Q3 2022 Golden Minerals Co Earnings Call
Operator: Greetings, and welcome to the Golden Minerals Company Third Quarter 2022 Quarterly Conference Call and Webcast. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on the telephone keypad. As a reminder, this conference is being recorded.
At this time all participants are in a listen only mode.
A brief question and answer session will follow the formal presentation.
Operator: If anyone should require operator assistance during the conference, please press star zero on the telephone keypad. As a reminder, this conference is being recorded.
please press star zero on the telephone keypad. As a reminder, this conference is being recorded.
As a reminder, this conference is being recorded.
Operator: It is now my pleasure to introduce your host, Karen Winkler, Director of Investor Relations. Thank you. You may begin.
Director of Investor Relations. Thank you you may begin.
Karen Winkler: Thank you, and welcome to Golden Minerals Company’s third quarter 2022 earnings call and webcast. On the call today are Golden President and CEO, Warren Rehn, our Chief Operating Officer, John Galassini, and our Chief Financial Officer, Julie Weedman. Following their prepared remarks, they will be available to answer questions.
Karen Winkler: On the call today are Golden President and CEO, Warren Rehn, our Chief Operating Officer, John Galassini, and our Chief Financial Officer, Julie Weedman. Following their prepared remarks, they will be available to answer questions.
Karen Winkler: Before we get started, please note that certain statements made by management today will be forward-looking within the meaning of applicable securities laws. Forward-looking statements involve known and unknown risks and uncertainties that may cause actual results or performance to be materially different from those expressed or implied by such statements. Please refer to our most recently filed Form 10-Q for details of risks and other important factors that could cause actual results to differ materially from those in our forward-looking statements.
We're looking statements involve known and unknown risks and uncertainties that may cause actual results or performance to be materially different from those expressed or implied by such statements.
Please refer to our most recently filed Form 10-Q, four details of risks and other important factors that could cause actual results to differ materially from those in our forward looking statements.
Karen Winkler: I will now turn the call over to Warren.
Warren M. Rehn: Thank you, Karen. Good morning, everyone. I'll start the call by providing an overview of the company's third quarter performance, followed by full year 2022 production guidance and several project updates. John will then take you through the quarter's operational highlights, followed by Julie, who will review our third quarter financial results and 12 months projections. After their remarks, we'll take questions from our analysts and from others who have submitted them.
Warren M. Rehn: I'll start the call by providing an overview of the company's third quarter performance, followed by full year 2022 production guidance and several project updates. John will then take you through the quarter's operational highlights, followed by Julie, who will review our third quarter financial results and 12 months projections. After their remarks, we'll take questions from our analysts and from others who have submitted them.
Warren M. Rehn: John will then take you through the quarter's operational highlights, followed by Julie, who will review our third quarter financial results and 12 months projections. After their remarks, we'll take questions from our analysts and from others who have submitted them.
Warren M. Rehn: After their remarks, we'll take questions from our analysts and from others who have submitted them.
Warren M. Rehn: In the third quarter 2022, we reported $5.3 million in revenue, $4.4 million in cost of sales and a net operating margin of just under $1 million. Lower metals prices this quarter weighed heavily on our net operating margin as we saw both gold and silver prices dropped significantly from the second quarter.
$4 4 million in cost of sales.
Operating margin of just under $1 million.
Lower metals prices this quarter weighed heavily on your net operating margin as we saw both gold and silver prices dropped significantly from the second quarter.
Warren M. Rehn: Rodeo continues to operate close to plan. However, we have seen higher cash cost per ounce of gold produced than anticipated, although slightly lower than in Q2. These higher costs are due mainly to continued higher costs of explosives and to slightly higher-than-average waste-to-ore ratios as we reach the bottom of the Phase 1 Rodeo pit.
We have seen higher cash costs per ounce of gold produced than anticipated, although slightly lower than Q2.
These higher costs are due mainly to continued higher costs of explosives and two slightly higher than average waste to ore ratios as we reach the bottom of the phase one radio pit.
Warren M. Rehn: Compared to 2021, the main driver of higher per ounce cost is the lower average head grade of material mined as has been in the mine plan since inception. For full year 2022 production guidance, we maintain our estimate for payable production of 12,000 to 14,000 ounces of gold, and we are projecting slightly higher production of silver between 47,000 and 50,000 ounces.
For full year 2022 production guidance, we maintain our estimate for payable production of 12000 to 14000 ounces of gold and we are projecting slightly higher production of silver between 47050 thousand ounces.
Warren M. Rehn: Average head grades for the full year are projected at around 2.8 grams per tonne gold, which is slightly lower than the prior 2.9 grams per tonne estimate and 10.8 grams per tonne silver, which is higher than the prior 9.4 grams per tonne estimate. Mill recoveries are expected to remain at between 75% and 80% for gold and 80% to 85% for silver.
And 10, eight grams per tonne silver, which is higher than the prior year to $9 four grams per ton estimate.
Mill recoveries are expected to remain at between 75% to 80% for gold and 80% to 85% for silver.
Warren M. Rehn: We announced last quarter that our plans to start mining at Velardeña would be delayed while we work through a modified mine plan and mining methods in order to counteract excess dilution we observed from one of the veins and the test mining we conducted earlier this year.
Warren M. Rehn: We are continuing with this work, notably continuing to study ore sorting, which shows promise and initial tests and they allow upgrading of mine material by rejecting waste using an automated system after mining and crushing. John will provide additional information about the work we are doing at Velardeña in advance of a production restart decision.
John will provide additional information about the work we are doing it better dania in advance of a production restart decision.
Warren M. Rehn: On the exploration front, in July, we finished an additional round of exploration drilling at the Yoquivo Gold-Silver project in Chihuahua State Mexico, and we are now following up on some good results on the Pertenencia, San Francisco and dollar veins to tighten up drill spacing in advance of completing and publishing a maiden resource estimate for this property. We expect to have these results for release in the first quarter.
We are now following up on some good results on the person NCS, San Francisco and dollar veins to tighten up drill spacing in advance of completing and publishing a maiden resource estimate for this property.
We expect to have these results for release in the first quarter.
Warren M. Rehn: At the Sarita Este project in Salta Province, Argentina, we completed additional drilling that was designed to follow-up on the discovery encountered in the initial 2021 drilling program. The discovery hole showed potentially economic grade gold over an interesting thickness in an oxidized near-surface intercept. In August, we reported results from this program, which confirmed the discovery hole and continue to expand on the mineralized volume. We have since completed additional drilling that brings the total since inception to 4,925 meters in 51 core drill holes. Results to-date point to a potentially economic, shallow, oxidized gold system, which is open to the south.
The discovery hole showed potentially economic grade gold over an interesting thickness and then oxidize near surface intercept in August we reported results from this program, which confirmed the discovery hole and continued to expand the mineralized volume.
We have since completed the additional drilling that brings the total since inception to 4925 meters and 51 core drill holes.
Results to date, pointing to a potentially economic shallow oxidize gold system, which is open to the south.
Warren M. Rehn: In April 2020, we entered into an earn-in agreement with Barrick Gold at our El Quevar project located in Salta province, Argentina. This past June, Barrick completed a five-hole 1,300-meter initial diamond drill program to test the highest priority targets at the property. Barrick reported vuggy silica alteration, which is commonly associated with high sulfidation epithermal and gold and silver deposits in all of the drill holes.
This past June Barrick completed a fivefold 1300 meter initial diamond drill program to test the highest priority targets at the property.
Barrick reported buggy silica alteration, which is commonly associated with highest oxidation epithem won't gold silver deposits and all of the drill holes.
Warren M. Rehn: Partial assays from the program point to high-grade gold over a narrow interval in an area that has seen very little drilling. Final assay results from the program are still pending. We expect Barrick to follow-up on these results with additional drilling in 2023.
Final assay results from the program are still pending.
We expect Barrick to follow up on these results with additional drilling in 2023.
Warren M. Rehn: I will now hand, the call over to John to talk in more detail about our operations.
John Galassini: Thanks, Warren. Our Rodeo mine produced just under 3,000 payable ounces of gold and 11,900 payable ounces of silver in the third quarter of 2022, marginally lower than the figures we reported last quarter.
Marginally lower than the figures that we reported last quarter.
John Galassini: Year-to-date, we've produced just under 9,600 payable gold ounces at cash costs per payable gold ounce net of silver credits of $1,316. We're processing at the rate of just over 520 tonnes per day and achieving around 75% recovery for gold and experiencing a slightly lower silver recovery of 78%. We are forecasting similar results for the remainder of 2022 with the exception of a slightly higher silver recovery. From inception in January 2021 through September 30th, 2022, we have produced approximately 24,000 ounces of gold and 90,000 ounces of silver at cash costs averaging $1,089 per payable gold ounce net of silver credit.
We're processing at the rate of just over 520 tons per day.
G being around 75% recovery for gold and experiencing a slightly lower silver recovery of 78%.
We are forecasting similar results for the remainder of 2022 with the exception of a slightly higher silver recovery.
John Galassini: From inception in January 2021 through September 30th, 2022, we have produced approximately 24,000 ounces of gold and 90,000 ounces of silver at cash costs averaging $1,089 per payable gold ounce net of silver credit.
John Galassini: During the third quarter, cash costs per payable gold ounce net of silver byproduct credits were lower at $1,391 as compared to $1,426 in the second quarter. Rodeo saw a significant cost increase in basic materials such as explosives and our processing facilities have also seen a substantial increase in reagent costs. Despite this, we were able to keep other costs in check and lower our cash costs quarter-on-quarter as a result of lower oxide plant processing costs, less blasting materials required for the quarter and lower administrative costs. Gold and silver head grades in the third quarter were nearly identical to the second quarter of 2022.
Rodeo saw a significant cost increase in basic materials, such as explosives and our processing facilities have also seen.
A substantial increase in reagent costs.
Despite this we were able to keep other costs in check and lower our cash cost quarter on quarter as a result of lower oxide plant processing cost.
Less blasting materials required for the quarter and lower administrative costs.
Gold and silver head grades in the third quarter were nearly identical to the second quarter of 2022.
John Galassini: Looking ahead, we continue to estimate full year 2022 average realized prices of $1,800 and $25 per gold and silver ounce, respectively, a 2022 net operating margin between $6 million and $8 million and recovery rates of around 75% to 80% for gold and 80% to 85% for silver. Given the lower head grade and higher supply costs, we've raised our full year estimate of cash cost per payable gold ounce net of silver credits to approximately $1,300 from $1,200.
2022, net operating margin between six and $8 million and recovery rates of around 75% to 80% for gold and 80% to 85% for silver.
Given the lower head grade and the higher supply costs. We've raised our full year estimate of cash cost per payable gold ounce net of silver credits to approximately <unk> hundred dollars from $200.
John Galassini: Last quarter, we announced we would be moving forward with a tailings expansion project at our oxide plant ahead of its original 2023 schedule. The tailing storage expansion at Velardena plant that processes Rodeo material has begun earlier than previously forecasted due to higher-than-planned plant throughput at the Rodeo mine this year.
The tailing storage expansion at dollar Dania plant that processes rodeo material has begun earlier than previously forecast due to higher than planned plant throughput at the rhodium mine this year.
John Galassini: We began construction activities in October. And as of November 1, we have reached 50% completion on the project. We anticipate reaching 80% completion in the next two months with final completion in late January 2023.
We anticipate reaching 80% completion in the next two months with final completion in late January 2023.
John Galassini: The work is estimated to cost around $2.2 million, $1.5 million of which we anticipate incurring in 2022 with the remaining $700,000 in the first two months of 2023. The expansion project is anticipated to provide an additional 350,000 tons of tailings storage that will service Rodeo for the remainder of its mine life. It will also service a portion of Velardena materials should we elect to restart the mine in the future.
One 5 million of which we anticipate occurring in 2022 with the remaining.
700000 in the first few months of 2023.
The expansion project is anticipated to provide an additional 350000 tons of tailings storage that will service rodeo for.
The remainder of its mine lives.
We'll also service a portion of <unk> should we elect to restart with mimo for future.
John Galassini: We're continuing to work in support of ultimately making a production restart decision at the Velardena properties. You'll recall, we announced last quarter that although the results of earlier 2022 test mining met expected productivity metrics, they did not meet anticipated dilution metrics on some of the Velardena mine, and we elected to continue evaluating modified mine plans and mining techniques and address a dilution issue before making a restart decision.
Youll recall, we announced last quarter that although the results of earlier 2022 test mining.
Matt expected.
Productivity metrics, they did not meet anticipated dilution metrics on some of the veins mined and.
And we elected to continue evaluating modified mine plans and mining techniques and address a dilution issue before making a restart decision.
John Galassini: Since then, we have continued to study alternative mining methods and began ore sorting technology evaluation. It has been determined that the resue mining method is most optimal for Velardena, and we will continue optimizing techniques to decrease dilution. In terms of ore sorting application, we have completed the first round of ore characterization testing with positive results.
It has been determined that the <unk> mining method is most optimal for Birla Dania and we will continue optimizing techniques to decrease dilution.
In terms of ore sorting application, we have completed the first round of ore characterization testing looks positive results with <unk>.
John Galassini: The second phase of testing will require bulk samples from Velardena, and we're currently determining the location and ore type that will probably represent our mine life. These samples will be utilized to determine the feasibility of the technology of Velardeña and evaluate the true value generation of this processing step. We expect to have our testing complete by February or March 2023.
Samples will be utilized to determine the feasibility of the technology at dollar Dania and evaluate the true value generation of this processing staff.
We expect to have our testing complete by February or March 2023.
John Galassini: I will now hand the call over to Julie to present our financial results.
Julie Weedman: Thanks, John. For the third quarter 2022, our net operating margin at the Rodeo mine was approximately $0.9 million from revenue of $5.3 million received from the sale of approximately 3,100 ounces of gold in Dore. While the operating margin from Rodeo in the third quarter 2022 was positive, we reported negative after-tax income of about $2.7 million. Exploration expenses were approximately $2.4 million, which included $0.6 million on cost to increase the capacity of the tailings facility at Velardeña, $0.4 million on drilling at Sarita Este, $0.3 million on drilling at Yoquivo, $0.1 million on drilling at Rodeo, and $1.0 million on other drilling and exploration. This is lower than the second quarter's $2.8 million. G&A costs of $0.9 million for the third quarter were lower than the $1.3 million in the second quarter of 2022.
While the operating margin from radio in the third quarter 2022 was positive we reported negative after tax income of about $2 7 million.
Exploration expenses were approximately $2 4 million, which included <unk> $6 million on costs to increase the capacity of the tailing facility at Belo Dania.
<unk> 4 million on drilling at <unk> at day.
0.3 million on drilling at El Cubo.
<unk> 1 million on drilling at rodeo and 1.0 million on other drilling and exploration. This is lower than the second quarter's $2 8 million.
G&A cost of 0.9 million for the third quarter were lower than the $1 3 million in the second quarter of 2022.
Julie Weedman: Expenditures in Q3 2022 for El Quevar were $0.2 million, similar to the second quarter of 2022 and are expected to continue at approximately that level going forward. Care and maintenance expense at Velardeña was approximately $0.4 million, which was higher than the second quarter of 2022.
Sharon maintenance expense at Bella Dania was approximately zero point $4 million, which was higher than the second quarter of 2022.
Julie Weedman: We expect to continue positive operating margin from Rodeo throughout 2022 and continue to forecast an operating margin of between $6 million and $8 million for the full year 2022. This assumes full year 2022 plan throughput levels of approximately 520 tonnes per day with lower grades compared to 2021 of approximately 2.8 grams per tonne for gold, and 10.8 grams per tonne for silver. This operating margin estimate assumes a future gold price of $1,800 per ounce and a silver price of $25 per ounce.
This assumes full year 2022 plant throughput levels of approximately 520 tons per day with lower grades compared to 2021 of approximately two eight grams per tonne for gold.
10, eight grams per tonne for silver.
This operating margin estimate assumes a future gold price of $800 per ounce and the silver price of $25 per ounce.
Julie Weedman: We ended the quarter with about $6.5 million of cash. Net cash flow for the quarter was a negative $3.0 million due primarily to cash used in operating activities. Spending on capital items has significantly dropped off compared to last year with only $46,000 spent during the first nine months of 2022 compared to $1.5 million spent in the first nine months of 2021. The higher 2021 figure included construction of the second ball mill added to our oxide plant.
Julie Weedman: Spending on capital items has significantly dropped off compared to last year with only $46,000 spent during the first nine months of 2022 compared to $1.5 million spent in the first nine months of 2021. The higher 2021 figure included construction of the second ball mill added to our oxide plant.
Compared to $1 5 million spent in the first nine months of 2021, the higher 2021 figure included construction of the second ball mill added to our plant.
Julie Weedman: Assuming metal prices averaged $1,800 per ounce for gold and $25 per ounce for silver, we expect our cash balance to remain between around $4 million to $6 million over the next 12 months through September 30, 2023, depending on spending on exploration projects. These projections include the $1.75 million of payments scheduled to be received from fabled through September 30, 2023. The cash projection does not assume any other forms of debt or equity financing.
Between around $4 million to $6 million over the next 12 months through September 32023, depending on spending on exploration projects.
These projections include the $1 $75 million of payments scheduled to be received from fabled.
Through September 30 of 2023.
The cash projection does not assume any other forms of debt or equity financing.
Julie Weedman: I will now turn the call back over to the operator who will take your questions.
Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. Confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions.
We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. Confirmation tone will indicate your line is in the question queue.
If you would like to ask a question, please press star one on your telephone keypad. Confirmation tone will indicate your line is in the question queue.
please press star one on your telephone keypad. Confirmation tone will indicate your line is in the question queue.
Confirmation tone will indicate your line is in the question queue.
You may press star two if you would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
One moment please while we poll for questions.
Okay.
Operator: Our first question is from the line of Jake Sekelsky with Alliance Global Partners. Please state your question.
With Alliance Global partners.
Please state your question.
Jake Sekelsky: Hi, Warren and team. Thanks for taking my questions.
Warren M. Rehn: Hi, Jake. Glad to have you here.
Jake Sekelsky: Just looking at costs, which actually decreased quarter-over-quarter, isn't something we've seen from many of your peers given the inflationary environment, so well done there. Was this a function of consumable prices coming down quarter-over-quarter, or were there other factors at play that contributed to this?
Which actually decreased quarter over quarter. It just isn't something we've seen.
Many of your peers.
Given the inflationary environment, so well done there.
Was this a function of caisson consumable prices coming down quarter over quarter.
Or were there other factors at play that contributed to that.
Warren M. Rehn: Yeah, Jake, great question. Let me just start with that, and then maybe I'll pass over to John for further color. Part of the decrease was that we had done some extra lasting and material moving in Q2, which did aid a bit in Q3 cost structure. But the other part, I think, is that the -- basically the operation was running a little bit more smoothly in Q3 than Q2, and that helped as well. I don't know John, do you want to add any color to that?
Let me let me just start with that and then maybe I'll pass over to John for further color.
Part of the decrease was that we had done some.
Xtra.
Lasting and material moving in Q2, which did a bit in Q3 cost structure.
But the other the other part I think is that the.
Basically the.
The operation was running a little bit more smoothly in Q3 than Q2 and that helped as well.
John do you want to add any color to that.
Okay.
John Galassini: Sure. We actually did see an increase in our commodities such as blasting materials, substantial increase in explosive, increase in some of our reagents at the oxide plant. But what we were able to do, as Warren mentioned we had already blasted a significant amount of our ore and material handling prior. In addition, we have really clamped down on our costs in terms of being able to run the plant in the most efficient way possible. We're bringing our reagent consumptions down to just the bare minimum and being able to maintain our recoveries. So in terms of the operating costs, we've been able to overcome some of the increase in commodity prices simply by being able to decrease the amount that we use.
Actually did see an increase in our commodities such as blasting materials.
The substantial increase in an explosive.
Increase in some of our reagents at the <unk>.
Oxide plant.
While we were able to do as Warren mentioned, we had already blasted a significant amount of our ore and material handling Pryor. In addition, we have a really clamped down on R.
Our cost.
Costs in terms of being able to.
The plant in the most efficient way possible, we're bringing our <unk>.
Our reagent consumptions down to just the bare minimum.
And being able to maintain our recoveries. So in terms of the operating costs, we have been able to.
Overcome some of the increase in commodity prices simply by.
Being able to decrease the amount that we use.
Jake Sekelsky: Okay. That's helpful. And then just switching over to, Velardena. I mean, most prices have obviously been volatile lately and they're re-bounding a bit today. But I'm just curious, has the volatility in prices caused you to slow down with any of the test work at Velardena at all, or are you still full steam ahead there?
Jake Sekelsky: And then just switching over to, Velardena. I mean, most prices have obviously been volatile lately and they're re-bounding a bit today. But I'm just curious, has the volatility in prices caused you to slow down with any of the test work at Velardena at all, or are you still full steam ahead there?
And then the rebounding a bit today, but I'm just curious is the volatility.
Prices caused you to slow down with any of the tests work related at all or are you still full steam ahead there.
Warren M. Rehn: Well, Jake, certainly the volatility has caused us some cause -- it's just not -- the risk is fairly high at the low prices we were seeing earlier this year. I had certainly expected prices -- [indiscernible] prices to recover more quickly, but macroeconomic factors have really made that not happen.
Yes.
It's just not the risk is fairly high at the low prices, we were seeing earlier this year.
I hadn't certainly expected prices precious metal prices to recover more quickly.
Macroeconomic factors.
<unk> really made that not happen.
Warren M. Rehn: We're still pushing ahead on the testing, and we just need to see some good way to control the mining dilution that we observed for us to have a good chance of making plan on production. So it did slow us down a bit, perhaps, but we're still moving forward with all the speed we can.
Good way to control the mining dilution that we observed.
For us to have a good chance of making plan on production. So it did slow us down a bit perhaps but we're still moving forward with.
All the speed we can.
Jake Sekelsky: That makes sense. That’s all for me. Thanks, again.
That’s all for me. Thanks, again.
Warren M. Rehn: Thank you, Jake.
Operator: Thank you. Our next question is from the line of Heiko Ihle with HC Wainwright. Please proceed with your question.
Our next question is from the line of Heiko.
With H C Wainwright.
Please proceed with your question.
Marcus Giannini: Hi, everyone. This is Marcus Giannini calling in for Heiko. Thanks for taking our questions. In regards to the course at Velardena, can you provide us with a bit of color in terms of the system you plan on using, how successful the tests have been so far, and if there's any mines where the system you're considering are currently actively being used sort of as an analog comparison?
In regards to the ore at.
Bill or Daniel.
Can you provide us with a better color.
In terms of the system you plan on using <unk>.
How successful it has it been so far.
Any mines, where the system youre considering.
Currently actively being years and that sort of as an analog for comparison.
Warren M. Rehn: I'll just hand that question over to John, if you don't mind, John. I think you would have more detail on that.
Warren M. Rehn: I'll just hand that question over to John, if you don't mind, John. I think you would have more detail on that.
And do you have more detail on that.
John Galassini: Yes, sure. Thanks for the question, Marcus. We're looking -- we're working with Metso Outotec right now with our initial testing. They've -- and there's other manufacturers as well, but their technology has grown leaps and bounds within the last few years. The system is based on sensors, a number of sensors, including near infrared, X-ray transmission, electromagnetic, other things and the processing speed of the computers and infrastructure to run it has grown tremendously as well, making this a much more viable technology than it was even 5, 10 years ago.
Thanks for that.
Question Markus we're looking we're working with.
Mezzo Auto Tech right now with our initial testing.
David.
And theres other manufacturers as well, but the technology has grown leaps and bounds within the last few years.
The system is based on sensors.
Number of sensors, including near infrared X Ray.
Transmission electromagnetic other other things in.
And the processing speed of of the.
Computers, and an infrastructure to to run at <unk> has grown tremendously as well, making this a much more viable technology than it was even 510 years ago.
John Galassini: So we're working with them. We've sent our first samples off to Germany for ore characterization more than anything else, nothing -- we have not performed any sorting test yet, as I mentioned on the call. We're just now collecting those samples to rather large bulk samples that will be utilized for this testing. Basically, what this does is reduces the dilution. You increased the head grade that you see going to the mill, which in turn, reduces your overall cost, you use a lot less energy, you're milling less ore, less water, it goes on and on. So in terms of other mines that are utilizing this, we're putting a list together now to potentially visit some of those places.
And our first samples off to Germany for ore characterization more than anything else lapping.
We have not performed any sorting tests, yet as I mentioned on the call.
Just now collecting those samples are rather large bulk samples that will be utilized for this testing.
Basically what this does is reduces the dilution.
Kris the head grade that you see going to the mill, which in turn reduces your overall cost us a lot less energy, you're milling less or less water. It goes on and off so.
And in terms of other mines that.
We are utilizing that.
We're putting a list together now to potentially visit some of those places.
John Galassini: A couple of mines -- one that comes to mind is San Sebastian there in Mexico. They utilized this technology back when it was still an order of magnitude less in terms of the optimal way to operate it. They didn't have the newer technology, the newer sensors and certainly not the driving power of the computers behind it. So we're doing a lot of studies and looking into the feasibility of it here. We have a lot of hope for it, but we'll see how this turns out after we go through the actual sorting test itself.
In Mexico. They utilize this technology back when it was still an order of magnitude.
Les in terms of.
Yeah.
The optimal way to two operated.
It didn't have the newer technology, the newer centers and certainly not the driving power the computers behind it so.
We're doing a lot of.
Ah studies and and looking into the.
Feasibility of it here, we have a lot of hope for it but we'll see how this turns out after we go through the actual sorting tests itself.
Marcus Giannini: Okay. Awesome. Still sounds like it's pretty early days, but looking forward to those results. And then just for clarity, the $4.3 million on total exploration and property holding costs, do you have any idea as to how much inflation is now in way the number of meters you're drilling? I guess, I'm asking a bit differently, what are you currently seeing with drilling costs by asset in Q4? And what do you anticipate seeing next year? I'm not sure how much negotiation is already happening in that regard?
And then just for clarity of that $4 3 million on total exploration.
Operations and property holding costs.
Any idea.
How much inflation at nine way at the number of meters are drilling I guess im asking a bit differently. What are you currently seeing with drilling cost by asset.
In Q4, and what do you anticipate seeing next year Im not sure how much negotiation is already happening in that regard.
John Galassini: Yes. Thanks, Marcus. The exploration costs in Mexico for diamond drilling have stayed fairly steady for us. We're seeing, obviously, an increase in fuel costs and some upward pressure on labor costs in Mexico, but our actual drill contract, the contracted amounts have remained constant in Mexico, mostly because the operator is so good at maintaining control of costs. I do expect we'll see some increased costs next year as this works its way through the system. I don't expect them to be at the level that we're seeing of general inflation. I think they'll be somewhat subdued.
The exploration costs in Mexico for Diamond drilling has stayed fairly steady for us we're seeing obviously the increase in fuel costs. And some upward pressure on labor costs in Mexico, but our actual drill contract contracted amounts have remained constant and Mexico. Mostly because the operators so good at maintaining. Control of costs I do expect we'll see some increased cost next year. As this works its way through the system, but I don't expect them to be. At the level that we're seeing general inflation, I think there'll be somewhat subdued.
And some upward pressure on labor costs in Mexico, but our actual drill contract contracted amounts have remained constant and Mexico.
Mostly because the operators so good at maintaining.
Control of costs I do expect we'll see some increased cost next year.
As this works its way through the system, but I don't expect them to be.
At the level that we're seeing general inflation, I think there'll be somewhat subdued.
John Galassini: And that's to the credit of the contract that we're using more than anything else. So we are looking around and negotiating, but we have a good relationship with the contract driller and he's able to maintain costs to the levels that really don't affect the number of meters that we drill. In Argentina, it's a bit of a different story. Argentina inflation has been extreme, as I'm sure you're aware. And so we have had some upward pressure on costs there, but still quite reasonable. I don't think the change in cost to us of drilling has increased more than about 10% to 20% in Argentina, and that's in an environment where inflation is running at 70%, 80% on an annual basis.
To level set.
Really don't affect the number of meters that we drill in Argentina is a bit of a different story, Argentina inflation has been.
Stream as I'm sure you're aware and so we have had some upward pressure on costs here, but still quite reasonable I don't think the.
The change in cost to us of drilling has increased more than about 10% to 20%.
Argentina, and that's in an environment where.
Inflation is running at 70% to 80% on an annual basis.
John Galassini: In part, that's because of the strength of the US dollar. So we're looking at this in US dollar terms, not in Argentinian peso terms. So up to date, we've been able to maintain are metered in the drilling at cost very close to what we had seen prior to the kick in of inflation, but we will see some effects going forward.
So we're looking at this in U S. Dollar terms not in Argentinean peso terms, so up to date, we've been able to maintain our meterage and the drilling costs.
Costs at very close to what we had seen prior to the kick in of inflation, but we will see some effects going forward.
Marcus Giannini: Okay. Awesome. Yes, thanks for the color there. I'll hop back in queue.
I'll hop back in queue.
John Galassini: Thanks, Marcus.
Operator: Thank you. Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad.
Operator: Our next question is from the line of Sid Rajeev from Fundamental Research Corp. Please proceed with your question.
Fundamental research call.
Please proceed with your question.
Sid Rajeev: Hey, good morning everyone. Jake mentioned, you are also pleased to see cash costs declining, especially since your grades were similar and everyone else is reporting higher costs. So it was very nice to see that. And I think based on your $1,300 per ounce for the full year estimate, it seems like Q4 costs might be even lower. But yes, that was good to see that. But in terms of Velardena, is it fair to assume that a production decision might be by mid next year, or are you looking at second half?
Jake mentioned, you are also pleased to see cash costs declining, especially since your grades were similar and everyone else is reporting higher costs. So it was very nice to see that. And I think based on your $1,300 per ounce for the full year estimate, it seems like Q4 costs might be even lower. But yes, that was good to see that. But in terms of Velardena, is it fair to assume that a production decision might be by mid next year, or are you looking at second half?
Everyone else is.
Higher costs. So it was really nice to see that and I think based on your own 1500.
Per ounce for the full year estimates it seems like Q4 costs might be even lower.
But yes.
That was good to see that but.
In terms of Anadenia is it fair to assume that.
A production decision might be.
Mid next year we're.
Looking at second half.
Warren M. Rehn: Yes. Sid, thanks for the question. No, it really depends on how quickly these ore sorting tests come together for us. I think midyear is probably the most obvious timing for the decision. And assuming that we don't have any setbacks in trying to control the dilution problem. I think that the ore sorting looks very promising. As John pointed out, I think what we should be well placed to be able to make a decision halfway through the year. So call it by the end of Q2.
Thanks for the question.
It really depends on how.
Quickly these ore sorting tests come together for us.
I think oh. Mid year is probably the. Most. Obvious timing for the decision. Assuming that we don't have any setbacks and trying to control the dilution problem. The ore sorting looks very promising as John pointed out.
Mid year is probably the.
Most.
Obvious timing for the decision.
Assuming that we don't have any setbacks and trying to control the dilution problem.
The ore sorting looks very promising as John pointed out.
I think we should be well placed to be able to make a decision.
Halfway through the year, so call it by the end of Q2.
Sid Rajeev: And if the decision is positive, are you able to move to production within six months?
Are you able to move to production within six months.
Warren M. Rehn: We can – yes, and we can start production right away. The question will be the construction of the BIOX plants, which is required to have the full economic benefits of the production. However, we would, once we have that decision made, and have started, we can start production and stockpile the pyrite concentrates according to the plan we have in place anyway, until the BIOX plant would be completed. So, the main obstacle there is just financing for the BIOX plant and we're still looking at the total capital cost that that will entail. We had some decent estimates, but of course, they have been affected by inflation and I expect the cost to go up. But at any rate, we would be able to start production early, be able to sell lead concentrates with silver into the market after start-up, but we wouldn't have the full operation at optimal production and income until after the BIOX plant was completed, which process will take about a year from the decision point.
The question will be the.
Construction of the <unk> plants.
Which is required to have the full economic benefits of the production.
However, we would.
Once we have that decision made and have started.
We can start production in stockpile the pyrite concentrate.
The plan, we have in place anyway until the <unk> plant would be completed.
So the main obstacle there its just financing for the box plant.
And we're still looking at the.
Total capital costs at that will entail and we had some decent estimates but of course as they have been affected by inflation and I would expect cost to go up.
Warren M. Rehn: But at any rate, we would be able to start production early, be able to sell lead concentrates with silver into the market after start-up, but we wouldn't have the full operation at optimal production and income until after the BIOX plant was completed, which process will take about a year from the decision point.
So our lead concentrates.
With silver into.
Into the market after startup, but we wouldnt tell the full operation at optimal production.
Income until after the <unk> plant was completed which process will take about a year from the decision point.
Okay.
Sid Rajeev: Okay. Now, for the new plant, how much CapEx -- I know it's kind of a moving piece, how much CapEx you're looking at. We are modeling $4 million to $5 million new money plus your OpEx cash from operations. Is that a fair assumption?
How much Capex I know, it's kind of moving.
How much capex youre looking at.
Modeling $4 million to $5 million, new money plus your opex cash from operations is that a is that a fair assumption.
The.
The last well.
Warren M. Rehn: The less solid cash, our capital estimate I had for the BIOX plant was about $10 million, and so I think you're in the ballpark with that, Sid. But we do expect upward pressure on that capital spend for the plant itself, and just haven't determined exactly to what point that's going to take us. So before we make the decision obviously, we would have a much more detailed capital quote in place that would encompass all the increases due to the inflation up to that point.
It was about $10 million.
And so I think youre in the ballpark with that said.
But we do expect upward pressure on that on that capital spend for the plant itself and just haven't determined exactly to what points.
Going to take us so before we make the decision obviously, we would have a much more.
Detailed capital quote in place.
That would encompass all the increases due to inflation up to that point.
Sid Rajeev: Okay. Just two more questions on the other projects, Yoquivo maiden resource coming out next quarter, anything you can talk about that? What are you expecting? And will you move to a PEA after that?
Questions on the other projects will made in lease was coming out next quarter.
Anything you can talk about that what are you expecting and really move to a P. After that.
Warren M. Rehn: Yeah, I think it should be a pretty easy move to PEA. We're expecting an interesting project with robust grades. We've only drilled out and are focusing on one of the vein systems of four to five total vein systems on the property. So we know we can expand – we will be able to expand in the future on the initial maiden resource. I just want to put a – get a starting point, and show the sorts of grades that might be possible for the entire project in the main resource. And we'll be able to move fairly quickly, I think, to PEA level estimates based on the initial resource and go from there. It will look attractive. It's just a matter of getting that independent review of the resource out there, before we actually talk about hard numbers.
We're expecting an interesting project with robust grades.
We've only drilled.
Drilled out and they're focusing on one of the vein systems of four to five total vein systems on the property. So we know we can expand.
We will be able to expand in the future on the initial maiden resource I just wanted to.
Good starting points and show the sorts of grades that might be possible for the tire entire project in the maiden resource.
We'll be able to move fairly quickly I think to PPA level estimates based on the initial resource and go from there. It will look attractive said, it's just a matter of.
Getting that independent review of the resource out there before we actually talk about hard numbers.
Yes.
Multiple speakers: [Sid Rajeev] Okay. So, can we assume that you would move to PEA right away, or are you going to update after that before the PEA? [Warren Rehn] My hope is to move to PEA right away next year. So, I don't think it will take us much time to get the costs estimated for the PEA level study.
My hope is to move to Pega right away next year. So I don't think it will take us much time to get the cost estimated for the PPA level study.
Let's say.
Multiple speakers: [Sid Rajeev] For Sarita Este are you close now that with these recent drill programs are ready to update the existing resource? [Warren Rehn] So we haven't announced a resource at Sarita Este yet. And we're probably ways away from that. We're still waiting for drill results from this latest round that we just finished up in October -- base round of drilling. So once we have that in hand, we'll take a look at it internally and see if we should go ahead with a resource estimate then or whether it would be worthwhile waiting for one more round of drilling before we see the obvious limits of some of that mineralized volume, at least where we can get toured on Sarita Este. So I think we're a little ways away from actually bringing that into a resource report -- main resource report. But next year is looking likely to me.
The lease and rental programs.
Update the existing resource.
So we haven't we haven't.
Announced a resource at Siri to Este yet.
We're probably a ways away from that.
Waiting for.
Drill results from this latest round that we just finished up in October .
The latest round of drilling so once we have that in hand that will take a look at it internally and see if we should go ahead with a resource estimate then or whether it would be worthwhile waiting for one more round of drilling.
Before.
We see the the obvious limits of some of that mineralized volume at least where we can get to it I am sorry to SD.
So I think we're a little ways away from actually bringing that into a resource.
Report main resource report.
But next year is looking likely to me.
Sid Rajeev: Alright. Thank you so much. Appreciate it, Warren.
Warren M. Rehn: No. Thank you. Thank you, Sid.
Yes.
Operator: Thank you.
Operator: As a reminder, please press star one on your telephone keypad to ask a question. If you would like to ask a question, please press star one on your telephone keypad.
Press Star one on your telephone keypad to ask a question.
If you would like to ask a question. Please press star one on the telephone keypad.
Operator: There are no further questions at this time. I would like to turn the floor back over to Karen Winkler, Director of Investor Relations for closing comments.
I would like to turn the floor back over to Karen <unk> director of Investor Relations for closing comments.
Karen Winkler: Thanks to everyone for joining. And this concludes our call today. We look forward to talking with you again next quarter. Have a good day.
Operator: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Yeah.
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