Q2 2021 Avino Silver & Gold Mines Ltd Earnings Call
And my second quarter, 'twenty, 'twenty, one conference call and webcast.
A reminder, all participants are in listen only mode and the conference is being recorded.
After the presentation, there will be an opportunity to ask a question.
And the question queue. You May Press Star then one on your telephone keypad should you need assistance during the conference call you may signal, an operator by pressing star zero.
I would now like to turn the conference over to Jennifer North manager of Investor Relations. Please go ahead.
Yeah.
Thank you operator, good morning, everyone and welcome to the Avino Silver and gold mines Limited Q2, 'twenty 'twenty, one financial results conference call and webcast on the call today, we have the Companys President and CEO, David Wilson, Our Chief Financial Officer, Nathan Harte, Our Chief operating Officer, Carlos Rodriguez, and our V. P Tech.
Clinical services Peter Latta.
Before we get started please note that certain statements made today on this call by the management team May include forward looking information within the meaning of applicable securities laws forward looking statements are subject to known and unknown risks uncertainties and other factors that may cause the actual results to be materially different than those expressed by or implied.
By such forward looking statements. The company does not intend to and does not assume any obligation to update such forward looking statements or information other than as required by applicable law.
For more information, we refer you to our detailed cautionary note in the presentation accompanying this call or on our press release of yesterday's date I would like to remind everyone that this conference call is being recorded and will be available for replay later today.
Play information and the presentation slides accompanying this conference call and webcast will be available on the website. Thank you I will now turn the call over to <unk>, President and CEO, David Wilson David.
Thanks, Jen good morning, everyone and welcome to <unk> Q2, 'twenty 'twenty, one financial results conference call and webcast. Thanks for joining us.
Before we begin please note that the full financial statements and MD&A are now available on our website.
On today's call, we will cover the highlights of our second quarter 2021 financial and operating performance.
And our plans for Q3.2021, then we will open it up for questions.
Please note that all figures are stated in U S dollars unless otherwise noted.
During the second quarter, we focused on the necessary work and activities at the mine site that would allow us to resume operations.
In addition, we made excellent progress in our exploration program, which was announced during the first quarter of this year.
Prior to the restart of operations multiple preparations were ongoing including hiring mine workers upgrades to improve recoveries at the mill reestablishing or testing the mill circuits and the cleanup of equipment ground and facilities.
In addition, our exploration program yielded an initial test of drill results, which were announced in July.
We had drilling results from El Trumbo vein, which is a priority target and an offshoot of the avino vein, which has been one of the feeder veins for the company's milling complex historically data indicates that there are high grade areas within the vein over considerable with and there is underground.
Infrastructure adjacent to the vein.
Which would allow access for mining drilling on the vein has been.
From surface to can firm continuity of mineralization at depth.
We also had results from Santiago vein, which is further north in the Avino mining district in an area of narrow veins that average between one and two meters in width and intersects the San Gonzalo vein with mineralization similar to the historically high grade San Gonzalo Silver gold mineralization.
Yeah.
The continuity of the mineralization of the Santiago vein is being tested.
In addition, we received results from La Valencia vein the style of mineralization intersected resembles a low sulfur regulation epithem old San Gonzalo vein to vein may represent a northwestern fault dislocated extension of the San Gonzalo mine vein.
These results are encouraging as the presence of mineralized material and the Lama Lynch a vein.
Has been shown to extend along the strike distance of 250 meters and to depth of 75 meters from the surface.
650 meter GAAP between the Lama Lynch, a vein and the northwest a termination of the San Gonzalo vein remains perspective.
We are currently infill drilling the oxide tailings resource that sits within our tailing storage facility T. S. F number one we call it 200 holes, where plant of which 57 holes have.
Were drilled by the end of Q2.
In addition to these four areas of drilling we are also testing the westar, Sonora and San Jorge veins.
Okay.
Last week, we were extremely pleased to have announced that operations, we're resuming at the mine.
We had to take necessary steps over the last few months and although at times. This may have seemed arduous.
There were necessary in order to finally have the positive outcome that we have all been waiting for.
During the quarter there was some mining activities at the Avino mine, which included testing them of the mill and resulted in the following production.
<unk> 3504 ounces of silver produced 45 ounces of gold produced 55043 pounds of copper produced.
All totaling up to 15477 ounces of silver equivalent.
At the mine, we will continue to take precautionary measures as we begin restarting operations.
The health and safety of workforce their families and the communities in which we operate is Paramount and we will continue to be dedicated to maintaining a safe work environment.
Yeah.
We believe that the outlook for silver is positive and according to the Silver Institute global demand for silver will rise to $1.25 million ounces in 2021, the highest in eight years led by investments in industrial and investment grade physical silver.
I E bars and coins.
The uses of silver expanding and they are expanding quickly. According to the Midas touch consulting the price will be forced higher by any expansion in new applications of silver.
They see expandable markets for silver use and water treatment flexible displays the pharmaceutical industry five G communication RFID radiofrequency identification devices nanotechnology silver oxide batteries high performance engines function.
Clothing and solar technology.
As well exploration activities across Mexico is on the rise with hundreds of thousands of meters from various mining companies are planned across the country with increasing budgets.
And the same for Avino is our own drill program was announced and then increased in the first quarter.
Yeah.
Also in the quarter, we continued to make excellent progress with the dry stack tailings storage facility T. S. F number two we call it which is on privately owned Avino mine is permitted and is currently in the final stage prior to commencing construction.
Concrete foundations have been poured for the building that will house the filter press as needed.
And our expectation remains that the project will be completed during the fourth quarter of 2021 or slightly pushed into Q1.2022 due to the unseasonably heavy rainfall.
As I've mentioned before it should add an additional eight to 10 years of tailings capacity based on the current mill throughput rate.
We chose dry stacked tailings for its environmentally safety and economic advantages dry stack is the most stable form of tailing storage it reduces water consumption and reduces the storage footprint by requiring less land.
Our ESG initiatives continue to move forward as we incorporate principles of our sustainability and social responsibility.
During the second quarter multiple social governance policies were implemented as well as the health and safety plan, which includes a new medical Doctor and Department onsite, who inspects different work areas to detect any possible risk to the health of our workers.
We are committed to growing in a sustainable way that supports the wellbeing of our communities and the environment in which we operate.
We believe that the push towards the green economy, and the fact that we mine the metals needed will certainly benefit our shareholders going forward.
I will now ask Nathan Harte, <unk>, Chief financial Officer to present, the financial results for Q2.2021.
Yeah.
Thank you David it's my pleasure to be on the call and I would like to welcome everyone, who has joined US and is viewing our presentation today.
As you can imagine avino financial results were impacted by a lack of production at the Avino mine.
Having said that we exited the second quarter and an extremely strong financial position.
Our cash balance at the end of the quarter was $26.8 million, which represents a significant increase when compared to 12 million at the beginning of the year.
Working capital at quarter end was $30.4 million compared to $15 million at the beginning of the year, which represents an increase of over 100%.
Yeah.
We continued with our plans to reduce debt during the first half of the year, having lowered debt liabilities by a further $1.7 million.
For the year to date June 32021.
This brings total debt reduction since the beginning of 2022, just under $9 million and we are happy to report that we expect to be debt free and then the usual payables and equipment leases by the end of Q3 'twenty 'twenty one.
This will allow avino to maintain significant financial flexibility moving forward.
Okay.
During Q2, no revenues regenerated and as such no silver equivalent ounces were sold.
Avino reported mine operating losses of $1 million for the second quarter, which is made up of 500000 and standby care and maintenance cost and 500000 in depreciation depletion.
Losses before interest taxes, depreciation and amortization were $2.9 million compared to 800000 in Q2 of 2020.
Adjusted losses for Q2, 2021 were 800000 compared to adjusted earnings of $2 million in Q2 of 2020.
We reported net losses from after taxes from continuing operations of $2.7 million or <unk> <unk> per share for the second quarter.
Which includes noncash losses of $1.2 million related to foreign exchange movements, and 100000 relating to the realized loss on the exercise of warrants and which avino received proceeds of around $100000 during the quarter.
Capital expenditures for the first six months of the year were $1 million.
With the strike action the company took specific messages to limit unnecessary capital expenditures during the first half of the year other than for exploration activities, which have ramped up since February.
All necessary projects and upgrades have continued honest plant, which includes the new dry stack tailings storage facility.
We do expect the capital and exploration expenditures will increase over the coming quarters as we continue to move forward with the increased exploration as well as the ongoing tailings upgrades.
Finally, I want it radiate the reiterate the strength of <unk> financial position.
We continued with our plans and reducing debt and at the end of the quarter, we maintained over $30 million in liquidity, including our investment holdings.
With cash representing over eight times, our debt liabilities at the end of the quarter.
We are continuing with our plans to add value for our shareholders and our stakeholders throughout the rest of 2021.
I will now hand, it back over to David for a discussion on exploration as well as with Avino has planned for the rest of the year.
Thank you Nathan the exploration program is ongoing and is targeting several areas of the property, including the avino vein, the Santiago van and the El Trumbo vein to date 90 to 100 meters have been drilled the breakdown of the drilling is as follows 2000 and 469.
Meters at the Avino vein 1717 meters at the Santiago vein 1568 meters at the old Trump vein 820 meters at the Lama Lynch via vein 340 meters at the newest of Sonora vein 133 meters at the San Jorge.
In 2160 meters at the oxide tailings.
We are currently waiting for additional assays to be received.
Hiring is ongoing at the mine as we are looking to ensure we are getting closer to the amount of workers at the mine that we had prior to the shutdown.
The dry stack tailings project is going well with long lead items on site now prefab building to be erected soon with concrete having already been port.
Improvements to circuit for ongoing that will improve gold and silver recoveries through the use of new equipment.
Yeah.
Avino main focus for the next quarters to ramp up the production levels and operating activities at the mine and to keep moving forward with the exploration program.
We're focused on locating new mineralized zones within the property and confirming continuity of mineralization in the current Avino E T production area.
Finally, the health and safety of our employees and communities is always top priority and we continue to analyze situations in Vancouver in Mexico, and collaborate together to make the best decisions that are the most beneficial to the widest group, including all our stakeholders.
As of this past Monday, the Canadian land border will be opening two fully vaccinated Americans and further opening up to the international community starting in September. So this is a great step forward as we look to put the pandemic behind us.
We were pleased with the progress we made in Q2, and we look forward to an even more productive third quarter and remaining 2021.
We would now like to move the call to the question and answer portion operator.
Okay.
We will now begin the question and answer session to join the question queue you May Press star.
Star then one on your telephone keypad.
Sarah ton acknowledging your request.
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Her phone please pick up your handset before pressing pool.
Let's try your question. Please press Star then two.
Hello pause for a moment as callers join the pool.
Your first question comes from Heiko Ihle with H C. Wainwright. Please go ahead.
Hey, David and team. Thanks for taking my questions can you hear me okay.
Yes, Hi, Heiko.
All.
Good news.
So we start of operations on August 3rd or just over a week into production that is in the public domain.
Can you just venture a bit of a guess what your current throughput recovery and production level of insight is and.
If you Wanna be so maybe provide a little bit of trajectory on how you see the remainder of the month in September.
And then just building on all of that any idea how much cash cash money was spent at the site in the last 30 days.
Okay, I'm going to turn that to.
Peter Latta VP of technical services and Nathan to talk about the cash portion go ahead Pete.
Thanks, so much David.
So just we're just getting kind of the initial reports back from this week and we are ramping up.
So I mean are you looking for specific numbers or what kind of answer can I give you.
Hey, if you can give you specific numbers that would be wonderful more than I asked for but I wasn't bold enough to ask for it so.
We have specific numbers that would be amazing.
No sorry.
We're right now at about 1000.
Once per day.
Uh huh.
And we're looking to ramp up to what that was pre covid, which is around the <unk> hundred 2000 Mark.
Okay.
And.
So what sort of.
Trajectory for that ramp.
We're hoping to do that in the month of August.
All in all this to come.
Perfect and then just how much how much cash was.
Extremely helpful. And then so great it's more or less are looking like pre covid grades as Walter are you high grading of bid or are you trying to get to the veins is there anything that should surprise us.
No I mean, we're following.
Schedule with the plan that was laid out last year.
And as updated we happened to be in the high grade area, but that's not because we're we're doing any type of high grading or anything. We're just following the sequence that's planned basically going from bottom to top end.
And we can talk more about that if you're interested but the grades are quite good.
Got it okay.
Okay, and then just the cash question I guess, it's a nathan. Thanks. Thanks. So much that was extremely detailed and I think it really helps investors that certainly helps us.
Yeah.
Yeah Nathan here.
So in addition, you know obviously there wasn't but there's a bit of lag as we wrap up and before we see revenue has come back in.
So I'd say, we probably spent about an additional $1 million and bringing that up.
But we'll definitely recoup that fairly quickly.
You know, where we do have we will have sales in August.
We're getting paid on those fairly soon.
Great and then just a little follow up for Nate.
And just thinking out loud a little bit I mean, your balance sheet present as strong as ever really been I'm talking when I say now I'm talking about 2021.
Looking ahead.
Again as much as you're willing to disclose here have your considerations for a minimum cash balance minimum working capital et cetera change compared to what you would have stalled in 2020 or before even.
No. That's a fair question I think you know are our views about balance sheet are honest.
We think very highly of the where it is right now and we'd like to keep it there.
So I would say.
Yeah, I mean to answer the question I guess, yes, I'll, probably our minimum cash balances has gone up a bit just based on where the company is now versus where it was 18 or 16 months ago.
But at the same time, we want to make sure that we're putting our cash to work for our shareholders.
Thanks, Perfect sense I appreciate your time and I'll get back in queue.
Thank you Heiko. Thank you.
The next question comes from Matthew O'keefe with Cantor Fitzgerald. Please go ahead.
Thanks, Operator, Hello, gentlemen, great to see you back in production.
On some of the other programs that you've got going on obviously the exploration well on.
On the dry stack tailings project when is that is that expected to be completed by the end of the year when is that expected to be completed.
Yes.
That could be completed by the end of the year.
Okay, but there have there has there has been some delays because of the heavy rainfall.
You know it's possible it could be Q1 next year, but we're shooting for the end of this year.
Okay, Great and then are there other any more mill improvements that youre working on and if so can you sort of talk about that and also on the mine development Brian.
The plan there.
Sure Oh, I'll, let Peter Latta take that you can talk about what's going on in the mill and the mine development go ahead Pete.
Thanks, Matthew Yeah, we are looking at a few different projects in the in the mail for sure. We've added some additional recovery equipment and that's been completed.
We're looking at an automation project that we have.
We've kind of just kicked off which is good to try and modernize a lot of our automation and tie everything together with kind of a central Dcs system, which is fantastic, which should help reduce both costs and hopefully improve recoveries.
We're also looking at some.
A variety of different types of projects to to increase efficiency.
I'm happy to talk about those as more detailed maybe offline.
Okay.
That's good to know and within the mine are there.
There is still some some development there too to allow for increased.
Is that correct.
Yes, that's kind of what we talked about last time before it before we ended up shutting down and that work at Dolby.
That's what that extra that's that bring us up from that 18 to 2000 tonnes per day that we saw before pre covid to that 2500 ton per day limit and.
We do need to do that underground development.
It is.
It sits at about 350 meters of development required of that underground development to make for that one way traffic.
That was something we were talking about last year.
So where you pick that up now in and or what.
What would be the timeline to get up to that.
Yes, I mean, we're going to see how the ramp up goes you know Carlos is busy bringing back more underground workers and making sure that we can get our mine up to up to the throughput first the pre covid throughput and then we'll look at the underground development project.
Yeah.
Okay.
Okay. That's good.
Okay that possibly have ordered some new rewarded some new underground equipment and larger scoop trams.
Okay.
Great that's it for me thanks.
Thank you Matthew.
Once again, if you have a question. Please press Star then one.
The next question comes from Jay Zukowski with Alliance Global Partners. Please go ahead.
Hey, guys. Thanks for taking my question.
Just a quick one on CSF to sort of the timing on that and it sounds like it was pushed to Q4 or early 2022.
What is existing capacity look like now.
Are you guys fairly comfortable that that you know if there are any more delays, we shouldnt see an interruption at all in production, yes, there's there's still capacity in the open pit.
So.
Current rate, yes, it should be fine there, but also we have some capacity left in CSF number one.
And which were won't impact the drilling that's going on there.
And then another option if we wanted to increase the size of <unk> number one.
We could consider putting in.
Yeah.
Some safety barriers and then we could have more capacity there. So we don't see any interruption between now and getting CSF number two completed.
That's what I think you have some flexibility.
Yes.
That was all on my end thanks Pat.
Thank you Jake thank.
Thank you.
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 everyone for taking the time to listen today, we're looking forward to ramping up production now that our operations have resumed we appreciate all of our stakeholders patients and support we're excited for the remainder of 2021 and for Avino. Thanks again for listening and have a great day.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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