Q1 2023 Fortuna Silver Mines Inc. Earnings Call
Speaker 2: Greetings and welcome to the Fortuna Silvermines first quarter 2023 financial and operational results call.
Speaker 2: At this time, all participants are in a listen-only mode and a question and answer session will follow the formal presentation.
Speaker 2: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.
Speaker 2: I will now turn the conference over to your host, Carlos Vaca, Director of Investor Relations. Sir, you may begin.
Speaker 3: Thank you, Ali. Good morning, ladies and gentlemen. I would like to welcome you to the Fortuna Silvermyke's first quarter 2023 Financial and Operational Results Conference Call.
Speaker 3: Hosting the call today on behalf of Fortuna will be Jorge Alberto Ganoza, President and Chief Executive Officer, Luis Dario Ganoza, Chief Financial Officer, Cesar Velasco, Chief Operating Officer, Latin America, David Will, Chief Operating Officer, West Africa, and Paul Wieden, Senior Vice President, Exploration.
Speaker 3: contained in the presentation and discussed in today's call are presented in US dollars and otherwise stated.
Speaker 3: Before I turn over the call to Jorge, I would like to indicate that this earnings call contains overlooking information that is based on the company's current expectations, estimates, and beliefs. This overlooking information is subject to a number of risks, uncertainties, and other factors. Actual results could differ materially from a conclusion forecast.
Speaker 3: actual results to differ materially from the conclusion, forecast, or projection in the forward-looking information and the material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information is contained in the company's annual information form and MDNA which are publicly available. Kemp Baby shadows Bob
Speaker 2: Thank you, Carlos. Good morning to all. Our business performed well during the first quarter. We recorded net income of $0.04 per share, achieved production of 94,110 gold equivalent ounces on track to meet annual guidance.
Speaker 2: and our costs were all in line with our guidance projections for the period.
Speaker 2: that sustained worldwide inflation.
Speaker 2: and corresponding cost creep that we all experienced over the past couple of years.
Speaker 2: has been compressing business margins across the precious metals mining industry.
Speaker 2: This despite initiatives to optimize our operations and streamline the business.
Speaker 2: Gold and silver prices did not provide any significant relief on margins as of Q1 2023, but going into the second quarter, metal prices and margins for the business are looking much stronger.
Speaker 2: For average realized gold price for Q1 was $1,893.
Speaker 2: which is essentially flat against what we realized in the comparable quarter for 2022.
Speaker 2: And only 7% higher against a realized price two years ago in Q1. 2021
Speaker 2: For Silver, the story is even a bit more difficult.
Speaker 2: For 2023, we realized...
Speaker 2: For this Q1 we realized $22.52.
Speaker 2: which is 14% lower against the $26.20 we realized in Q1 2021.
Speaker 2: Over the last year, quarter against comparable quarter or consolidated cash cost per ounce went from $772 per ounce to $5,000 per quarter.
Speaker 2: to $923 per ounce up 20%.
Speaker 2: Despite all this, our EBITDA came in at a healthy $65 million and the business generated net cash from operating activities of $41.8 million.
Speaker 2: After meeting all our sustaining capital demands, funding corporate expenses and paying $12.9 million in taxes, the business generated free cash flow.
Speaker 2: in capital demands, funding corporate expenses and paying 12.9 million dollars in taxes, the business generated free cash flow of 8.7 million.
Speaker 2: Luis will expand on our management discussion of financial results later in this presentation.
Speaker 2: Subsequent to the end of the quarter, we have had a few relevant events of importance that I want to mention. Thank you very much everyone for being here today.
Speaker 2: During April at the San Jose mine in Mexico we had to contend with a 15-day stoppage derived from a union claim demanding increasing profit sharing beyond what is stipulated by law. This dispute has been resolved and operations resumed.
Speaker 2: In early May as well, the Mexican government approved the new mining reform, which we view as negative for investment in the country, unfortunately.
Speaker 2: For starters...
Speaker 2: mineral exploration in open ground becomes an activity reserved for the government.
Speaker 2: An existing mineral concession and mine operation will be subject to many questionable articles in the law which provide for higher costs and uncertainties to investment. We expect there will be many constitutional appeals filed with the Supreme Court of Justice in Mexico against the new law.
Speaker 2: coming from mining companies and other interest groups. Another item to be aware of is our first gold pour at the newly built Seguela mine, which is imminent and we expect
Speaker 2: the poor in this second half of May. On May 8th, we reached an agreement with Chesa Resources to acquire 100% of the company for an all-share consideration.
Speaker 2: representing approximately 5.1% of the pro forma for tuna.
Speaker 2: We expect this transaction to close in late August .
Speaker 2: Chester is of great strategic fit to Fortuna. Geographically the Chester properties are located in Senegal, a near neighboring country to our existing operations in Cote d'Ivoire and Burkina Faso.
Speaker 2: a mining friendly jurisdiction Senegal, and a place where we can leverage our West African management infrastructure and expertise.
Speaker 2: The Diambasut project is a high value advanced exploration opportunity with multiple target steels to be drill tested.
Speaker 2: located in the heart of the Senegal-Malaysia zone, within a few kilometers of Tier 1 mines in the portfolio of gold majors. And the preliminary economic assessment carried by Cheser on the AMBA suit outlined a conventional open pit and CRL process.
Speaker 2: that even with a sub-million ounce gold resource as it stands today, can deliver robust internal rates of return above our minimum investment threshold. Paul Weeden, our Senior Vice President of Exploration is with us. Paul, can you please share our views on the exploration opportunities that Cheser presents to us?
Speaker 4: Yes, certainly, thank you, Jorge. As Jorge said, JESTA represents the next step for our West African growth and it follows the Saguena development.
Speaker 4: And this is a project we've also been tracking for a few years now and watching it grow over time.
Speaker 4: So just a quick summary, I saw it's located in Senegal, it's actually located in the south-eastern corner of Senegal, about 680km from Dakar. Easy to access, it's a well-serviced major regional road that runs down through that way, it's a highway. Low security risk, it's a mining funding jurisdiction and we've got several tier 1 scale mines within 50km of the project.
Speaker 4: CHESS has highlighted a, CHESS's scraping studies highlighted a technically simple, open pit mining concept across several pits with a conventional 2 million tonne pan-am operation and we would see that as something we'd continue to pursue.
Speaker 4: We would also anticipate this being a project that we would follow very closely behind the Sagala Development Park, given that when we acquired that four years ago we had an inferred resource of 400,000oz and today we're back to poor gold. I don't expect this to be the correct number soon.
Speaker 4: Just moving across to the geology side of it, why do we really like it? It's located in the really highly prospective Kinyemba-Kaduga Inlaya which is a world class mining district.
Speaker 4: host to several large T1 operations.
Speaker 4: The Dairieswood project itself is located on a series of displays that go up the main Senegamalai Shear Zone which is host to the majority of those large deposits. And I really like the structure complex nature of the deposit that's there to highlight the visual prospectivity and also you see there's a lot of similarities to the nearby footcull and concoto and yalaya operations.
Speaker 4: Beechfield, Gold and Barrick. They're all within the closest to 12 kilometres of life.
Speaker 4: So far the Chester folks have identified four shallow gold deposits with a very well-developed oxide supergene signature to them and we'd certainly see that evolving further with further exploration work that we'll be looking to carry out later on this year and we'll resume that work.
Speaker 4: At the moment though it's a very attractive exploration play for us. They've got the resources, they've currently got 625,000 ounces of indications at 1.9 grams and a further 235,000 ounces at 1.5 grams.
Speaker 4: We see those growing over time as well as the work we've got to do at the businesses Hurston.
Speaker 4: The recent work at Casasoco, there's been certainly some decently-rised intervals reported there. Gumba Gumba Nord, and the Western Splay. So these are all drill-ready targets and some preliminary work done to date. In addition to those, there's several new additional targets we've identified.
Speaker 4: using their datasets and that's really one of the highlights for us.
Speaker 4: There's a portfolio here of new targets available for us to walk up and test.
Speaker 4: And then there's also the potential there for a wider regional consolidation. We see a lot of encouragement there. Direct and immediately adjacent to us is Kebale West. Let me share at least boundary with him.
Speaker 4: They've got a project there which is looking quite interesting and then to the immediate west we also have Africa's Karakieniya project which is also again highlighting the potential that we see through the area.
Speaker 4: So in short, what we see here is an advanced exploration play that we could see moving through the phases to feasibility in a fairly short order of time, on which we had a high potential for growth. Very simple geology in the sense that we know what's there. It's got a nice degree of structural complexity which adds a bit more excitement to the process. But it's a project which we think we can carry through fairly quickly and looking forward to.
Speaker 4: getting into the grad election this year.
Speaker 4: Thank you, Roy.
Thank you, Paul. We'll move now to get an update from our operations, from our Chief Operating Officer. So David, do you want to get going?
Thanks, Logik. Operations in West Africa continues as highly performance during Q1 2023. The Yaramoko delivery gold production of 26437 oz.
This was ahead of the mine plan. The additional production contributing to Yaramaka is all in sustaining cost.
and cash costs of $1,509 per ounce and $819 per ounce respectively.
both ahead of the lower end of angle guidance. The wireless construction remains on time and on budget.
with the first low ball projected for this month. Safety performance at the Aramoca was strong in our rendering reported.
Unfortunately, Exe Gala and exploration contractor received a finger injury which was later classified as an LTI.
In early April , a failure of the Arzec tunneling structure at the Yaramoko portal occurred which resulted in the loss of the access to the underground mine for a period of 27 days whilst rehabilitation operations took place.
Normal underground operation resumed on 1 May. The processing plant treating existing stockpiles throughout the rehabilitation period.
Thank you.
and we do not anticipate any human.....Yaramoko underground grave control and Brownfield's exploration programs continued with encouraging results, extending our planned mining boundaries on the western side of the ore body and increasing...
and processing activity was always delivered to the wrong path from the antenna page.
which is the first deposit being mined.
Delivered to the crushing and milling circuits and grade control drilling at the initial benches at Antenna.
We have more than 12,000 meters drill.
Load clearing and construction to the Antium pit, the second deposit being mined, is currently taking place.
with grade control drilling expected to start in late May 2023.
All mining major equipment is now being modalized to site and Motor Angle, the mining contractor, and now in the final stages of the construction of key infrastructure.
in parallel with excellent progress on the ground, operational readiness, scope, drive events as well.
The Mining, Technical, Processing and Maintenance teams have all been recruited, with Motor and Guild scheduled to recruit the remaining members of the Mining team over the coming months.
Back to you, Jorge.
Thank you, David, Cesar, can you give us your update on Latam operations please?
Sure Jorge, thank you very much. And as you mentioned before, last week our San Jose mine in Mexico resumed operations after a 15-day illegal locate.
We are now working on the production recovery plan and don't anticipate any impact on annual guidance at this stage.
We are also assessing potential impacts on the additional costs related to the agreements reached with the union.
as well as production targets and safety performance for the year.
During the first quarter, San Jose produced 1.3 million ounces of silver and 8,231 ounces of gold.
These results are slightly below Q1 2022.
Due to lower grades than planned, as a result of higher dilution in one of the sublevel stopping areas, and a small delay in the mining sequence at level 800.
We anticipate mining better grade stokes in the upcoming months though. Cash cost per ounce at San Jose has come under pressure from a stronger Mexican peso, coupled with higher inflation and lower headgrades.
All the sustaining costs for the quarter is in line with annual guidance.
as lower production and higher cost of sales were offset by timing in capex execution.
and higher cost of sales were offset by timing in CAPEX execution. Moving down to Argentina.
The gold production of the Lindero mine was 25,258 ounces.
aligned with the mining sequence for the quarter. Headgrades are expected to improve in the upcoming mining zones as per mine plan.
Mine production for the quarter was 1.6 million tons of mineralized material with a stripping ratio of 1.07 to 1, which is aligned with the operations planned for the year of 1.17 to 1.
Linderos ASIC is in line with guidance for the year. Cash cost per ounce was impacted by higher labor and one-time services costs.
as well as the effect of lower grades but partially offset by lower CAPEX execution and savings in key consumables. ASIC is expected to come in at the high end of guidance for the year.
lower grades but partially offset by lower CAFEX execution and savings in key consumables. ASIC is expected to come in at the high end of guidance for the year. In Peru
Despite social unrest and numerous road blockades throughout the country in January and February , operations at the Cayama mine have not been significantly affected.
The operation delivered strong production for the first quarter, with 8, 19, and 10% higher production for silver, lead, and zinc respectively.
The operation benefited from better headgrades at levels 16 and 17, the deepest levels of the mind, and higher tones processed during the period.
Calioma's all-in sustaining cost for the quarter benefited from higher production, lower cash cost, and lower capex execution, and is on target to achieve the lower cost range of annual guidance.
That covers the three Latin American operations.ers, for get back to you.
Thank you. Luis, do you want to give your report on financial results, please?
Thank you. Please give your report on financial results.
Yes, good morning. So sales were $175.6 billion in the quarter.
a decrease of $6.7 million or 4% compared to Q1 2021.
A slight decrease was driven by 10% lower silver prices and 14% lower zinc prices.
The volume effect on our sales year-over-year was neutral as slightly lower gold and silver sales were offset by higher sink production at our Cayuga mine.
Year over year, our key financial metrics reflect the impact from inflation rates experienced throughout 2022 as well as lower operating margins at Yeramoco and Lindero related to schedule decreases in head rate.
These impacts resulted in cash cost per gold equivalent ounce sold of $916 for Q1 2023, which was $144 above the prior year.
So I just mentioned this increase is a combined effect of higher input costs across our operations
more processed tonnage to produce a lower number of ounces at the Aramoco and Lindero.
and the negative effect of relative prices in the calculation of gold equivalent production of approximately $29 per ounce.
So adjusted net income for the quarter was $13.2 million, down $20 million year over year.
adjusted EBITDA was $65.3 million down $15 million year-over-year.
We have disclosed for the quarter consolidated all-in-sustaining costs including corporate expenses of $1,514 per gold equivalent ounce sold.
which represents an increase of $230 per ounce year over year.
The increase is explained by higher cost per ounce sold described before, higher sustaining capex of $109 of which...
Two thirds is timing of payments in the prior year, with an offset from lower corporate G&A of $24 per gold equivalent unsolved.
For Q2 of 2023, we expect to see somewhat higher consolidated all-in-sustaining costs due to a pickup in sustaining capex and a stop at Chateau Saint-Jose.
For Q3 and Q4 of this year we expect to see a trend towards lower levels as SEGELA starts weighing positively on our all-in-sustaining cost performance.
Moving on to cash flows, net cash from operating activities in the quarter was $41.8 million compared to $33.2 million in Q1 of 2022 as changes in working capital and lower income taxes paid compensated for the lower EVA of $15 million year over year.
Free cash flow from operations was $8.5 million compared to $9.6 million in the prior year. As Jorge emphasized, our reported free cash flow figure is after sustaining CapEx, brownfields exploration and corporate expenses. It does exclude TV
Seguera construction and green fields exploration.
Our additions to mineral properties and properties, plants and equipment as per the cash flow statement was $61.5 million which consisted mainly of $30 million of sustaining capex and brownfields exploration.
$17.3 million Seguela construction expenditures.
$4.5 million of other pre-production activities at Seguela.
$3.7 million of greenfield exploration and capitalized interest of $2.8 million.
Onto the balance sheet, we closed the quarter with a liquidity position of $129.7 million which includes $45 million and drawn under our existing trade facility as of the end of March.
The remaining cash to be spent on the CIGELA construction at the end of the quarter was approximately 23 million dollars.
And finally, our total net debt, including the outstanding convertible debenture, is $166 million resulting in a leverage ratio of total net debt to adjusted EBITDA of 0.7.
Back to you Jorge.
Thank you. That concludes the management of the questions. So Carlos for the Q&A.
Thank you Jorge. We would now like to open the call to any questions that you may have.
Thank you. At this time we will be conducting a question and answer session. If you would like to ask a question please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
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One moment please while we poll for questions.
Thank you.
We have a question from
Tony Christ with Odyssey Investments. You may proceed. Thank you. My name is Chris. Hoyer, could you give any more...
specific indication of what you expect from the gold mine starting production this month.
what you expect in the future. The other comment I have is I imagine you gentlemen are looking forward to a very exciting future. Thank you for the question, Chris.
In the remaining cost, we have provided a range of
that goes from $880 to $1,080 per ounce.
to $1,080 per ounce.
So that is our more immediate
or more immediate estimation.
based on our best assessment of where we are with the project and how the project has been evolving, which is really on time and on budget. I can only commend the good work that the entire West African team has done.
based on our best assessment of where we are with the project and how the project has been evolving, which is really on time and on budget. I can only commend the good work that the entire West African team has done.
achieved and delivered throughout the construction commissioning and now ramping up, right? We expect first gold pour in the coming days, it's imminent.
Before the end of this month we should be having our first gold. But looking forward, looking at the bigger picture, Seguera is a flagship asset for the company. It has many key features. One is meaningful production.
Second is low cost mine operation.
Third, it has today a long life of reserves. Today as we see the mine based on reserves and the conversion work we are doing on sand and dirt resources, we can easily see beyond a decade of mining based on reserves.
Beyond that is tremendous exploration potential. We hold a commanding land position in the Seguela camp. I call it a camp. We have 30 kilometers.
from north to south along what's most prospective and productive mineralized gold belt.
from north to south along what's most prospective and productive mineralized gold belt.
Sometimes I am asked, what follows after Seguela? And my immediate response to that is more Seguela.
We have the expectation that Segala can be a much larger mind than what we are bringing into production today which is already quite meaningful. Thank you.
Thank you, thank you so much. Thank you.
We have another question from Adrian Vay with Adrian Vay Asset Management. You may proceed. Yeah good afternoon. Two questions if I may. First one, do you have a sort of budget for exploration at the Diembe... sorry Diembe Sood...
project for the next year and then the second question would be you know I just wondered if you had any any high-level views that you can give on the geographic spread of the company and do you look
you know, are you looking at region? Are you wanting to emphasize particular regions or are you looking purely at each mine, each opportunity as it comes along?
Thank you, Adrian. With respect to the AMBA suit budget.
The transaction, the chess acquisition is expected to close.
in October , in sorry, in late August .
So, we are currently working on our plans.
for the work that will start once the transaction is consummated in August . That will of course encompass an expiration budget. We do not have a budget at this time. I can advance to you.
That exploration will be a focus for the Diambasud work that's coming ahead. We also will likely be doing some engineering work.
will be a focus for the Diambasud work that's coming ahead. We also will likely be doing some engineering work.
The ambassador has a published preliminary economic assessment and Cheshire management was working already on a feasibility study.
So, although completion of the feasibility study, I wouldn't call it a priority for us right now. Certainly, we will look at aspects of the feasibility study, looking to see opportunities for optimization.
and bringing our own expertise and thoughts to the design and conceptualization of what could be a future minder.
bringing our own expertise and thoughts to the design and conceptualization of what could be a future mind there.
own expertise and thoughts to the design and conceptualization of what could be a future reminder.
Exploration will be a priority and we are working on those budgets and plans as we speak. We have some time because the transaction is set to close in August as I explained. With respect to the more strategic question, your second question on geographic spread for the company and that is a key aspect of Fortuna. Fortuna is a company that today...
discussion. So what you will see is Fortuna anchored in the two regions where we are already established. That's West Africa and the Latin Cordilleran belt.
Within these two most productive mining regions...
You will see us focused one in the countries where we already operate, in the five countries where we operate. The five countries where we are established are mining jurisdictions, you know, Mexico, Peru, the province of Salta, which is proud of its mining heritage.
Burkina Faso, the Ivory Coast and now expanding into Senegal. But you will see us first focused in the countries where we are already established and as a second priority is near neighbors.
So what we want to do is be able to leverage the existing infrastructure we have in our management hubs in the city of Abidjan, in Cote d'Ivoire, and in the city of Lima in Peru. This is where our management hubs sit.
for the two regions and where we have expertise that we can leverage within the region. You should not look to see Fortuna stepping out of these regions. For example, sometimes I'm asked about Africa. Africa is quite a large place and diverse.
we're not looking for opportunities across Africa, we're looking for opportunities in West Africa, in near neighbors in the countries who were already established. The same with La Tam. So we're not looking at opportunities in North America or Australia or the Philippines or places like that.
Our core areas of focus are where we are already established. We feel very comfortable there growing our business and we believe we can manage the geographic dispersion we have in place today.
core areas of focus are where we are already established, we feel very comfortable there growing our business and we believe we can manage the geographic dispersion we have in place today. Okay, thank you. Thank you. Okay, thank you.
Thank you. Our next question is coming from Justin Stevens with PIE Financial. You may proceed.
Hey guys, just a few questions from my side here, more sort of on the exploration and sort of ops side end of things. I know there was some talk earlier this year about looking at Arisato.
Can you just give us an idea of what the timeline might be for the evaluation there? The potential to potentially bring that into the mine life and what would be needed from the permit side of things? Yes, I can advance things from the permit side of things. Arecado is within our mining concession.
Thanks, Roy. Yeah, we've.
Last year we wrapped up another phase of worker in Para Zorro.
and we were successful in expanding the footprint of the minimisations there. We ran out of some good optimisation of the results and certainly very encouraging. The grades that we've got are comparable to what Linderos is given Linderos long life of mine.
There's not a real need at the moment to continue to advance that because it doesn't displace anything that's better value. So with that, Aaron's are we at the end of the Landera Mine mine, there's still some work to be done on the optimization of it, but we've certainly got a reasonable sized resource there at the moment.
We will continue to look at the structural repeats of it. It's a polyphase intrusive that's here. And we do see some evidence of a reasonably strong, reasonably coherent structural overprint that I don't think was recognised previously.
But yeah, we're not really doing a lot of work out there at Zara for the next year or so. Got it. That makes sense. Moving over to the gilla end of things though, obviously some pretty nice results coming out of Sunbird that last a little while as you've been drilling up there. And good to see sort of that resource bump.
Are you planning to put out another updated resource on that or is it just sort of expecting that to fall into the usual annual cadence and sort of line up with the annual resource updates?
Thanks for that. Look, we're just going to have the sunbirds drilling just wrapped up now. Let's move across to the ops guys to start the optimization and then introduction into the life of mine later on this year so it'll come out as part and parcel of the regular right next to you.
Got it. That makes sense. And just on that, obviously, it's looking like it's got a decent amount of size there. What sort of – or two different ways either. What sort of potential flexibility do you have in DeepBolt tracking the plant?
or what do you see as the main Seguilla process bottleneck if you were to try to look at increasing this replay?
David, do you want to address this question on the model making of the
the Galas plant and what our plants are with respect to assessing the expansion of the mill.
Yeah, yeah, yeah, so that one, although within the initially anticipated setup of the plan to pin DFS, it will not match theLU, which means DFSICT, and it willNESCH, 2020!
It was expected that we would be able to increase the throughput of the plant around year 3 to about 1.5-1.6 million tonnes a year.
That was ultimately based around changes in grain size and modifications through the plant.
The design of the plant also has an option for the installation of the ball mill and pebble crusher later on in life as well to further expand the story plot.
At the moment obviously the focus will be to see where the real boundaries...
exist in the existing plant. At the moment we're just establishing operation of the plant and we're feeding oxide ore so it's a little bit early to be able to go through that process but by... I'll have to run these off to the worship site for those coming on, we didn't make the procedure so let's run these off that, we'll run these from that time so that
A little bit later on this year we should be starting to feed pressure and we should be able to start looking at where some of the bottle necks lie and be able to work on removing those bottle necks. I think Segalera over the following years is going to be a very very dynamic environment with the sunbird deposit coming into the mining plan and the aristocracy.
the constricting factor will really be planned through the mine. I think both will be pushing each other along for a good couple of years later. Great. That's what we want to hear. That's it for me though. Thanks Sa processors.
Thank you.
Our next question is coming from Jasper Wike with Valparo. Sir, you may proceed.
Thank you operator. Most of my questions have already been answered, but I have one question on your recent acquisition of Chester Resources.
So you will be focusing on exploration and finding more answers and more satellite pits at the
at the Ambassador, but do you have any sort of target in amount of bounces that you would like that you would be able to settle for before moving into development and devising a feasibility study on the Ambassador?
But do you have any sort of target in amount of answers that you would be able to settle for before moving into development and devising a feasibility study on the AMBASSAD?
Thank you, that's a good question Jasper.
That's a good question, Jasper.
We have a threshold and a view that the Ambasut with the work that Paul has outlined has a fair chance to go beyond a million ounces.
So, that's with work in the immediate area of deposits that have been discovered and drilled and also with some of the other initiatives outlined by Paul. Our view is that it can certainly get beyond a million ounces. How big? The drill bit will tell us, right?
But beyond a million ounces, we believe a reasonable expectation based on the information and our understanding today.
beyond a million ounces is we believe a reasonable expectation based on the information and our understanding today.
We have certain criteria, we want to see a life of reserves that support a mine for over a decade. We would like to see in our mine portfolio all of the assets at 10 years plus in reserves.
And we would like to see production that for a company of our size annual production from each asset nor in the range of 150,000, 120,000 ounces annually. So with respect to physical metrics.
That is what we would like to see in every asset. And then of course we have our financial thresholds with respect to our expectations on internal rates of return and things like that. More on the fixed cycle side of metrics, 10 years of reserves minimum and meaningful production at competitive costs of course.
With the grades that we have at Diem Basut, over a gram and a half, we believe we can achieve low cost rounds.
and it's conventional mining, conventional processing. So we just need to focus on the exploration and get it beyond that mount which is the million ounces. Today is a submillion ounce deposit. As we have said in the past, it looks very much like a Seguera look to the exploration team.
back in the day when the Seguilla acquisition was made. When the Seguilla acquisition was made back in 2019, Seguilla was a 400,000 ounce deposit.
Today it is touching 2 million ounces and continues to show potential to grow.
So we see a similar opportunity in general terms. Thank you, that was a great answer and you provided some great call on that.
Sounds reasonable.
That was it for me operator.
So it's for me operator. Thank you so much.
At this time, we have no further questions on the telephone lines, so I will hand the call back over to management.
Thank you, Ali. If there are no further questions, I would like to thank everyone for listening to today's earnings call. Have a great day.
Thank you, Ali. If there are no further questions, I would like to thank everyone for listening to today's earnings call. Have a great day.
Thank you. This does conclude today's conference, and you may disconnect your lines at this time, and we thank you for your participation. Thank you.