.

If you have any questions or comments please.

Star 1 on your phone and at this time.

And we ask that while posing your question. Please pickup your handset if listening on speaker phone to provide optimum sound quality.

Please hold while we poll for questions.

Please press your first question for today is coming from Heiko Haley. Please announce your affiliation and pose your question.

Okay.

Yes.

Okay.

<unk>.

Are there heiko.

And I can hear you fine point.

I can hear you aneel.

Excellent excellent.

Perfect well. Thank you guys for taking my questions not sure Joe just transpired there.

And I just want to point out the company and has a bigger yields and the S&P 500 or so.

Clearly.

Well optionality here.

And you stated in the release that you have started from profit sharing with your employees, although there arent really any details and the relief and just a couple of things and I'm just trying to clarify.

Factors are people ranked them is it 50 is it production is there anything else.

And some.

Hi, Heiko, it's Kim.

That's actually and excellent question and <unk>.

And there is actually very little guidance, Alex regarding what factors will ultimately be companies will be able to incorporate and theres a lot of legislation going on right now and discussion with the legislation regarding.

What that will look like right now we are taking the basis that it's 10% of net income.

And so with maybe taking a bit more of a conservative approach, we know it won't exceed that.

Obviously, we'll reward employees, if if it's appropriate to go higher than that but at this point. That's the approach we're taking the assumption, we're taking and in.

Regarding the following to determine that those factors.

You already answered 1 of my next question.

Which was how much is it going to be and.

And then when does the whole thing start and and also can we trend line, the same 10% figure or whatever wherever it might come and this year into.

The path here as well please.

Yes, Heiko I think that that's a fair assumption to we did take the assumption based on a full year impact for the $1.2 million for profit sharing was calculated from January through June and unless there is any other changes and the legislation that should continue into the future.

Next year Okay.

And then and just 1 little clarification at the end here you came in at 12.80 for all sustaining costs for each he'll walk us through I mean this detail as you can in this setting if you could.

Would you expect to see for the remainder of the year, there and factors that may swayed.

This figure either direction, especially given all the capital improvements that are being undertaken at site. Please.

Heiko.

The reason that our all in sustaining was higher than originally projected was the fact that during Q.

2 we have remaining and.

Sweet alternative mining zones, you'll recall in late Q1, we had some ground control issues and.

And that necessitated necessitated a change and plan. The result of that we were in lower grade areas and our byproduct credit suffered.

We are now back on track with our original.

And the original areas that we added.

And our anticipated. The result of that is our base metal credits are byproduct credits are going to increase significantly and the second half.

And bring our all in sustaining and are Josh cost back in line with our guidance.

Guidance.

It was a timing issue and as stated by out of the ground control issues, we had earlier and the year.

Makes sense.

Wonderful.

And I'll hop back in queue. Thank you very much.

Thanks Heiko.

Okay.

Okay.

And mine.

Okay.

Ali I think the next person in line is Ron operator can you add immune.

Yes. This is Ron here from me Okay. Your line is line.

<unk>. Thank.

Thank you.

Alan it's good to talk to you again and thank you for taking my questions.

It's good to hear from you Rod.

The company reached peak production last fall. So this is the third quarter and a road sequential decline.

So it's obvious that you inherited a challenge in the midst of completely.

Rebuilding your management team.

And I am comforted to hear that the Q1 ground conditions are now resolved and behind you. So I'm trying to get a sense.

And of when you get back to your production growth again.

And including a great improvements. So can you just maybe take a step back and just summarize some of the mining challenges and your plan.

To address them going forward.

Okay Ron.

The plan for this year has and always has been to.

To reduce our.

Production rate down to 500 tons a day.

Last year, we were running Directionally is 1980.

The way that the company was able to sustain that level of production was to focus solely on the solar debt structure and switchback.

It's very wide width and its a long haul.

Almost bulk mining underground so the volumes.

Land were relatively easy to sustain.

However, if you focus exclusively on that you miss opportunities for.

Taking advantage of some of the narrow very high grade veins and the Arista system in particular.

So.

So we made a very conscious decision to reduce our volume.

And to refocus on some of the high grade veins and a restart.

Going to be seeing increased grades in the second half of this year coming from 2 areas solid at over and switchback.

<unk> trends.

Candelaria and other veins and a restart.

It was a conscious decision because when you remind when you're mining and narrow veins.

Productivity is by definition lower you just cannot and material it's fast.

However, the grades are good.

And mine the mine dictates what your level of production should be.

So I am not going to suggest to you that we will be on and ever increasing production rate.

Geology dictates what you can get.

And I can tell you is our focus is to Max.

Maximize what is available.

To us by the dictates of geology and to operate and the most efficient manner possible.

Part and parcel of that is programs that we've initiated in the past several weeks.

To effectively go in and stripped down and.

Annualized and rebuild all of our systems within the mine.

And whether it's geology, whether its operations maintenance and processing we're going in.

Looking at them from an efficiency and a.

Governance, when I say governance, it's not corporate governance per se.

So operations and governments, a governance perspective, and while this work is just beginning.

I believe that relatively soon potentially as soon as Q4 youre going to start seeing increased profitability for those tons that we are able to mine from.

Underground.

To address your question, yes, it is and I.

I appreciate that color. Thank you I just wanted to follow on.

I appreciate that Youre sticking to your guidance for cash costs and all in sustaining costs certainly after byproduct credits.

Could you maybe then just take a step back and give us an updated outlook.

But and if production, specifically silver and zinc, which I think has been below expectations. So far.

And that's implying that you're playing catch up there can you give us some.

Maybe some color as to how confident you will be for example meeting your 171.8 million ounces of silver and.

21000 tons.

And of zinc.

Ron.

As Ive already discussed we ended up mining in lower grade areas of the mine and particular in Q2, but also the good portion of Q1.

We will not be able to get completely caught up and zinc.

And silver tonnage.

However.

The run rate that you will see for the second half of the year will exceed what we had originally planned. So we are playing catch up to a certain extent, but the reality is.

We will never be able to completely.

The recovery.

The.

The way that we're going to be hitting our targets to be quite honestly is the fact that we still got very strong commodity prices and that.

Yeah.

On 1 hand, I hate to take credit for something that I have no control over that horizon tide floats all boats.

We.

We are back on track in terms of our production profile, but it is not something that we can recover from completely this year Ron.

No thats fine, but at least Directionally. It appears that the worst is behind us and now we're back on a path to get to where you certainly.

We'd like to be and that's good enough for me. Thank you all.

And let others.

Okay. Thanks, a lot we are back on track.

So holly genes.

And that is up next can you. Please make his line lives.

Okay.

James Your line is live.

Good morning, Alan and Jim and congratulations.

From question teams are results from the quarterly cash flow yield.

I think most of my questions on the put and and stuff were answered I just have some clarification points I want to ask on.

And the first was probably the Kim the $1.9 million that was spent on Onboarding of the third party employees that was incurred in Q2 will do.

And that any of that continue on and bleed into Q3 or beyond or is that 1 time charge done for the last quarter.

Yeah, James Thank you for that question.

First of all I want to clarify that the 1 and what the total 1 line was not cash impact during the quarter.

And is 1.

And 2 related to the profit sharing.

And that will continue and that's been reflected and short term liabilities and will be paid in 2022.

And the other 700000 that you've seen is actually sitting in our launch from liabilities and relates to severance payments that if and employees.

Ladies and terminated Youre obligated to pay under Mexican law, we did honor tenure by substituting our employees from the third party and to our company.

And we felt it was appropriate to record that liability. So it does January payments would be paid upon termination should there be attrition.

So that $700.

And what really James is probably more of a onetime blip there will be occasional adjustments to that for price increases and changes in employee head count deflation et cetera, but it will be rather minimal.

And the next question I guess is for Alan and.

In terms of the reduction and the budget for the.

The underground mine development, what led to debt reduction and what impact will that have on operations going forward if any.

It wasn't.

It wasn't a reduction and budget what it was as we underperformed our plan.

And the reason for that James as Youll recall.

We did suffer some ground control issues.

Our late Q1 that necessitated new development that was not and the plan to get back into the solar that being we.

We have done that but by doing that.

And we were unable to.

Maintain.

And our development rate as originally planned.

Effectively we diverted scarce resources to maintain our production profile at the expense of the longer term development.

Will it have an impact yes, do I expect it to be.

Something that you will see and the financial.

<unk> no.

We do have scarce resources in terms of developments, we've got limited development teams, we've got limited development equivalents.

We are placing a great deal of emphasis on our exploration development and.

And.

At the same time.

We need to recoup the lost.

<unk> that we suffered because of the ground control issues.

And our mind like this Tim.

Typically you want about a year of develops workings ahead of you today, we don't have that so we are going to be making a huge.

And push over the remainder of this year and most of next year to get back on track.

I do not expect it to impact our operating results and.

It is certainly going to and impact the <unk>.

Schedule of the guys at the mine, but I don't think it will surface to the point.

And to the financial statements.

Okay. That's good news and then in terms of the renewed emphasis on the satellite areas, such as Cerro, Colorado and the areas surrounding their gorilla pilot projects should we expect any increase and the original exploration budget is above the $7.2 million that was allocated.

And also can you give us any preview of the results to date on the drilling programs either from delineation and expansion and its potential impact on the resource estimate.

It's premature for me to be able to address the latter at this point however.

What we are doing is placing a great deal of emphasis on in mine and near mine exploration those.

And those areas that you just mentioned are all near mine exploration.

What we're trying to do is build up our resource and then subsequently our reserves.

New takeaway and the perception and the marketplace that were short lived asset and that's really the thrust.

We can go and focus on Greenfields exploration miles away.

But that doesn't move the dial in terms of resource.

Growth and we really do I believe.

Need to be able to demonstrate increased.

Increased resources just to put.

Some investors eddies summit, some investors do not understand.

That's a mine of this tight chip.

Typically only has anywhere.

Anywhere from 3 to 5 years ahead of it at any point in time.

Exploration is difficult, mostly because it's primarily done underground.

Driving exploration drifts are slow and time consuming so it's difficult to get a big resource ahead of us that being said.

That is.

Our focus right now both in terms of exploration drilling and infill drilling to upgrade.

Mineralized material up into the.

Proven and probable categories does that answer your question.

It does Ella and and that's fine.

2 last questions.

I have 2 if time permits.

1 was for Kim you had mentioned Kim that there was an increase on the consumable prices as well as the volume of diesel and Thats, something we should be considering a ongoing increase for future quarters.

Or is that a temporary 1 time charge.

Yes.

I'm going to take part of that question James.

Right now Youre seeing increased cost for diesel for 1 primary reason and that is we have been for this past quarter running 2 of our gen sets to supplement the grid power from the Mexican authorities.

We are anticipating that we will be getting and additional allocation of power from.

The grid beginning in September which will hopefully eliminate.

Net bump in diesel consumption and Youll see that when decrease.

There are in fact.

And everybody knows whether the fed or anybody else is willing to admit that there is impact inflation.

And we are seeing is that the impact of it is it significant.

It doesn't move the dial dramatically.

Is it going to continue.

Your guests.

So it is mine I personally and I think it will but.

Typically what happens and not environments as your input inputs increase because of rising commodity prices. So does your revenue flow.

That may be overly optimistic I accept and but thats really what I think it will happen.

And I'm sure and that is something I am hoping for in some ways I guess the last question was something I've heard with some of my readership, which is.

Concerns or questions about the large increase from the potential issuance of new shares outstanding.

And the growth and the balance sheet on a prior call Alan you had mentioned and that the.

Company is looking and targeting potential acquisition opportunities do you have any further color on how thats progressing with any prospects or are you still anticipating that's going to be a 2022 time frame.

James I don't have a timeline.

Let me back.

Backup and address the first part of that question first and then I'll come back and talk about targets.

The increase in authorized capital was a significant increase.

1 of the things that has to be no no.

Understood.

As we have a shelf prospectus for the ATM on <unk>.

File with the SEC.

And if we were to just issue the shares.

Contemplated in that shelf prospectus, we would've exceeded our authorized capital it was too tight to appropriately manage the capital structure of the company and.

As a result, we felt it prudent just increase flexibility.

Yes, if we identify a target that is appropriate.

Yes, we would consider using our stock to acquire it.

But.

Only and the situation where the transaction is accretive almost.

Every metric.

We are not going to go and issue a bunch of.

Stock and dilute the.

Per share net asset value attributable to our shareholders that will not happen.

We will not go and issue a bunch of shares and dilute our.

Cash flow attributable to our shareholders, that's not quite yet.

No by imposing the discipline of.

And ensuring that any transaction, we contemplate as accretive.

And reduces the universe of possible acquisitions.

Historically the mining industry.

Almost and.

I'm a bit embarrassed to say this because I've been in the mining industry for a very long period of time, but historically the mining industry has been very on disciplined when it comes to mergers and acquisitions and.

And the.

The industry is littered with the carcasses of bad deals.

Because people have overpaid and they have not paid attention to.

Fundamentals of M&A, you don't do it unless it makes sense you don't do it unless it's going to create value and you certainly don't do it just to get bigger.

And unfortunately, the latter factor seems to be a motivating factor for a lot of M&A.

And that is not what we're doing.

Having said all of that.

That's what makes it difficult from you need to give you a timeline on any potential activities for the company.

I am looking all the time.

Just by being in this seat opportunities present.

And so on a continual basis.

I will tell you and particular in.

The pure gold sector.

It is very very very difficult to find a transaction that makes sense.

You will see late development stage projects selling for 50% to 70% of NAV.

Well, if you sit back and think about it.

That doesn't leave a hell of a lot on the table for purchaser.

The only way that anybody could ever do that is they have to make the assumption that kohl's is going to go to 2000.2200, and then it makes sense, but if gold goes back to <unk> hundred and.

Other cargoes on the side of the.

And so.

And that is not something that's by and prepared to do.

And what I want to grow the company, yes, I do and.

And I willing to risk company by making a undisciplined and inappropriate transaction no I'm not.

I can't give you timing, James and I wish I could but this whole initiative.

And by definition opportunistic and it happens if it happens it happens when it happens.

No that's fair Alan and I appreciate the color, especially on the ATM as well as the metrics you might be looking at I think that's all from my questions and ill jump back in queue and.

She was the best for the next quarter.

Thank you very much and I look forward to talking to you soon.

Your next question is coming from John Bair.

These announce your affiliation and pose your question.

Thank you.

With ascend wealth advisors, thanks for taking my questions.

And then.

Addressed here.

I do want to go back to.

2.

Beyond boarding aspect and I guess it would it be fair to say that day.

And <unk>.

And requirements that you've had to address are across the board.

Other Oh.

Well or not.

Energy.

And then our I'm sorry, my brain isn't it.

No other mineral competence and others.

And why.

Yes.

Let me, let me answered I think I know where you're going.

This onboarding process was necessitated by change and labor legislation and Mexico historically.

Most companies.

Mining and other companies.

Hire their employees indirectly through I'll call. It a service provider, who actually hired the employees and then the operating company would enter into a service contract with.

The third party.

Yes.

Under the terms of this.

<unk>.

The government has determined that they want to eliminate that and have companies employ their workers directly.

This is across the across the board. This is not mining specific it's Mexico specific.

The 10% debt.

Talks about in terms of bonus.

Is.

Mandated by legislation. However, there is no guidance within the legislation as to what that really means.

When you talk to legal counsel they would suggest.

With that as the top end of the bonus range and there may in fact, if you apply appropriate operating metrics and thresholds to it it may be totally appropriate to pay a lesser amount, but we don't know yet so we've taken a very conservative stance.

Take them, the legislated amount and so thats what.

And that.

The onetime cost that Kim alluded to of 700000.

Is something that we would have incurred anyway.

Our third party service provider had too.

Make severance payments when employees left.

When.

And with them across to our payroll, we carried with them their seniority and their history.

Straight across and that 700000.

Effectively represents.

Accrued severance and retirement obligations arising from past service.

Okay.

Yes.

And when we put it in perspective for you a little bit.

That's very helpful and so essentially they're eliminating staffing companies face and with the legislation.

Effectively does I'm, assuming and factory for <unk>.

Or.

Well gas or agriculture or anything it's pretty.

Is that across the board does that is that fair.

That is correct.

Hey.

And.

Along the same lines.

And are there does that mean you end up.

Having too.

Pick up say healthcare costs, and I don't know what the structure down there is.

And is a real legislation requirements.

Has that is in other words is it is it very.

Very different from kind of the U S framework.

And employee of the company.

And there are certain.

And so forth or is that all taken care of like health care benefits that kind of thing taken care of.

Much of it.

We pay we provide to our employees health care benefits, just as a U S employer, but.

And the difference is cost of health care and Mexico is significantly lower than it is in the United States and.

This is.

A move straight across so we were already paying all of those costs indirectly through our service provider.

So we don't we haven't noticed any impact in terms of labor rates and terms of benefits. Those were just the flow through the oil and the impact was this legislative change about.

And the.

By the 10%.

Keep in mind that we have in fact paid bonuses and the pass.

So while.

It looks a little bit draconian and it's not really a major operational change and what we do.

And some ways, it's almost form.

The substance from a financial state and point of view.

Okay very good shifting too.

The dry stack facilities and what Youre doing there is this going to.

Allow for increased processing of material or are you just simply.

<unk>.

Improving or disposal tailings and so forth that could be.

Perhaps re processed at a later date should commodity prices.

Price and.

Hmm.

Minerals are within that is it.

And over products as well as a gold silver.

Okay.

Let me I'll start from the first question and work through them.

The reason for dry stock conventional tailings facilities fill up.

And over time, you either expand them build new ones.

And your body you changed your technology and and.

We're in an area that.

We felt would benefit from dry stack versus conventional tailings for 2 reasons.

1.

It allows us to reclaim the original open debt by using it as an area for dry.

Our debt position, so we actually are moving.

Way ahead in terms of site remediation and in fact, we will be exceeding the standards required for site mediation by utilizing the dry stack technology.

It is not.

It's not because.

<unk>, it's less expensive if you look at <unk>.

Run rate P&L on the 2 alternatives.

Phil the filtration and dry stack is going to be slightly higher than conventional tailings deposition. However.

The cost of construction.

Billings management.

Because <unk> is exorbitant so you've got this capital versus operating cost trade off.

But from an environmental point of view dry stack is far preferable from a reclamation point of view is far preferable from a water use perspective is <unk>.

Incredibly preferable because.

Facility recycled 80% of our process water now.

What are used to go out and the tailings facility and it was lost due to of operations, so substantially reduces our water consumption.

As to what's in our tailings.

There will be everything and our tailings that we produce but if.

Because we are doing our job right.

The amount of metals contained in our tailings is so de minimis that there really is no residual value nor would there likely ever be.

And the future now you may have heard of situations where companies go in and.

We are re process historic tailings.

And some old gold mines.

They would have 4 and 5 grams going out and their tailings and their remaining 30 grams. So they didn't care and they didn't take the time to really ensure that they extract.

<unk> every bit of payable metal because they didn't need to.

But if you look at practices over the past 20 years.

And the recovery of metal by way of either leaching technology, our flotation technology has increased to the point, where there is very.

Very little in the way of payable metal going out into our tailings.

That answer your question and I will absolutely.

That's very good.

What was that.

Okay, that's pretty much what I have for today. Thank you so much for taking the questions and good luck and no. Thank you.

Sure.

And Florida, Okay very good.

Okay.

Your next question is coming from Lawrence Danny Please announce your affiliation then pose your question.

Hi, I'm, a private investor and shareholder and first of all I'd like to.

Congratulate you all on and good second quarter.

During the question.

So given given your strong cash flow and increased.

Capital and the bank.

Is it feasible I know you've got infrastructure that you're.

And we're investing in but is it feasible that.

And the next 6.6 to 18 months a dividend increase as possible.

Yes.

What's your.

Your question is on the surface very simple and.

When you drill down to it is incredibly complex youre going to the heart of capital allocation and capital management.

I have articulated.

Consistently since I got into this seat.

And the desire and need to grow the company.

And if.

I am successful and doing that.

There may be alternative uses of capital.

That should <unk>.

<unk> generates a higher return for our investors and a modest increase and the dividend.

Got you.

If we're sitting here 18 months from now.

And we have accumulated directionally $80 million or so and the bank and I don't have a strong use of capital immediately in front of me.

Yes, I would consider doing that.

What I.

It was prudent for our company and our situation number 1 we want to maintain the dividend and I think our current yield is running around 2%.

I do not want to discontinue that but what I do want to do is build up a sufficiently large cash reserves.

And to enable us to take advantage of opportunities as they present themselves.

And Thats really the focus so I'm not avoiding your question, but I am saying my priority is to establish cash reserves to give us.

<unk> flexibility to grow the company and if in fact, those don't present themselves yes.

I would certainly consider.

Giving some of that capital back to shareholders.

Totally makes sense. Thank you so much.

Youre very welcome.

Okay.

Go ahead Kevin.

And never had.

A question that came on line from George regarding the number of employees that were impacted by the labor reforms and George. Thank you for that question. It was approximately 500 points that's in round numbers and.

We can have other individuals on site, but they are working on construction other top box.

Yes.

And I have 1 question that was came in and on the interim ACH and it was whether or not we had any thoughts about buying back shares of stock and the open market.

This goes to the previous.

Question was on.

Yes.

Really as the capital allocation.

<unk>.

I am going to be I'm going to add.

Answered this by first declaring my bias.

I've been involved as a director and and.

And management of a number of companies over the years have impact.

Gone through either a normal course issuer bid.

Substantial issuer bids.

And.

It's never accomplished.

What.

The intent was and every every case the bank balance went down and stock price didn't do anything and your float was reduced.

Cabinet work it can work.

Or do you really want to go and have a substantial issuer bid and buyback 20 percentage of your company.

But picking away on a normal course issuer bid really is not very effective.

Personally and.

And I am 1 person on the board of directors I do not speak for the entire board on this issue I'm talking off the top of my head.

But personally I would rather see.

I would rather see distributions to shareholders by way of dividends and I would buy a share buyback now that is a personal preference and bias.

It is not going to be universally accepted.

But.

I think that's.

If you are effective way of returning capital to shareholders and stock buybacks.

Well I don't.

So Alan at this time there are no further question, okay. So and as there are no further questions. We would like to thank you again for attending the call and we will talk.

That's a more again next quarter.

Thanks, everyone.

Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.

Yes.