Q3 2021 Coeur Mining Inc Earnings Call
Good day and welcome to the core lab third quarter 2021.
This conference call.
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I would now like to turn the conference over to Paul viewpoint T cell.
Investor Relations. Please go ahead.
Thank you and good morning, welcome to core mining third quarter earnings Conference call. Our results were released after yesterday's market close and a copy of the press release and slides are available on our website I'd like to remind everyone that our press release slides and some of our comments today include forward looking statements from which actual results may differ please review the cost.
Generic statements included in our press release and presentation as well as the risk factors described in our recent 10 Qs in 2020 10-K, now I'll turn it over to the team.
Alright, Thanks, Paul and good morning, everyone.
Overall, the third quarter reflected a continuation of our strategy of investing in our North American assets to further reposition the company with lower cost sustainable free cash flow and solid returns over longer mine lives.
Starting off on slide three in today's presentation I'd like to highlight a few key points before turning the call over to the rest of the team.
As you can see it was a quarter with several significant developments in decisions results were in line with our internal forecast and we're set up to deliver a strong finish to the year and achieve our original production guidance.
Mick will go through the operations in more detail shortly but I'll quickly touch on a few main points.
Wharf led the pack and achieved its second highest operating cash flow and free cash flow since we acquired the operation six and a half years ago.
<unk> and Kensington were largely on plan and are on track to deliver strong fourth quarters.
And Rochester as results reflect steady progress, despite devoting 38, and a half days or about 45% of the quarter to crushing and hauling over liner material to the new stage six leach pad before winter.
It's worth pointing out that Rochester is year to date results reflect two and a half months of essentially no stacking on the legacy stage four pad as they've prioritized activities to support the Poa 11 expansion.
On the exploration front results continue to validate our ongoing commitment to these higher levels of investment we invested $20 million in exploration during the quarter alone.
This commitment to drilling has led to double digit reserve and resource growth over the past few years and we look forward to hopefully delivering further growth again at the end of this year.
If you turn to slide seven you can see that exploration continues to be a real differentiator for core.
We anticipate investing $70 million in exploration in 2021, which is nearly 40% higher than the record we set last year.
And as one of the largest programs in our sector.
We remain on track to achieve our full year drill footage targets, yet investing slightly less than originally anticipated.
Which reflects efficiencies we are realizing from these larger programs.
We will plan to provide another exploration update before the end of the year that will focus on exciting new results at our assets in Nevada, both at Rochester, and from the Crown District in Southern Nevada, where there continues to be a lot of activity.
Switching over to our expansion projects I want to walk through some updates starting with the Rochester Poa 11 expansion.
This project remains our top priority and is a transformative well funded source of production and cash flow growth for the company.
Things are moving right along overall progress stood at 42% complete at the end of the third quarter in.
In addition to completing the crushing of over liner for the new stage six Leach pad. The team also kicked off foundation work for the Merrill Crowe plant and the Crusher corridor during the quarter.
As we mentioned on our last conference call, we're experiencing the impact of inflation on remaining an awarded work like most companies are reporting.
Overall, we're fortunate to have had the vast majority of our contracts locked in prior to the current spike in cost and supply and labor disruptions.
We're trying to mitigate some of these impacts by re scoping and re bidding unabated contracts.
But we currently estimate that we're likely to see a 10% to 15% overall increase to the poa 11 construction costs.
Thanks to the ongoing test work and operating experience taking place at Rochester, Our technical team has identified an opportunity to create additional operating flexibility by installing pre screened into the new crushing circuit.
We have kicked off detailed engineering and we'll be evaluating the merits of implementing this process improvement over the coming months.
Assuming we elect to pursue this opportunity it could potentially extend the timetable for completion and commissioning of the crusher by three to six months.
In the meantime, we plan to install prescreened on the existing crusher during the first half of next year to give us some full scale run time and experience that we can potentially incorporate into the new crusher configuration.
Now switching over to silvertip, given the current inflationary environment and pandemic driven supply and labor disruptions, it's not an ideal time to be kicking off a new capital project on an accelerated timetable despite multiyear highs zinc and lead prices.
Fortunately, our silvertip expansion and restart is still in the early innings, which gives us a lot of flexibility.
Despite the uncertain macro environment, which contributed to higher than expected capital estimates for an accelerated expansion and restart one thing we are certain of is the quality and prospectively of the silvertip deposit.
The exploration results along with the knowledge and new discoveries. The team is generating have led us in the direction of evaluating a larger silvertip expansion and restart on a potentially slower timetable.
To take advantage of such a high grade and significant resource.
750 ton per day processing facility isn't likely large enough to maximize silvertips value.
We're going to take some additional time to evaluate what a larger design and footprint could represent in terms of economics and overall flexibility.
This approach will give us time to continue drilling and hopefully keep growing the resource allow.
To allow for the dust to settle on many of these current macroeconomic factors and allow us to focus on delivering poa 11, while not straining the balance sheet.
Finishing out the highlights we're pleased to announce that we entered into an agreement with avino silver and gold to sell them. The Lopresti Yosef project in Durango, Mexico.
This transaction offers some real potential synergies to unlock value from that asset with their nearby Avino mine.
Strategically the transaction checks a lot of boxes for us with respect to further enhancing our geopolitical risk profile, our metals mix and the timing of our development pipeline.
We can deploy some of the fixed cash consideration into the Rochester expansion and into our highly prospective exploration programs.
The transaction provides a lot of upside to the asset through the equity ownership, we will have along with contingent payments and two royalties we will retain.
Shifting gears I want to quickly bring your attention to a set of slides starting on slide 17 that highlight the great culture and diversity efforts, we have a core.
To be a high performing organization, a company's culture strategy and capabilities need to be aligned something that I believe we've achieved over the past few years.
To that end I want to recognize our head of human resources, Emily Scouten for her efforts on D E and I and for recently, winning the industry's rising Star Award from S&P Global Platts.
We continue to integrate our ESG efforts into our strategy and overall decision making.
Before having Mick provide an overview of our operations I'd like to follow up on my Silvertip comments by providing a brief overview of the silvertip exploration results and why we are so positive about its potential.
Thanks, Mitch and good morning, everyone.
We bought silvertip in late 2017 with the recognition that the asset excellent growth potential. We now have almost $3 five kilometers of potential growth defined based on step out drill holes or more than triple what we knew in 2017 as highlighted on slide eight.
This year, we have completed and the largest exploration program in the history of the project.
Preferably silvertip accounts for roughly 25% over $70 million overall budget at core.
The site team led by Ross Easterbrook has done an outstanding job managing to 100000 meter drill program.
Drilling from underground has given us the ability to conduct exploration year round.
And test different parts of the ore body from different angles, which has been a crucial part of the silvertip growth story underground.
Underground drilling in early 2021 has led to the discovery of the southern silver zones vertical feeder structures.
Manto ore zones, and more recently vertical feeder structures under the discovery South zone.
These structures represent significant resource tronox potential and debit.
Excellent upside.
We now have two rigs active underground with plans to add a third rig early next year. We also expect to continue with three surface rigs testing resource growth to the south and the one five kilometers gap between southern silver and <unk> zones.
With a larger drill budget. This year, we expect to continue significant growth at silvertip, which will give our development team confidence.
Rightsize, the future operation potentially increased scale of the ore body.
One final note the team reported last week their cut the best hole ever with 11 mineralized Manto horizons.
The hole is located under Silvertip mountain.
<unk> 500 meters or 500 feet south of the southern silver and kept creek zones in an area with no resource shapes at this time.
This new step out hole as a significant indicator of the growth potential we expect for 2022.
Beyond.
I'll now pass the call over to Mick.
Yeah.
Thanks Helms.
Before diving into operational results I want to recognize the team for continuing to prioritize health in CFT and driving continuous improvement in this area.
Flipping to slide 24, I'm proud to report that we recently received the <unk> mine safety and Health Technology Innovation Award for our cross functional COVID-19 response efforts.
I'm truly honored to be part of such a great team that is relentless in its efforts to work together and look after the wellbeing of our people.
Now turning to slide five to cover the operations and starting off with Palmetto.
The team did an excellent job maintaining higher throughput levels and maximizing recoveries to offset some of the lower grades that we've been experiencing with our re sequenced mine plant.
We've also continued advancing development, while focusing on increasing rehabilitation rates across the main.
Which helps ensure that we've appropriately prioritize the health and safety of our workforce.
Importantly, operating costs remain within guidance, helping to Coca borrowings lower realized prices and generated $15 million of free cash flow.
We expect a strong finish to the year pulmonary.
And we're excited to see how much production growth we can achieve here in this fourth quarter.
Switching over to Rochester.
We pushed just under one 3 million tonnes of ore arena for the new stage six leach pad during the quarter completing the necessary requirements for Poa 11.
It's important to note when we are generating global Ana we will not pushing material stock on the legacy <unk> full leach pad, which had a knock on effect for production during the third quarter.
Despite the near term production impact all time energy and resources used to finished crushing globally now with an important step towards completing this highly anticipated expansion project.
Now turning to Kensington.
Production was slightly higher during the quarter as better grades helped to offset lower mill throughput caused by stope sequencing and drill parts availability.
The good news is that we anticipate more hybrid dwelling material over the coming months and have already received the necessary spare parts for our stope drills.
Leaving us very well positioned for strong production growth in the fourth quarter.
The Kensington team did an excellent job balancing multiple priorities and maintaining solid cost controls throughout the quarter, which helped generate nearly $50 million of free cash flow.
Finishing with wharf I wanted to start by acknowledging a tremendous achievement on October foods. The team at wharf celebrated one year without a recordable safety incident truly an amazing accomplishment.
From a results standpoint, we'll put together yet another great quarter, which marks back to back periods of strong performance.
Gold production was up 17% and cash flow because were the second highest since cause acquisition back in 2015.
With that I'll pass the call over to Tom.
Thanks, Nick.
First I wanted to add a bit of color on the noncash adjustments that impacted our third quarter earnings.
We wrote off $26 million of Mexican VAT refunds to which we strongly believe we are entitled but like many other multinational companies doing business in Mexico, we have experienced significant challenges from that and the Mexican courts and obtaining these payments.
We also had a mark to market adjustment on our equity investments primarily related to Victoria gold.
However, the carrying value of the investment remains above our original cost.
Turning over to slide four I'll quickly run through our quarterly consolidated financial results.
Revenue of $208 million was driven by relatively stable metal sales and a lower average realized silver price versus the second quarter.
Operating cash flow totaled $22 million.
It was lower than last quarter, but also negatively impacted by changes in working capital were moving working capital operating cash flow improved by more than 10% quarter over quarter.
Like most companies, we are seeing cost pressures related to consumables and labor across all of our operations.
So our strong cost control focus we have maintained our cash guidance at all sites, except for Rochester, where we guided a modest increase.
With stronger expected Q4 production, we anticipate operating cash flow levels to continue climbing as we finish out the year.
Turning over to slide 12, and looking at the balance sheet. We ended the quarter with approximately $330 million of liquidity, including $85 million of cash and $245 million of availability under our revolving credit facility.
Also it's worth highlighting that these numbers do not include the $140 million of equity investments on our balance sheet.
While we did draw down modestly on the revolver. We ended the period with a net debt to EBITDA leverage ratio of one four times.
We will continue adhering to our disciplined capital allocation framework and remain focused on our goal of keeping net leverage below two times and maintaining liquidity of at least $100 million throughout the entire Rochester construction period.
The incremental capital costs at Rochester will put pressure on this call. However, we expect the revised timeline for silvertip.
Along with the current robust metals price environment will leave us well positioned to maintain a strong and flexible balance sheet.
I'll now pass the call back to Mitch.
Tom before moving to the Q&A I want to quickly highlight slide 13 that outlines our near term priorities as we approach the end of the year.
Yes.
With production guidance reaffirmed and a strong expected fourth quarter underway, we're feeling confident about our 2021 results and in our ability to carry this momentum into next year.
We will continue pursuing a higher standard and execute at a high level to deliver consistent results and industry, leading organic growth from our balanced portfolio of North American based precious metals assets.
With that let's go ahead and open it up for questions.
Thank you we will now begin the question and answer question.
I ask a question you May press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys.
Kurt <unk>. Your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question comes from Mark Reichman with Noble capital markets. Please go ahead.
Good morning. This question Mark in my roles.
I have been getting more questions about sustainability reports.
So I was just kind of hoping you might be able to elaborate on Coors framework for limiting juicy emissions I mean, a lot of companies are saying well, we're looking to improve on our current pad others are aligning with the Paris agreement others are putting out plans for an eventual path to net zero emissions by 2050. So just your general thoughts on your efforts and tradeoffs.
It would be helpful.
Yes sure.
Very relevant question, thanks for asking it and I have casing out here in the room with Us foods.
Our general counsel and leading our ESG efforts here.
On the website our responsibility report.
<unk> is available, which we've done now for the last two years and.
And that's a great place.
Just.
For you to.
Refer.
The inbounds that you get.
As well as you know every quarter I think we do a really good job in these quarterly <unk>.
Slide deck that accompany these calls of highlighting different elements of our ESG priorities and efforts.
We are.
I would consider it and I think third parties consider us a real leader.
Among our peers and even I think we punch above our weight when it comes to our ESG.
Priorities, we just are now.
Into the first year of having a G HG emissions intensity target that we've.
Gone out with which we're proud of and I think is a.
A good indication of just how serious we are about.
Doing our part and it's consistent with our overall strategy and priority that we place on our ESG initiative here. So.
We'd be happy Mark to set up any detailed call with you one on one with any of your inter.
Interesting.
To go deeper into in the ESG.
If there is any interest.
No that'd be helpful. I think the focus is really focused on the on the on the climate change portion of it and the pathway.
Then just the second question is do you think will support agreement associated with Victoria Gold.
Do you think that will get extended or what are your thoughts on that.
Yes, good question.
Exploration date is the 31st.
<unk>.
You will maybe note if you really dug through.
Nate and all your spare time, our disclosures there is embedded derivative tied to that support agreement.
That we assigned a value of zero two.
In our disclosures, which is <unk>.
Maybe an indirect long winded and may be wonky way of answering your question of the <unk>.
Hood.
We assign.
There being any value associated with that with.
With that agreement.
Okay, well, thank you very much I'll quit while I'm behind.
Thanks Mark.
Our next question comes from Michael Dudas with.
Vertical research partners. Please go ahead.
Good morning, Mitch and gentlemen.
Good morning, Hi.
So Mitch can you maybe elaborate a little bit more on on Rochester, and the Prescreening capital that may or may not go in.
What are some of the tradeoffs for IR ours.
Timing broker to enhanced or lengthening life for cash flow through through the year through.
Through the project.
Yes, good question ill ask Mick to cover that.
<unk>.
We've zeroed in on here over the last few months is we've done a whole lot of test work out there and as we have continued to operate.
The existing <unk>.
Operation.
Especially as it relates to some of that softer ore that we've talked about on prior earnings calls.
This pre screen <unk>.
Concept is something we think that can provide a lot of flexibility for for handling that softer ore type.
In the coming coming years, Mick do you want to go a layer deeper on pre screens.
For sure. So very typical in a mine is the ore body develops and we'll see a little bit of frames and very typical in other means.
Prescreen and made a full those veins of.
But there's a few things of course.
That manages the veins at <unk>.
And that we put to the heap Leach, which is a good positive thing helps us manage the PSD and then it also helps with throughput at tape. We haven't finished the design on that yet though so.
So we're busy working through that and we'll certainly update as we go forward, but for the moment.
We're taking a deep look at that we're going to look to put some kind of pilot into the ex pit to.
To make sure that the technology that we put in the matches the ore body that will have and that will get good learning ahead of any kind of possible implementation of Limerick.
And we will have that work Mike wrapped up.
Here in the fourth quarter your expectation is that we'll have some.
Understood and then looking out at the rebid and reconstituted.
Requirements for the remaining capital allocation on Rochester.
Talk a little bit about timing and some of the diner, obviously, you've talked about some of the dynamics, but.
Just your contractor.
Cereal timing is everything so tight and as COVID-19 been an issue relative to.
Working in North Central Nevada, given the folks onboard.
Yeah, I'll start and then Tom you can pick up where I leave off.
The last point, there Mike Covid.
Is definitely.
Yes.
Exacerbating the labor.
Challenges for contractors.
Just in terms of available people.
That's not helping for sure.
That has I think found its way a bit into some of the preliminary.
Proposals that we received on some of this remaining on awarded work.
Tom maybe from here you can take over and talk a little bit about.
The 10% to 15% range that we.
Mentioned.
Timing and dynamics, Mike asked about that sure so.
Both of the two S&P high context data.
<unk> with fixed prices and mine to mitigate our risk and what happened was as part of that mitigation.
Given the labor supply shortages as well as some other cost inflation pressures that are absolutely real and we continue to read about we saw.
Some bids that were.
Much too high so we decided to go back talk rebid.
Each of the two contracts.
Widen the scope of who we're talking to and most importantly is to modify the commercial approach instead of a fixed price to go with it reimbursable cost with with a sharing of the commercial risks.
And so again so that work is.
Or digitally underway.
And hope to get that that awarded here in the near future.
Suspect, we'll have a lot more to say.
During the February year end call and then Mike just shape of remaining capital if thats.
A part of your question I think as we go into.
2022, and 2023, you could expect.
70% of the remaining capital next year and the remainder then in 2023.
As we as we wrap things up that makes it I won't give you a chance to add in anything if there's anything Tom or I did touch on that you want to make sure Mike Here's just we have some great partnerships like the one that will help with <unk>.
So of course.
That went really well and so we're talking to those kinds of organizations now will run about rebids and new strategy around execution on <unk> and those negotiations are going well.
We will update everybody after that so far.
Seeing some opportunity there too.
Pink those packages.
Does that help Mike.
That's great very helpful mature comment thank you very much.
Yes sure. Thanks.
Our next question comes from Joseph Reagor with Roth Capital Partners. Please go ahead.
So you mentioned team thanks for taking the question.
Yeah, Hi.
So two things first one.
On the cost side.
There's a lot of debate over.
Whether or not the.
The current inflationary environment will hold.
It will accelerate et cetera.
What are you guys doing to kind of plan.
For existing operations to keep cost inflation at a minimal over the next.
Year or two.
Yes.
Word transitory I guess it depends on what your definition is of.
Transitory right.
We don't really see there being some near term point inflection point here of where things start to ratchet back down necessarily so we are.
Yes.
Making plans and pursuing opportunities to try and offset some of those impacts that could be around for a very long long time.
Tom do you want to share a little bit more into some of the inflationary aspects and then make maybe make you can touch on some of the things we're trying to do operationally to mitigate the impacts.
So the two big <unk> for us have been labor labor and consumables.
And again some of the consumables like diesel for example, we're seeing 35% increases across our U S operations, 20% in Mexico, Fortunately diesel volume in that 7% to 8% range and then on labor kind of across the board, particularly at Kensington, we've seen some pressure so all of that kind of high.
And the 5% range increase in costs.
So.
And again, we're not anticipating when there are budget cycle right now, we're not anticipating that pressure.
To come off in 22 of at also.
We're doing lots of things.
To do our best to maintain those costs and again, we're pretty pretty pleased that we're able to maintain our cost guidance and I think a lot of the efforts making.
I can touch on here.
In a second are contributing to being able doubled our costs flat in this inflationary environment.
Yes.
On the on the efforts we have a really strong.
This improvement continuous improvement program. So we have various projects that we're working through last year. This year and we'll have a good focus on next year's portfolio as well to hold cost and improve cost and then, particularly where we have areas of high fixed cost to drive productivity at the same time them.
We've seen some really good progress this year.
And some of that space, particularly at pulmonary who in our Rochester.
Okay. Thanks for that color and then.
Mitch.
Kind of following on the sustainability question earlier.
And given that you guys tend to be a bit active on the M&A front have you guys given any thought to diversifying the company into battery minerals given.
One that would really help your ESG focus.
You have to have a critical mineral like that for the.
Change in the economies of the world and to just because that sector seems to have plenty of technical people, but not necessarily the most.
Mining experience.
Any thoughts there.
Yes.
Provocative question.
And one that with all the attention on some of these other rare Earth battery metals.
You can't help to think about things like that for us in the near term, we have an awfully full plate and delivering on those priorities.
That's our that's our focus and I guess Eurasia and interesting point there in terms of the ESG angle with the significant amount of silver that we do continue to produce even though.
Down to.
30% or less of our of our revenue.
It's got such a great ESG story to it in the end uses.
<unk> and electrification battery storage et cetera et cetera.
That is a.
We're pleased to have that as our sort of.
Critical metal contributor.
But as far as extending into any of the other railroads are battery metals for us that's just not.
Not a priority at least in the near term never say never but nope nope.
No plans to.
Look at anything like that.
Okay fair enough I'll turn it over.
Thanks, Joe Good question.
Again, if you'd like to ask a question. Please press Star then one our next question comes from Michael.
Okay.
RBC capital markets. Please go ahead.
Ahead.
Hi, Thanks, very much guys.
Could you just going back to the Rochester expansion and the timing of capital spend so if I do the math on the revised guidance for Rochester Capex.
In 2021.
Got to a number of about $60 million to $70 million in Q4.
And then about 300 or so million through completion based on that 10% to 15%.
Cost inflation so am.
Am I right in my math.
Thinking about at around $200 million in 2022 and $100 million in 2023 is that the ballpark.
Yes, I think your numbers sink up with that 70%, 30% 70 30 right.
Yes.
Okay, Great just wanted to make sure on that and then.
On silvertip.
Are you able to separate the delta in costs versus your expectations in terms of how much was related to the accelerated timeline and how much was general cost pressure or maybe in other words how.
How confident are you in a more reasonable number.
While pushing out the project if inflationary pressures remain.
Yes, good question.
Let me take a crack at it and I'm looking at Mac and Tom you can chime in if there is anything that I didn't.
Cover that.
Made a mess of but I think that is.
The accelerated timetable.
It was definitely.
A large contributor in terms of.
Not only squeezing.
Construction activities into what is a fairly short construction window.
Then needing to accommodate large numbers of contractors to do that well in excess of current current capacity. So the fixed cost those indirect costs.
We're only going to to grow.
Significantly under that accelerated timetable there was also a factor there.
Related to just the design.
Of several of the key infrastructure components, and placing them into the existing footprint.
We're less than optimal.
And drove costs higher as well and our thinking here is that with a little bit of time, obviously, we keep drilling in growing the resource.
Cft's.
Macro factors calmed down a bit we can take a little bit more patient approach to <unk>.
Footprint and how we might ideally lay out the site.
In a way that could alleviate some of those.
Some of those restraints I guess column that we that we saw in the feedback that.
We received there late in the third quarter.
So I'm not I'm, not giving you a real black and white answer, but I'm trying to give you. Some additional context to some of the drivers that helped kind of lead us in the direction that we're now that we're now going maker Tom is there anything.
You'd want to add to that yes.
Yes, I mean with.
The timeframe be in our hands, we can look at the technology selection mixture of the health safety environment and hygiene factor as a best practice level.
Levels, and then we optimize that as we learn more about the resource.
<unk>.
Real great opportunity for us the early works has gone very well so what derisking the project as we go.
That site cleanup is gone and.
Gone very well the decontamination as <unk>.
One very well so.
Overall, I think we're well positioned Tom you want to add on to that yes, and just.
Again.
A staple of what we've been saying all along is the importance of a strong and flexible balance sheet during the entire Rochester construction.
And this is sort of another.
A boe in that statement to support to.
To support that we're going to have a strong and flexible balance sheet throughout the Rochester expansion. So.
Beyond that Ed mentioned.
Does that.
Does that help.
Yes that makes sense and maybe following on that last point are you able are realizing that this is a bit in flux and I guess part a of this question is when when should we expect.
The technical report or more color on how how the project will be progressing.
And part D is can you give us a sense of the quantum of spending.
At Silvertip.
In 2022 2023 before.
You had actually embark on the actual construction.
Now to fair fair questions, Nick I'll ask you to talk about schedule and.
Then Tom I'll ask you to talk about.
Spend.
Do you want to go through.
The technical report schedule it is highly likely to be around the middle of next year, but we have to determine that as we as we know.
Set a little bit.
Look at the.
The new schedule and this opportunity then we will talk about that as we go forward, but that's highly likely and schedule for <unk> and then overall.
For the project it will depend on the technology selection and the <unk>.
<unk> that we look to implement as an example of the potential for a staged approach compared to step change approach and then we have to look at the payment requirements for each of those options and we will leave that all out and not future Technical report.
You wanted to caveat in and again kind of depending on if we go down the staged or the step change of approach that's going to impact that the level of care and maintenance that will need to have.
So we'll be out with our budget here early in early in February.
And.
Again, I think the other piece of it is.
Obviously very excited about the exploration potential I think.
<unk>.
You'll see you'll continue to see at the levels of exploration to help support that growth and the resource So sorry, I can't be more specific at this stage.
No no. It makes sense sorry to go on just another one you mentioned last quarter you were looking at offtake options for funding is that still ongoing is that still a consideration.
Yes.
It's going to continue to be an element again, the testing is coming along.
As we continue.
Continues to be really positive.
I will of interest is high obviously.
The timing has now been pushed out and so.
But no change that that would be a big piece of the strategy to help fund.
Fund silvertip.
Okay, Great and I promise last question for me on a different topic can you comment on how if at all the new contractor laws in Mexico have affected.
Operations are costs or if it will in the future.
Yeah Yeah.
For us Mike that was.
A process that we completed in July when we <unk>.
Transfer to employees.
Out of a service company.
Really without any any big challenges.
The way, we have historically compensated employees in that service companies.
It has been consistent with how we compensate everybody regardless of what entity.
In which they work and so there was really no there's really no meaningful impact to our costs are labor costs wages compensation.
Between what we used to do and what we'll do going forward. So it was largely more of a of an administrative exercise that wrapped up in July.
And.
Theres been no no fallout or issues since then.
Okay, great. Thanks, very much for all the answers.
Thanks for all the good questions.
Okay.
Our next question comes from Brian Macarthur with Raymond James. Please go ahead.
Hi, Brian Hi, good morning.
I think Mike was asking a lot of my questions about the timing at silvertip and ongoing cap, our ongoing expenditures to care and maintenance, which I guess, we can't get yet, but maybe if I ask this differently conceptually are we thinking.
Flooded with Rochester that we're going to drill 22, 23, and we're trying to hit the construction season for some sort of plant in 'twenty four with production in 'twenty five and I realized some of that may be drilling dependent or are we now talking about something that we're going to drill for two or three more.
Years and aim for aim aim for 26, because I guess, where that comes out is what's what's the carrying cost as we wait for all this.
Notwithstanding the fact, but I totally see what youre doing and trying to sequences with Rochester.
Yeah well.
Ill go first my preferences door number one.
Yeah.
Yeah.
But we will let the.
We will have to work sort of dictate the schedule and.
Again, you used the word Brian conceptually conceptually the idea of a staged approach.
It makes a lot of sense, where you could start maybe a little sooner and smaller and allow the operation to kind of self fund its own.
Expansion over time, and as permitting and continued drilling right.
Sort of lay out the runway for.
For the future.
But again, that's a that's.
That's a concept slash.
Preference at this point now the work is underway to.
If thats.
The viable way or not.
Anything you want to.
Yeah to that for sure.
It's absolutely dependent on back of course, we have permits in hand already.
Amendments that we can make to those permits to allow us to build a smaller plant.
We want to go for a big plant and we have to reevaluate those permits in the footprint and then.
And then get those things in place before we make those changes to certainly a preference to look at a modular approach, but we'll look at the best value proposition for silvertip.
And then we'll make that decision when we are ready and balancing that with balance sheet.
And preserving the flexibility there.
Does that help Brian.
And then I assume you just as you go through that you just continue to aggressively drill and try and figure out what you actually have here too.
Where do you want to build the bigger plant.
Exactly.
Okay.
That's great. Thanks, very much okay.
Thanks, Brian.
Our next question is a follow up.
Mark Reichman Global capital markets. Please go ahead.
Thank you and just lastly, I wanted to ask you about what's the impetus behind the sale of La <unk> I mean, I've heard some criticism, but you've known they will open a long time and it seems like that.
We'll probably try to make the most of this asset and you have retained some interests. So just kind of your thoughts.
About that transaction in and why now.
Yeah. Thanks for the question.
La <unk>.
We've been trying to.
Determine the best path.
For unlocking some value there for a while that was acquired in a environment, where the silver price was sort of mid thirties.
And that thing.
Looked awfully attractive well, we're not in that environment anymore.
And when it comes down to kind of after tax risk adjusted returns.
<unk> has a hard time competing with the other opportunities that we have.
Mostly here in the U S West and then.
To a lesser extent up in up in Canada.
So there were there were some of those thoughts going into this.
And then just Mexico in general it has become a more challenging environment for mining.
At least that's been our experience in terms of permitting security.
Kind of corruption rule of law.
And not that the.
Write off drove the <unk> decision, but it is certainly our ongoing disappointment challenges with S. T down there around these VA T refunds, which goes back several years now has been another headwind and just tax rates in general in Mexico relative to the other.
And for US in particular here in the U S, where we have a lot of <unk>.
Tax loss carryforwards.
So there were a lot of lot of ASP.
Aspects to this.
Including.
That's the primary silver.
Asset.
We're comfortable with kind of our metals mixed as we have it.
Currently.
And I think leveraging that infrastructure next door there at Avino makes a lot of sense and it's hopefully a pathway to realizing some value out of La Presse theosis sooner then.
Then we would on a standalone basis.
That's very helpful. Thank you very much Mitch.
Yes sure.
Our next question comes from Ryan Thompson with.
Please go ahead.
Hi, Ryan Beck, Hey.
Hey, Mitch thanks for the updates.
Just a question on Rochester.
Kind of looking at recent run rates Youre producing call. It between 700 900000 ounces of silver.
78000 ounces of gold over the past few quarters.
You mentioned that you've been using the crusher for the overlying material expansion and so on is it a safe assumption to assume that Rochester production over the next call. It few quarters is going to pick up a little bit now that crusher is available how should we be thinking about it over the next.
Medium term before the expansion is done.
Yes.
And then Nick you can.
Follow up.
<unk>.
In the very near term here in the fourth quarter.
Despite some recent record range out in northern Nevada, and California from that.
<unk> Bob.
We're excited about this this fourth quarter at Rochester, just because theres not any over liner being B G.
Generation and diverted over to stage six theres not a swap out of.
It should be a fairly clean quarter relative to recent ones.
And then going into early next year, the only thing that Pops up on my radar screen here in response to your question Ryan is putting those three screens in to the legacy ex pit crusher there.
There'll be a little downtime associated with that I am thinking whats early second quarter spring yet.
22, yet, but otherwise that we'll be able to have some some higher sustained.
Throughput rates question rates stacking rates.
With hopefully continued better improvement with these inner lift liners that we put in with the NP 1000 that we put in.
Earlier this year and then with those screens in.
We'll be putting in their earlier in April of 2021.
Long winded answer I don't know if I gave you any any good color there, but make you want to add anything to that or yeah.
For sure.
We'll continue to use the ex pit is really a large scale pilot for the Limerick into aluminum a lot of things. So we will continue through 'twenty two to optimize the PSD and look for.
The balance between throughput and recoveries and we'll continue to learn things so that we can optimize that.
The project when we bring it to de risk that in the performance of it.
So with that we expect to see some variability through 'twenty two but overall it should be more stable now that we've got the infrastructure in place not prescreen that we'll put in in Q2.
Got it no. That's that's very good to hear and thanks for the.
Added color on that.
Maybe just one more for me.
I noticed that you didn't.
Wouldn't be taking questions on Victoria in your prepared remarks, so maybe if you could just give us an update on what your latest thinking is with that investment.
I don't remember, saying, I remember, saying that last quarter, but I'm open to that.
Okay.
Look at it.
Since may when we made that investment for I think it was $117 million.
We.
Of share consideration to Orion.
<unk> been a good investment it's up to I think current value of 160.
$1 million or so so it's <unk>.
Generating a nice return a nice gain for us.
Their stock price has increased significantly whether you look back over the last three years.
Over the last year to date, I think it's up 50%.
Almost 30% since we bought the 18% so they have.
Definitely benefited from I suppose a combination of.
That ramp up there at Eagle as well as perhaps.
Some speculation in the stock price since the.
May purchase of the 18%.
They have said publicly.
That they are running a soft process.
We're not a part of that process and despite having a.
An 18% ownership.
And a genuine interest.
We continue to view Victoria is a <unk>.
Attractive opportunity it's on strategy.
And we noted they put out some.
Some solid third quarter production results recently, so the ramp up seems to be progressing well. So those are.
At least some some thoughts in reaction to a response to year to your question does that.
Yes.
Yeah, that's great.
Thats good color thanks for that.
Maybe I'll just sneak one more quick one can we get an update on the southern Nevada property and Theres been some sort of activity in that region as well.
If you can update what the latest thinking and activities out there.
Yeah, Hans Youre still on so if I if.
I don't have anything that you want to make sure.
That we say to Ryan feel free to chime in but we'll keep drilling there.
We love our land package, we think it's great that Anglo has kind of helped to validate the.
The enthusiasm in the region there by acquiring Corvus.
That's all one big system that we're drilling on.
We will continue to prioritize the drilling but our.
Of course.
Interested in finding ways to work.
With neighbors to make the pie is big as possible to share.
Share infrastructure to do whatever we can to maximize value and we look forward to having those discussions at the appropriate time I think for now the best thing we can do is keep drilling.
I mentioned earlier.
Earlier that we'll be putting out an <unk>.
Exploration update still here this year that will contain some some new results from down there and suffice to say, we remain really excited and there's a lot a lot of potential down there. So.
It's an active area, it's probably the most exciting exploration district currently.
In Nevada, and that's a great place to be we know it well and we look forward to having that sort of become clearer.
Clearer part of our our future pipeline.
Perfect. Thanks, Thanks for that niche that's all I had thanks.
Okay. Good no. Thank you Ryan.
This concludes our question and answer with Awesome I would now like to turn the conference back over to Mitchell Krebs for any closing remarks.
Okay, well hey, thank you for all the good questions and for your time this morning.
And we will have another call like this I guess early next year I can't believe I'm, saying that and happy holiday season, due to everybody that doesn't seem right, but I guess thats, where we are on the calendar. So.
Have a safe happy and healthy holiday season, Thanks for your time today and.
Have a good rest of the day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.