Q1 2023 Torex Gold Resources Inc Earnings Call
[music].
Thank you for standing by this is the conference operator.
Welcome to the Toric <unk> Gold Resources, Inc. First quarter 2023 results conference call.
As a reminder, all participants are in listen only mode and the conference is being recorded.
After the presentation, there will be an opportunity to ask questions.
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I would now like turn the conference over to Dan Rollins Senior Vice President Corporate development and Investor Relations. Please go ahead Mr. Owens.
Thank you operator, and good morning, everyone.
On behalf of the torch team welcome to our Q1 'twenty <unk> three conference call.
Before we begin I wish to inform listeners that the presentation accompanying today's conference call can be found under the investors section of our website at Www Dot parks gold Dot com.
I'd also like to note that certain statements to be made today by the management team may contain forward looking information.
As well as those included in the Q1 2023 MD&A.
On the call today, we have Jody <unk>, President and CEO , Andrew Snowden, CFO as well as Dave Stefan NATO Executive Vice President Technical services and capital projects.
Following the presentation Jodi, Andrew and Dave will be available for the question and answer period.
This conference call is being webcast and will be available for replay on our website.
Last night's press release, and the accompanying financial statements and MD&A are posted on our website and have been filed on SEDAR.
Also note that all amounts mentioned in this call are U S dollars unless otherwise stated.
Now I'll turn the call over to Jim.
Thank you Dan and good morning to all on the line welcome to the Tor, It's Cold Q1 2023 results call.
Most of my remarks by saying that we delivered another strong quarter, which puts us on solid footing to achieve our production and cost guidance. In 2023 opening highlights include with the site team. They delivered a strong production results driven by record throughput in the mill and another record quarter from our E. L D Undergrounds.
Our project team made steady progress on the development of media Luna, which continues to track to schedule and budget and we also released our updated mineral reserve and resource statement in the quarter, which saw US replace the majority of reserves mined in 'twenty to 'twenty, two as well as add materially to our resource base.
In terms of the agenda for the call it'll be the same as usual I'll provide a brief reminder of our strategic pillars, which continued to frame. Our execution plan then I'll step you through the key business and operational highlights specific to the first quarter then over to Andrew Snowden to provide a review of the financials and then David Stefanie will provide a progress update on meta.
Luna and then I'll close off with an overview of our year end reserve and resource update and a bit of an update on the status of the new Mexico mining laws. Then we will open up the call for questions from our listeners.
Starting on slide four this is a review of our strategic pillars, which set out the long term vision for Tarek <unk>. Our strategy remains unchanged and you can see on this slide the five key areas of focus as we make our way through 2023.
On optimize and extend E. L. G. The year end reserve and resource update with a key indicator of the ongoing success of the external portion of this plan with reserves update it with reserves replaced in the ELT underground and an additional 240000 new ounces added in the EOG open pits.
On de risking advanced media Luna the project is tracking to schedule and budget, we passed the four kilometer mark in the Whitehouse tunnel and executed purchase orders for the primary underground mining fleet, we're very much looking forward to showing all of the progress. We've made on the project to some of you in person next week, when we host our AD.
A list visit.
On grow reserves and resources are good success with our drilling and exploration program. In 2022 is shown up in our MRM, our update which I will take you through at the end of the deck.
And prudent capital management, we remain in solid position to fund the development of media Luna at.
At the end of the quarter, we had $683 million left to spend on the project against available liquidity of $564 million.
This combined with ongoing free cash flow from E. L. G. We're feeling very competent and confident about the balance sheet.
On ESG excellence as announced last week, we entered into a sustainability related loan with our existing lenders essentially just adding some sustainability targets and incentives for hitting those targets inside the context of our existing credit facilities.
Turning now to slide five.
We delivered record production of 123000 ounces during the quarter delivered by record throughput in the mill and another quarterly record established at E. L. G underground.
The strong production performance underpins strong cost performance with an average all in sustaining cost margin of 42% delivered in the quarter.
Adjusted EBITDA was $133 million driven by a realized gold price of almost $1900 per ounce.
Cash flow from operations was $47 million, which reflects seasonal tax and royalty payments primarily related to fiscal 'twenty two.
The seasonality in cash flow is well known to those who followed towards some per usual you can expect operating cash flow to again be strongest in the second half.
Turning now to some operational highlights on slide six I've already talked about the top left out of 123000 ounces top right. Our new record milling rates of 13073 tons per day was achieved during the quarter driven by a real focus on maintenance practices.
The bottom left processed grade was down very slightly during the quarter as we processed some lower grade stockpiles and finally on the bottom right. You can see we delivered another record quarter on the underground mining front hitting more than 1700 tonnes per day on our way to that targeted 1800 tons per day by year end.
Moving to slide seven we're well on track to achieve full year production and cost guidance or as an important note here there'll be some quarter on quarter movement. This year. So it's not appropriate to take the Q1 production results and multiply by four.
Or to assume that cost delivered in Q1 will continue at the same level throughout the year.
We expect production in Q2, and Q3 to be softer towards the bottom end of the quarterly range implied by annual guidance and then it'll pick back up again in Q4.
There are a couple of reasons for this were the cleaning the wash has pitch this quarter. It's at the very end of life at the end of May and mine sequencing and the early mall and early more sore pits well see an extended period of elevated waste stripping as we move ahead with the planned pushback in both pits supported by the additional reserves announced last year.
The knock on cost implications here that with planned lower production levels and increased waste stripping over the next two quarters. Both total cash costs at <unk> in Q2, and Q3 are planned to be above the upper end of the full year guided range I want to emphasize that things are expected to return to more normal levels in Q4.
Our production costs will be closer to what we saw in Q1, setting us up to achieve to achieve production and cost guidance for the full year.
Turning to slide eight we recently announced that we entered into something called the sustainability linked loan modifying our existing credit facilities to include incentive pricing terms with respect to interest rates associated with achieving various charges and the categories of safety performance.
The net change in alignment with the World Gold Council responsible gold mining principles really just a financial reward for executing on the work we plan to do anyway.
With respect to safety, we had three lost time injuries during the quarter, all amongst or contractors working at the site all fairly low severity to finger injuries that a fractured risk.
With an increasing level of contractors at the media Luna project now over a thousand person Mark our team has really redoubled their efforts to ensure that everyone at site contractors and employees alike adhere to our safety protocols safety culture and manage risk to our standards and on this note I'm very pleased to report that we had no lost time injuries.
April .
Now I'll turn the call over to Andrew to speak to the quarterly financial performance.
Thanks, Jody and good morning, everyone.
As you can see here on slide 10-Q, one was another remarkable financial quarter for Torrance with the benefits of strong production and sales volume.
Record mill throughput.
The proportion of capitalized waste stripping all reported total cash costs in the quarter was $709, an ounce, which was better than the lower end of the guided range for the year.
Our all in sustaining costs of $1079 an ounce came in at the low end of the guided range supported the generation of $133 million of adjusted EBITDAR in the quarter.
I've noticed by Jodi earlier in the call. This guidance be turn costs are not expected to continue through the year as we expect that during Q2 and Q3, both TTC and ASIC will be above the upper end of the guided range before declining in Q4 as production increases and waste stripping.
Declines.
That being said, we do remain confident we can deliver on our <unk> guidance you gave in 2023.
Do you want to highlight though that the key headwind we are facing right now is less about inflation and more about the strength, we've been seeing in the Mexican peso.
Our planning for 2023 was based on an assumed piece of U S. Dollar exchange rates of 21.
As the average we saw in Q1 was $18 seven to one and this negatively impacted our operating costs in the quarter by about $3 million.
I mean, if you kind of think about the impact of the peso in our full year cost performance for the full year. Each one peso variance and exchange rate, we will have about a $10 million impact on operating pulse, that's about roughly $20 an ounce.
On our cost profile.
And just to provide put back into interest in broader context, our Mexican peso.
The expenditure represents about 50% of all in sustaining costs.
Moving back to our financials, our reported earnings per share was <unk> 79 cents per share in Q1, which benefited from a number of items I just briefly wanted to touch on.
Firstly, we benefited from a $24 million gain and deferred income taxes and that was due to the stronger peso on the value of our peso type space.
In addition, we also recognized a one off $15 million of current income tax gain related to a reassessment of provisions for uncertain tax positions.
Yes.
And finally, we benefited from the higher interest rates on our substantial cash balance during the quarter, recognizing it's $4 million of interest income here in Q1.
Partially offsetting these gains was a 27 billion.
The unrealized loss on our forward those contracts given the highest well with price at quarter end.
And after adjusting for a number of the items I just referenced our just our adjusted diluted EPS in Q1 came in at <unk> 58 per share.
Our net cash generated from operating activities was $47 million during the quarter noted when we reported our Q1 operating results in mid April was impacted by seasonal tax and royalty payments primarily related to fiscal 2022.
The impact of these seasonal payments combined with increased spending on media Luna resulted in negative free cash flow of $54 million in Q1.
And with the elevated level of media Luna capital plan through the balance of 2023 and into the first half of 2024, we do expect free cash flow to continue to be negative over the next several quarters.
Okay.
Turning now to slide 11, we wanted to provide a bit more context on our 2023 Q1 cost performance.
Just working down the chart you see on slide 11, Firstly on mining costs. These were higher during the quarter compared to last year, given the increased stripping in the pit as well as a greater amount of stockpile handling relates to blending in the mill and the lower run of mine feed delivered from our pits.
On the underground mining costs. These were down modestly year over year with record underground mining rates, providing economies of scale.
Uh huh.
And then on processing higher costs, primarily reflect the increased consumable costs, reflecting annual pricing established late last year.
Rhinitis assumption is consistent with prior quarters at about two five kilograms of tenable.
And finally on profit sharing this is slightly down versus 2022 with the main difference, reflecting an adjustment related to a 2021 PTU, which was recognized in Q1 of last year.
With a stronger peso, though cost management to continue to be a focus but we are continuing to actively review costs.
In order to provide some relief if the peso were to remain at these levels through the balance of the year.
Yes.
While we are discussing cost I do also just want to quickly point out there is a new line item you may have noticed in our <unk>.
Some statements in Q1 labeled other expenses.
This new line item will report on certain one off expenditures, we will be incurring in 2023, and 2024 to provide transparency and this relates to an ERP enterprise resource planning tool implementation, which we are undertaking across the company and also some trailing costs related to operational.
Readiness for media Luna both of them both of these costs cannot be capitalized under accounting rules due to that nature.
We expect these costs will total approximately $9 million through the course of 2023.
Yeah.
Next turning to slide 12, you'll see here, our cash balance declined by about $54 million during the quarter and as you can see from the waterfall. This was primarily driven by seasonal tax and royalty payments and increased capital spending primarily related to media Luna.
During the quarter, we made over $76 million of tax payments and this included the annual payment on the seven 5% royalty.
$1 billion annually.
I don't know that they shouldn't we made $10 million of other royalty payments, including the annual payments on the 0.5% royalty of about $5 million and that was paid in Q1.
As a reminder.
Half the first half of the year is always a period of lights of cash flow to which these tax and royalty payments in Q1 and also due to the annual profit sharing or PTU payment that we're making in Q2, we actually just made the most recent annual payment last week announced a $30 million if youll see that show up in our Q2.
Cash results.
More information on cash flow seasonality has been included in the appendix of today's presentation.
Just as a reminder, I just want to highlight.
Find the group of just a few items just to expect since lookout full through the course of 2023, Firstly monthly tax installments you can expect they will continue at current levels. You saw in 2022, and so that will approximate between $6 million to $7 million a month.
Accounting depreciation will also be consistent with 2022, we expect the range back to be between $1 $75 million to $200 million and are currently trending towards the upper end of that range.
And then depreciation for tax purposes are expected to approximate $100 million in 2023.
And so with a lower tax depreciation compared to accounting depreciation that without the reason for an increase you can expect to see in our deferred tax asset balance, which will increase through the balance of the year.
Turning now to slide 13. The next few slides are really just focused on the strength of our balance sheet and you can see here. The our balance sheet remains on solid footing with $322 million of cash at quarter end and no debt beyond small some small leases we have in place.
Including the $242 million of available credit on our terms and revolt term and revolving credit facilities, we exited the quarter with $564 million of available liquidity.
I do want to highlight here that would all lease liability will start to increase from Q2 through to the end of 2024 as we are executing on a plan that was included in our feasibility study to lease the mobile equipment required for media Luna operations.
The first 6 million installment payment on this equipment was made by the lessor earlier this month and you'll see that be reported in our Q2 balance sheet.
Just turning now to slide 14, you can see here, how the strong balance sheet comfortably supports our ability to fund the remaining media Luna project capital.
This slide highlights our goal of $783 million and required liquidity to both be able to fund the remaining $693 million of media Luna capital spend while achieving our strategic goal of maintaining a minimum $100 million of liquidity on the balance sheet.
The cash balance we have on hand at the end of the quarter and the availability. We currently have on our credit facilities with fund $564 million of this requirement, leaving only $219 billion of liquidity to be generated from our E. L. G operations over the next 24 months.
To put that in perspective based on our current run rates of generating almost $300 million of free cash flow from LG over the past 12 months you can see we have lots of comfort and supported with funding requirement.
This cash flow generation from EOG is also further supported by a gold price hedge program you can see summarized on slide 15.
Just as a reminder, this hedge program is purpose built to provide additional protection during the build out of media Luna.
First half of 2024.
Our gold price hedge program based on these hedges is now complete and I don't expect we will add any further so it's.
Gold hedge book.
During the quarter, we realized a $500000 gain on these forward contracts, which contributed $5 an ounce to the realized gold price.
We also recognized $27 million that I referenced earlier and unrealized mark to market losses on these contracts during the quarter and that was due to the prevailing gold price at March 31 on the forward curve.
But youll see Thats included in our Q1 income statement.
With that I'll now turn the call over to Dave <unk>, who will provide an update on the media Luna project.
Thanks, Andrew.
Slide 17 shows the progress at media Luna. After the first 12 months of a 33 month build period. The high level takeaway here is that the project is tracking to budget and schedule and our first concentrate production in Q4 of 2024 at quarter end. The project was 24% complete overall considering procurement engineering.
Underground construction and development and surface construction, while the completion rate is behind the level in the 2022 technical report the delays are related to non schedule critical procurement and.
Deliverables and the fact that we have built an additional cushion into the original schedule to mitigate supply chain issues as we finalize the schedule in late 2021.
Both engineering and procurement rates picked up as we issued a number of scheduled critical purchase orders such as our primary underground mining fleet, consisting of a mix of battery electric and diesel equipment positive displacement pumps and filter presses for the paste plant gravity concentrator and filter press for the copper concentrate facility and.
Our reverse osmosis unit for the water treatment plant.
Subsequent to quarter end, we awarded the agreement to supply our underground mining support equipment and just this week issued the purchase order for the personal transportation equipment. We're also about to award the contracts for both underground construction in vertical Allomap development.
Underground development is kept pace during the quarter with 18 active headings in media Luna Upper we have commenced development of the footwall drift at one of the first production levels.
Civil works in preparation for construction activities on the North side also progressed and are tracking to forecast following an initial slow start out of the gate.
Earth works for the new water treatment plant and 230 kilovolt substation are well advanced.
During the quarter, we spent over $66 million in the development of media Luna, bringing the total invested during the project $3 million to $191 million.
At quarter end, we had incurred 22% of the project expenditures and had additional commitments in place of 12%.
The committed and incurred levels to 34%.
The actual spend in Q1 was lower than what we had forecast heading into the year given the number of purchase orders were issued late in the quarter as were a number of invoices from contractors and vendors and a slightly slower ramp up from our surface construction early in the quarter with surface and development activities ramping up month week, we expect to see project expenditures climbed throughout the year.
The underground is not a result of productivity issues or performance delays with our underground contractor.
Overall, we are on pace to achieve the guided expenditure of $390 million to $440 million per year.
Slide 18 provides an updated on the critical schedule quite as tunnel.
In short tunnel advance rates continue to be exceptional from north south with advance rates from south to north improving materially over the last few months now that we're developing and the whole screen a diet rate, which is a very competent rock compared to the shale and limestone litho mythologies, we encountered last year.
At the end of April the main white as tunnel had advanced over four kilometers having delivered an average daily advance rate of seven meters per day.
South portal lower had advanced over one eight kilometers with the main spiral decline ramp on track to be completed towards the end of June advanced rates materially improved averaging four three meters per day over the last three months versus $3 eight meters per day last year and of note. We achieved five one meters per day during April our run rate, which is may.
Entail so far through me.
Last week, we safely broke through the west at advent, which you can see as denoted in the picture as ventilation tunnels.
Overall, the scheduled critical wireless tunnel is on schedule for breakthrough in early Q1, if not sooner.
Turning to slide 19, some recent pictures of the project on the left you can see a portion of the widest tallow, which participants on the tour. We will see next week is not only being driven at world, beating rates, but being done safely with quality.
In the Middle top is the recent breakthrough of the west added that tunnel beside that as a picture of the paste plant pad, which is being cleaned up to commence concrete pad pouring starting at the west side with our backup generation facility.
In the bottom is the first monthly safety alert held that site the safety alerts our way of reinforcing our best safety practices with our frontline workers reminding people of the importance following procedures properly being aware of one surroundings and ensuring that everyone. At site is responsible for safety. So speak up when you see an unsafe work practice with that.
I'll turn the call back over to Jody, who will close with a review of the successful year, we had on the drilling front from 2022, Thanks, Dave and Andrew.
The next couple of slides are really just highlighting the success of the 2022 drill program and step you through the results of our reserve and resource update this year.
On the reserve brands, we were able to replace more than 60% of reserves depleted last year, notably at EOG underground, we replaced more than 100% of gold equivalent reserves mined.
Selling successfully altimo pets added 190000 ounces of gold equivalent reserves. This is the or we're chasing with that pushback, where now stripping four. Additionally, our small optimization of the L. M onshore pit added 50000 ounces.
Recall that the pet additions or for the purpose of ensuring that we have a production plan that has a comfortable degree of overlap between the pits coming off and media Luna ramping up in 2025.
The final note here and I think it's important is that the change in reserves was driven by drilling the gold silver and copper prices used to estimate reserves remain unchanged.
Turning to slide 22, you can see we've had more success on the resource side drilling brought in close to 1.1 million ounces of gold equivalent measured and indicated resources prior to depletion. So that's a 16% increase year over year. If you think about it after depletion that 8%.
The resource additions came across multiple fronts at Epo infill drilling resulted in an initial indicated resource of 670000 ounces, but the benefits of higher grades from the inferred resource.
At media Luna, another 275000 ounces of gold equivalent resources were added primarily as a result of holes drilled back in 'twenty, one where we received assays. After the cutoff date for the 2022 technical report.
Drilling at EOG underground added 192000 ounces of MNI resources with drilling delivering new mining fronts that we're pretty excited about at sub sill. So in early March sewer deep.
Similarity of the case with reserves the metal prices used to estimate resources remain unchanged.
Turning now to slide 23, just a reminder, and an update on our drilling plans for this year drilling of the EOG underground and near mine targets is well underway and you can expect to have an update on those results later on this year.
Drilling at Epo has commenced for the year, but the program is focused really in two parts.
The first part of infill drilling as we look to upgrade additional resources to indicated to support an internal study to evaluate the potential to develop a new mining fronts that Epo. We're targeting this zone as a source of feed for our fill the mill work post 2027.
The second part of the program is focused on step out drilling to the north of Epo results from this part of the program are also likely to be released later on this year.
And Additionally, we're starting to we're looking to start wide spaced drilling targeting scarring mineralization in the area between EPL and many Luna West we're anxious to get there. We're just waiting on some permits to be received.
Before handing the call back to the operator for Q&A I will make some final comments on the recent changes to the mining law in Mexico, there's been much in the mining news about the iterations and evolution of the laws and their implications and I wanted to start here by emphasizing that the situation is fluid.
There were various drafts of the reforms and the process by which they were ultimately passed by the Senate is also expected by many to be the subject of legal challenges.
Based on our understanding today, the proposed changes to concession terms only impacts new concessions.
So trucks are pretty well positioned here as our concessions have terms of 40, but predominantly 50 years and expire in either 2040, but predominantly 2055, the largest concession we have which covers all of EOG in media Luna has an expiry date in 2055.
The reforms also address water concessions and water permitting again <unk> is pretty well positioned here, even with the addition of many alumina water needs as we have approval to drop 5 million cubic meters of water per year and today draw approximately 1 million cubic meters of water per year, so lots of room there for growth.
The other areas of focus for the amendments include payments to community.
Guarantees for asset retirement obligations no different from any other jurisdictions in the world and indigenous consultation framework.
Generally speaking it appears as though the bill in its current form may impact junior exploration and development companies more than established producers like us.
As I said there is much left to be clarified the story is not yet written and we look forward to continued dialogue with the government as bylaws and operating protocols are written over the coming months and years in the meantime, we just continue to do what we're doing and delivering value at marella.
With that I'll pass the call over to the operator and open the floor for questions.
Thank you we will now begin the question answer session.
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We will pause for a moment as callers join the queue.
The first question comes from Wayne Lam with RBC.
Please go ahead.
Hey, good morning, everyone.
That's on a good quarter.
Just had a question on the pit layback at the Mon.
I would call the decision and the plan was done I think at a much lower gold price around 1500.
Given where gold is today is there any potential to kind of bring in more material or are there any potential changes to the plan just given the higher gold price.
I'll take that one Wayne and thanks for the question, we're executing on the pit layback as designed.
My recollection is that it was done at $600 gold with sensitivities all the way down to 1300 at which point it still makes money if it does the gold price looks like it's going to sustain we'll factor that into our plans as we think about Ellie Merle sewer and additional optimizations and any remnant mining we might do at the Eleonore pit.
I wouldn't expect any changes there to be material, we're already quite comfortable with the pits getting out to mid 2025 that we have that overlap that we were looking for but it's certainly something we'll keep our eye on as this year progresses.
Yeah.
Okay, great. Thanks, and then maybe just on the permitting front.
Obviously, the EMEA integral is key for you guys and being able to operate them.
Just curious if there's any additional incremental permits need for operation that could potentially result in a delay at media Luna just given some of the legislature legislative changes in Mexico recently.
Curious if there's any small items on the permitting front that could potentially impact the start of operations.
That's a really good question Wayne with the legislative changes being what are what they are there is I would say a general disinclination to issue permits given the circumstances in Mexico that says we need it to additional mirror related permits for media Luna one is a bit of an adjustment of the footprint.
Modification for that we actually were awarded that permit last week and so feeling quite happy about that the other one that's ahead of US yes recall that the plan of media Luna as we're gonna no longer deposit tailings to our filter tailings storage facility part of the logic behind concluding mine <unk>.
And why has pets is if we're going to transition to in pit tailings deposition. We've now finalized the science and all of the details of the application for that additional Mia modification.
That's that will be submitted to the regulators this quarter in Q2 and have given ourselves plenty of lead time here to negotiate and disguise and hopefully secure that permit we have capacity in our filter tailings storage facility through to the end of 'twenty six quite comfortably we are.
Looking to get that in pit tailings deposition permit before that but we have a lot of leeway there to be able to secure that permit and work with government productively. So we're feeling quite comfortable about our permitting situation and again permits in Mexico or what are these things.
That depends on the quality of the project the quality of the permit application all of the detailed science around that.
<unk> and reputation with regulators and how you approach the permitting situation and so while it's certainly not in the bag, we're feeling quite comfortable about securing that tailings permit.
Okay.
Okay, great. Thanks, and then maybe just last one for me.
I was wondering if you might be able to provide a bit more detail on the pricing for the sustainability linked loan.
When does that go into effect and kind of what are the pricing ranges on the loan relative to the prior facility.
Curious on.
A bit more detail on how the targets are set.
Even though you guys already has an industry, leading safety record and commitment on climate change.
Those targets are at levels that you're you've already kind of been executing on.
Hi, Andrew Hey, it's Rob I'll take that question and looked at and I think you raise a good point that around our strong safety performance and environmental performance performance.
Create.
Long discussions to try and finalize the kpis around or.
Sustainability linked loan.
And really where we ended up with where we're goalposts that made sense based at all based on our current performance and based on our current trajectory I think all three areas.
Goals of safety and really the goal there is staying true we continued to achieve a leading safety performance that we're seeing today on the.
The environmental goals, that's really old linked towards the 2013 carbon 2030, sorry carbon reduction plan that we that we released late last year and the steps that we're taking towards that and then thirdly on the responsible gold mining principles.
Under our membership position under the World Gold Council, we are required already too.
Achieved full compliance under the <unk> and so the.
The Senate virtually loan has that as a third pillar of targets. So all very achievable targets.
The financial benefits of the of.
The loan I will say, it's very modest.
The credit facility as designed the pricing on that have not changed at 250 basis points plus sofa. The benefits of achieving these targets is really a five basis point savings on that pricing and so a fairly modest potential savings are not savings would be available to us through the course of 2024.
In 2025 based on the current term of the credit facilities. So hopefully that gives you a bit more color that way.
Okay, No that's great. Thanks, and good to see you guys put that in place and kind of hold yourself accountable.
To the targets that you've set.
That's all for me. Thank you very much for answering my questions.
Thanks, Mike.
The next question comes from Don Demarco with National Bank financial.
Please go ahead.
Oh, hi, Thank you operator, and good morning, everyone, Hi, Jody great quarter, one of the drivers is the record throughput can you add some color on how you choose this 13000 plus tonnes per day.
And there is some variability quarter over quarter, and how should we think about the throughput going forward.
For the rest of the year.
Yeah, So great question Don.
13073 tons per day to be precise in the mill has achieved in the quarter and every one of them is just a grind pardon the pun, but I will say the emphasis on our business process framework, which has been long in the tooth and implementation more than two years now which in.
Very short description, it's a really precise way of planning scheduling and executing maintenance work and so.
What is happening is that really coming to start to pay its dividend and so we had a very good quarter in terms of a staying on plan for the planned shutdown period. When you have a planned shutdown periods were 80 hours do you want to come in at 80 or less and conclude all scope on the.
Costs that you've identified for your shutdown those are the three and safety for sure but those are the metrics to which we hold ourselves to account and the other area, where BP is paying dividends is that.
The unplanned downtime is now slowly reducing and so hence you planned downtime and reduced to the point of eliminating unplanned downtime. That's the trick the other area, where we had a bit of an increase in tons per hour. So throughput in the mill and that's just again a function.
Have good maintenance of the Sag mill and ball mill.
Okay. Okay, that's great that's.
That's encouraging.
So you actually achieved this record despite the fact that you had your 80 hours of maintenance planned maintenance.
Looking ahead to Q2, three and four do you have maintenance every quarter or is there potential that you'd maybe set a new record we have maintenance every month.
Every month, yeah, it's quarter by quarter Independents, we have planned maintenance every month.
And forecasting on setting a new record for me an excellent.
Carry on of the year would be holding levels at above 13000 tonnes, a day that would be an excellent outcome for the milling team for this year.
Okay. Thank you.
So.
We're looking at are the messaging that was provided here that are the costs are going to be.
Above the top end of the AFC guidance range over the next couple of quarters.
And then that top end to 11 30 a.
And then it could be lower than the bottom of the range in Q4.
Can you give us an idea of how much higher or how much lower that swing might be over the next two quarters and then rebounding at year end.
Look I try and stay away from giving quarterly quarterly cost guidance, I think it's really difficult to be able to predict that with with accuracy.
And I think the way to think about it as looking at Q4 to be fairly consistent with Q1, and so would you be looking at modeling it.
In.
And consistently I think I think if you look at and think about AI FC.
A couple of things I would think about that one is obviously the impact of lower production and so if you kind of looked at modeling Q2 Q3.
Looking at kind of lower end of the production range.
From a guidance perspective on playing that out in terms of an expectation of Q2 Q3 production that will obviously have an impact on our cost profile.
And then some highest stripping through a through.
Through Q2, Q3, obviously, we had some high stripping hi capitalized stripping in Q1, it will be higher still in Q2 and Q3.
I'm hesitant to kind of give out specific guidance just because of the the challenge of doing that on a quarter to quarter basis production.
A general flavor of how to think about that.
Okay. Thanks, Andrew and then just finally, a quick question on Epo I mean, we see the the resource estimate the grades are looking good we have seen some impressive intercepts can you just tell us the pathway to potentially putting this into production in 2027.
And is there an opportunity to even given some of the grades that you've encountered to have a higher grade.
A portion of it mined out so maybe thinking about capex or whatever whatever is necessary to get this into production.
Yeah, it's such early days on Epo done and so be it.
Just upgraded a 670000 ounces and as you pointed out that Greg came up right. They inferred grade was about four gram a tonne gold equivalent the indicated grade is 5.16 medical plan. So we're really quite pleased about that.
I mentioned in the call. The two areas of focus for drilling around Epo that continued upgrade of inferred to indicated is important to us so that Dave and his technical team can really start at a very P. A level to wrap a mine plan around it some big questions yet do we tie into the what has tunnel to be tied.
Infrastructure back into Eddy aluminum main deposit and so we expect to have a better line of sight on that in the early part of next year and then I can probably with a greater degree of specificity to give you. Some idea about what we're doing with Epo when it could come on what.
Size, it could be where it's going to tie in and.
<unk> level idea of capital costs, but but it's still pretty early days I will say, it's showing up nicely. We're very excited about it not just epo, but epo north and the zone between many alumina west at Epo. This deposit we're thinking about it as a cluster now and it just does not do.
The point.
Okay, we'll look forward to updates on that then that's all for me. Thank you very much.
John .
Once again, if you have a question. Please press Star then one.
The next question comes from Eric Windmill with Bank of Nova Scotia. Please go ahead.
Oh, Hi, good morning, Thanks for taking my questions I'm, just still wanted to follow up you had a comment in your disclosures about the community development agreements that you signed.
Earlier this year just wondering if.
Do you have any additional details in terms of what some of the hot button issues are and are assuming you know all the local communities are now been submitted to the annual agreement I think.
Yeah.
Yeah. So we have 11 community development agreements some of them are on the north side of the river and we've got some new ones on the south side of the river with media Luna coming online.
I wouldn't describe the issues as hot button.
Eric there's sort of a continuation.
Ration of what our commitments have been in the community all along education for kids medical Dental health care. Good paying jobs that are safe for community members. We are very specific.
Community Committee for employment, both on the contracting side and then the direct employment side as you can imagine with the promise of media Luna on the South side does Labor Committee are really starting up in earnest and people are very I would describe it as excited receptive wanting to work with <unk> and <unk>.
Create some value for themselves and their communities on the south side.
The one new item for us on the sell side is that we're relocating that a very small community near many alere that called San Miguel.
We budgeted about $6 million for that we've had many many meetings with the community on it I would describe people is quite excited about what their houses could look like and where they are going to go and the prospect of clean running water and electricity and things that we tend to take for granted so.
More of the same on our community development agreements on the north side of the river, some new and interesting stuff on the Soc side.
But I wouldn't characterize it as hot button or contentious and I'm looking forward to that you're seeing some of that when you come to site next week Eric.
Okay.
Yeah Fantastic definitely looking forward to that maybe a good segue to the next question two I apologize if you already touched on it.
The regional exploration just wondering if you can comment on what's required there in terms of you know roads and support and what we might expect there in terms of the original program.
Yeah. The retail program really is limited I would describe that over the next couple of years, our exploration dollars and attention.
I'm merely focused on EOG underground Epo and media Luna why because the business priority is to fill the mill post 2027, and so we want to make sure that we're spending money in a way that supports the overall strategy to the extent that we're doing some region.
All exploration, primarily on the north side of the river in areas of to Cafe.
Youll see maps on that when you come next week, there will be permits required from either a heaters or existing individual land owners and then something called the coos changing use of land from the regulators depending on where we go early days, we're not looking at a whole bunch of investment on ROE.
Roads and things like that from my perspective, you Wanna be skinny on your dollars until you know that there's something there, but I would say that's quite a few years ahead of us because really the focus now is very near to areas that are really coming up in ways that were pleased with and excited about.
Yeah fantastic well. Thank you very much for that and yeah definitely looking forward to getting down to say next week I appreciate it.
Thanks, Eric.
As there appear to be no more questions. This concludes today's conference call. You may disconnect. Your lines. Thank you.
You for participating and have a pleasant day.
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