Q2 2023 Endeavour Silver Corp Earnings Call

Speaker 1: I B.

Yes.

Speaker 2: Thank you for standing by. This is the conference operator. Welcome to the Endeavor Silvercorp 2nd Quarter 2023 Financial Results Conference Call. As a reminder, all participants are in listen only mode.

Thank you for standing by this is the conference operator, welcome to the Endeavour Silver Corp, second quarter 2023 financial results Conference call. As a reminder, all participants are in listen only mode and the conference is being recorded.

Speaker 2: After the presentation, there will be an opportunity to ask.

After the presentation, there will be an opportunity to ask questions to join the question queue. You May Press Star then one on your telephone keypad should you need assistance during the conference call you May signal, an operator by pressing star Zero I would now like to turn the conference over the Galena Melichar Vice President of <unk>.

Speaker 2: To join the question queue, you may press star, then one on your telephone.

Speaker 2: Did you need assistance during the conference call? You may signal an operator by pressing star and zero.

Speaker 2: I would now like to turn the conference over to Galina Malager, Vice President of Investor Relations. Please go ahead.

Investor Relations please.

Please go ahead.

Thank you operator, and good morning, everyone.

Speaker 3: Before we get started, I ask that you view our MDNA, the cautionary language regarding overswicking statements, and the risk factors pertaining to these statements.

Before we get started I ask that you view, our MD&A for cautionary language regarding forward looking statements and the risk factors pertaining to these statements.

Speaker 3: Our MD&E and financial statements are available on our website at edrsilver.com.

Our MD&A and financial statements are available on our website at Edr Silbert dotcom.

Speaker 3: With us on today's call is Dan Dixon, Endeavor's CEO .

With us on today's call is.

That's excellent Endeavour's CEO .

Speaker 3: Christine West, our Chief Financial Officer, and Don Gray, Endeavor's COO.

Christine West.

Our Chief Financial Officer.

And Don Great.

Endeavour C L.

Speaker 3: Following Dan's formal remarks, we will open the call for questions. And now over to Dan.

Following gas formal remarks, we will open the call for questions.

Now over to Dan.

Thank you Galina and welcome everyone.

Speaker 4: I would like to start by acknowledging the tremendous achievements we made at Cara Nera in Q2.

I would like to start by acknowledging the tremendous achievements, we made a turn here in Q2.

Speaker 4: which advances our strategy in pursuing high margin production growth.

Which advances our strategy pursuing high margin production growth.

Speaker 4: During the quarter we obtained formal board approval, committed to project loan financing, established a seasoned team, and now construction is well underway.

During the quarter, we obtained formal board approval.

It's a project loan financing established a season team and now construction is well underway.

Speaker 4: Terran erasing, unique opportunity that will reposition the company to generate significant free cash flow, bringing us one step closer to achieving our mission and becoming a premier senior silver producer.

Sharon arrows in unique opportunity that will reposition the company to generate significant free cash flow.

Bringing us one step closer to achieving our mission of becoming a premier senior silver producer.

Speaker 4: Nevertheless, despite continued positive production performance, the headline for this quarter continues to be pressure on cost.

Nevertheless, despite continued positive production performance the headline for this corner quarter continues to be pressure on costs.

Speaker 4: As a company with operations in Mexico, we are facing the challenge of rising costs for which we remain vigilant to mitigate the impact.

As a company with operations in Mexico, we are facing the challenge of rising costs for which we remain vigilant to mitigate the impacts.

Speaker 4: Like all our peers, macroeconomic factors such as industry-wide inflation and a strengthening Mexican peso have continued to put pressure on consumables and labor costs across our operations.

Like all our peers macroeconomic factors such as industry wide inflation in our strengths named Mexican peso have continued to put pressure on consumables and labor costs across our operations.

Speaker 4: Unfortunately, we expect these trends to continue for the near term.

Unfortunately, we expect these trends to continue for the near term.

Speaker 4: In terms of production, consolidate Q2 silver equivalent production with up 8% year over year to 2.3 million silver equivalent ounces.

In terms of production consolidated Q2, silver equivalent production was up 8% year over year.

The $2 3 million silver equivalent ounces.

Speaker 4: bringing us to 4.7 million silver equivalent ounces for the first half of the year.

Bringing us to $4 7 million silver equivalent ounces for the first half of the year.

Speaker 4: This performance puts us well in in line to achieve this year's production guidance of 8.6 to 9.5 million silver equivalent ounce.

This performance puts us well and in line to achieve this year's production guidance of $8 six to $9 5 million silver equivalent ounces.

Speaker 4: Compared to the same period prior year, both silver and gold productions are up 10% and 6% respect.

Compared to the same period prior year, both silver and gold production are up 10% and 6% respectively.

Speaker 4: While our Gwanisavi operation was generally in line, higher tons milled were offset by lower grades.

Well, our Qantas to the operation was generally in line higher tonnes milled were offset by lower grades.

Speaker 4: Adjustments to the mine sequencing during the quarter resulted in lower grades compared to our planned and recent quarters.

Adjustments to the mine sequencing during the quarter resulted in lower grades compared to our plan in recent quarters.

Speaker 4: However, we expect to return to higher grades for both the third and fourth quarters. Compared to Q1, both silver and gold grades had decreased by 20% in Q2.

However, we expect to return to higher grades for both the third and fourth quarters as compared to Q1, both silver and gold grades.

<unk> decreased by 20% in Q2.

Speaker 4: performance of our other operating mind, Bollini Toast. Remain steady.

The performance of our other operating mind Bowlen Ito's remained steady.

Speaker 4: Increased gold production was offset by lower silver production.

Increased gold production was offset by lower silver production in Q2.

Speaker 4: The Bolognese operations teams continued a strong effort to meet or beat their targets, including mined and processed tons.

The ball and he knows operations seems continued a strong effort to meet or beat their targets, including mined and processed tonnes.

Speaker 4: Moving to our financials, we report it pop line revenue of $50 million with a cost of sales of $37.5 million. For operating earnings of $12.5 million.

Moving to our financials, we reported topline revenue of $50 million with a cost of sales of 30 37 $5 million for operating earnings of $12 5 million.

Speaker 4: After expiration, GNA and other expenses, we reported a net loss of $1.1 million or negative one cent per share.

After exploration G&A and other expenses, we reported a net loss of $1 $1 million or negative one cent per share.

Speaker 4: excluding non-cash market-market adjustment from market securities are adjusted earnings total $2.1 million or 1 cent per share of this quarter.

Excluding noncash mark to market adjustments on marketable securities our adjusted earnings totaled $2 $1 million or one cent per share this quarter.

Speaker 4: At the site level, Guanesha City delivered mine free cash flow of $5 million and all on the other was pretty much breakeven.

At the site level, you want us to be delivered mind free cash flow of $5 million and millennials was pretty much breakeven.

Speaker 4: Regarding operating costs, we've seen pressures across several inputs. Our direct cost per tonne, we're up 15% this quarter.

Regarding operating costs, we've seen pressures across several inputs are direct cost per ton were up 15% this quarter.

Speaker 4: At the time of guidance, our inflation assumptions were 5%.

At the time of guidance, our inflation assumptions were 5%.

Speaker 4: However, a year to date, we've seen those costs, the costs of key inputs like steel used for ground support in consumables such as thinking sign, I continue to increase that well above our assumptions.

However year to date, we've seen those costs the call offs of key inputs like steel used for ground support in consumables such as they can sign I continue to increase well above our assumption.

Speaker 4: Additionally, labor costs are having a significant effect with the strengthening of the Mexican peso.

Additionally, labor costs are having a significant effect with the strengthening of the Mexican peso.

Speaker 4: The peso has strengthened to a seven-year high. Originally, our 2023 guidance had assumed a 20 to one Mexican peso to US dollar exchange rate. However, we're currently looking at 17 to 1.

So our strengths into a seven year high originally our 2023 guidance had assumed a 20 to one Mexican peso to U S. Dollar exchange rate. However, we're currently looking at 17 to one.

Speaker 4: This is up 14% year to date which is increasing our local costs in US dollar terms.

This is up 14% year to date, which is increase our local costs in U S dollar terms.

Speaker 4: All these factors manifest themselves into overall higher costs. Both quarterly cash costs and the all-in sustaining costs are above our upper bounds of our guidance at $13.52 per ounce for cash costs and $22.15 per ounce for silver or all-in sustaining costs per ounce.

All of these factors manifest themselves into overall higher costs, both quarterly cash cost and the all in sustaining costs are above our upper bounds of our guidance at $13 52 per ounce for cash costs and $22 15 per ounce for silver our all in sustaining cost per ounce.

Speaker 4: As a result, management expects cost to be higher than cost metrics previously provided in our 2023 guidance.

As a result management expects cost to be higher than cost metrics previously provided in our 2023 guidance.

Speaker 4: Inflation is an industry-wide issue that's expected to persist throughout the year. We're closely reviewing our purchasing practices to see where and how we can mitigate the impact.

Inflation is an industry wide issue that's expected to persist throughout the year were closely reviewing our purchasing practices see where and how we commit it mitigates the impact.

Speaker 4: Containing costs will continue to be a key focus as we work to improve the efficiencies of our operation.

Canadian containing costs will continue to be a key focus as we work to improve the efficiencies of our operations.

Speaker 4: Management Antispace Cost Metrics for the Remain Jody, the year to align with H1 2023 actual cost.

Management anticipates cost metrics for the remainder of the year to align with H, one 2023 actual costs.

Speaker 4: At June 30th, we had cash on hand of $43 million and a working capital of $78 million.

At June 30, we had cash on hand of $43 million and a working capital of $78 million.

Speaker 4: To maintain flexibility on project execution, we initiated a $60 million ATM filing in Q2.

To maintain flexibility on project execution, we initiated a $60 million ATM filing in Q2.

Speaker 4: completion of the definitive loan documentation for the $120 million senior secured debt facility. It's expected soon with closing and draw down, expecting in Q3.

Completion of the definitive loan documentation for the $120 million senior secured debt facility is expected soon with closing and draw down expected in Q3.

Speaker 4: After the quarter, we further enhance our liquidity by selling a 1% stake in Capstone's Cosamine Royalty to Gold Royalty Corp. This sale will bring in a cash injection of $7.5 million in Q3.

After the quarter, we further enhanced our liquidity by selling a 1% stake in cap stones Codamine royalty to gold royalty Corp. This sale will bring in a cash injection of $7 $5 million in Q3.

Speaker 4: We originally obtained that royalty through a concession division agreement back in 2017 for less than $500,000.

We originally obtained that royalty through concession division agreement back in 2017 for less than $500000.

Speaker 4: Let me give you a quick update on construction at Taranara. At the end of Q2, we reached 30% completion.

Let me give you a quick update on construction at Turner.

At the end of Q2, we reached 30% completion.

Speaker 4: We have spent $70 million to the end of Q2 on direct development.

We have spent $70 million to the end of Q2 on direct development.

Speaker 4: project commitments total $144 million and we are tracking in line with the optimized plan both on timing and on budget.

Project commitments total $144 million and we are tracking in line with the optimized plan both on timing and on budget.

Speaker 4: During the quarter, we'd had steady momentum on engineering, surface construction at the plant site, mine development, and establishing internal processes to best execute the project.

During the quarter, we had steady momentum on engineering surface construction at the plant site.

Mine development and establishing internal processes to best execute execute the project.

Speaker 4: If you're interested in seeing photos of the construction progress, I encourage you to visit our website under the Terrenera page.

Your interest interested in seeing photos of the construction progress I encourage you to visit our website under the Terra naira page.

Speaker 4: A quick recap. On-site personnel has increased to over 450 employees and contractors, detailed mill and surface facilities engineering is set over 70% complete.

A quick recap on site personnel has increased over 450 employees and contractors.

Detailed mill and surface facilities engineering is that over 70% complete.

Speaker 4: Engineering was finalized to request proposals for the mill construction contract, including structural steel, mechanical, piping, electrical, and instrumentation.

Engineering was finalized to request proposals for the mill construction contract, including structural steel mechanical piping electrical and introduce instrumentation.

Speaker 4: Access road construction is substantially complete. The focus on early road improvements have greatly facilitated construction ramp up, especially prior to the rainy.

Access road construction is substantially complete.

The focus on early road improvements have greatly facilitated construction ramp up.

Especially prior to the rainy season.

Speaker 4: The camp to accommodate 550 personnel is substantially complete. Nearly all dormitory units have been installed. Several final living units remain pending.

The cap to accommodate 550 personnel are substantially complete nearly all dormitory units have been installed several live final living units remain pending.

Speaker 4: Mind development is advancing on two fronts, with over 600 meters completed as that June 30th. In the meantime, a new portal is being prepped to access the lower part of the or body.

Mine development is advancing on two fronts with over 600 meters completed as at June 30th in.

Meantime, our new portals being prep to access a lower part of the ore body.

Speaker 4: bulk earthworks for the planter is nearing completion with nearly 300,000 cubic meters of material moved. Excavations were completed for the course or reclaimed tunnel grinding areas and now rebar installation has begun.

Bulk earthworks for the planter is nearing completion with nearly 300000 cubic meters of material moved.

Excavations were completed for the course or reclaimed tunnel grinding areas and now rebar installation has begun.

Speaker 4: On the procurement side, deliveries are advancing on schedule with shipments arriving at the company's laydown warehouse. Major equipment deliveries in Q2 include jaw and pebble crushers, vibrating screens, flotation cells, and the concentrate bag.

On the procurement side.

Deliveries are advancing on schedule with shipments arriving at the company's lay down warehouse major equipment deliveries in Q2 include John Pebble Crushers.

Breeding screens flotation cells in the concentrate bagging system.

Speaker 4: And lastly, on the Communities Vide, we continue to partner with local schools to support education campaigns and cultural celebration.

And lastly on the community side, we continue to partner with local schools to support education campaigns and cultural celebrations.

Speaker 4: Looking ahead, our main focus now progressing mine development, advancing concrete work for the mill platform, and awarding the mill construction contract which will kick off the next major phase of construction.

Looking ahead, our main focus now progressing mine development advancing concrete work for the mill platform and rewarding the mill construction contract, which will kick off the next major phase of construction.

Speaker 4: I think that wraps up today's formal comments. Myself, Don and Christine are happy to answer any questions that you may have. Operator, could you please open it up for Q&A?

I think that wraps up today's formal comments myself dawn and Christine are happy to answer any questions that you may have operator could you. Please open it up for Q&A.

Speaker 2: Thank you. We will now begin the question and answer session. To join the question to you, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speaker phone, please pick up your handset before pressing in.

Thank you.

We'll now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad, you will hear a tone acknowledging your request if youre using a speakerphone. Please pick up your handset before pressing any Keith.

Speaker 2: If you would draw your question, please press star then too.

Your question. Please press Star then two.

Speaker 2: The first question comes from Heiko Ile with HT Wainwright. Please go ahead. Thank you Galina Dannen.

The first question comes from Heiko Ely with H C. Wainwright. Please go ahead.

Thank you Galina, Dan and team I assume you can hear me okay.

We can hear you well heiko.

Speaker 5: Excellent. Hey, on Taranera, I went through your July press release again earlier today and I compared it with your note today.

Excellent.

Tara on there I went through your July press release, again earlier today and compare it with your know today right.

Speaker 5: I mean, Dan also, you obviously provide some more color earlier on this call as well, but I still got to ask, are there any factors that are giving you a bit of a headache, both from an availability and pricing point of view? It seems like the camp is mostly done and mine development continues at a good pace. But is there anything that we should maybe know about? I assume the answer is no, but I just want to double check.

And then also where you always see provides more color earlier in this call as well, but I still get I ask are there any factors that are giving you a bit of a headache from an availability and pricing point of view. It seems like the campus mostly done in mine development continues at a good pace.

Is there anything.

That we should maybe know about I assume the answer is no, but I just want double check.

Speaker 4: No, it's a fair question. I mean, like you say, we're seeing a lot of inflation across our operations. I think Don and his team have done a really good job from a procurement standpoint of being ahead of the game.

No. It's a fair question I mean, let me say, we're seeing a lot of inflation across our operations I think Don and his team have done a really good job from a procurement standpoint, and being ahead of the game and.

Speaker 4: Locking a lot of our key components in, and I've mentioned this in the prior calls and prior press releases that are entire mobile sleep's already been on site. A lot of the key components of the plant that have been procured quite early on and expect delivery here in, and while we got some in Q2 and back after a year the remain will come. And I'll,

Walk in a lot of our key component Sandra I've mentioned this in prior calls and prior press releases that our entire mobile fleets already been on site a lot of the key components of the plant had been procured quite early on and expect delivery here, while we got some in Q2 and back half of the year there.

Common.

A lot of that.

Both components are key purchases have come in line with what our expectations were to come in line with what our optimized plan is in the feasibility study. So we did a really good job with that now theres always things that we get are concerned with and that's our job as management.

Making sure that we hit here our mine development headings in the.

The rates in executing on that over the next year year and a half will help us be on time and on budget for Turner of course, there is some things that we went on and hopefully there is some things are the things that we'll lose on and hopefully there'll be things that we went on.

Speaker 4: Of course, there's some things that we win on and hopefully there's some things or things that we'll lose on. And hopefully there'll be things that we win on from a cost standpoint. But at this point in time and it's early, like I say, we're only 30% complete at Turner, we feel like we're.

From a cost standpoint, but at this point in time and it's early like I say, we're only 30% complete at Turner, we feel like we are.

Speaker 4: We're tracking very well to what budgets have happened.

We're tracking very well to what budgets has happened.

Speaker 5: It was a very nice lead over to my next question. Obviously the Mexican peso has increased quite a bit. You mentioned earlier on this call and also in your release, we were at 17.12 right now.

There was a very nice lead over to my next question.

Obviously, the Mexican peso has increased quite a bit you mentioned it earlier on this call and also in your release me. We're at 17, one to right now.

Speaker 4: What are you using in your model for the remainder of the year? And I don't know if you have a longer term modeling the number for the peso as well, please.

What are you using in your models for the remainder of the year and I don't know if you have a longer term.

Italy, a number for the peso as well please.

Speaker 4: Yeah, for the remainder of our year, we're generally putting our cost guidance right around what we did with H1. So we average just above 17 for H1, maybe it's closer to 18, so 18 to 1 and probably would be comfortable saying that. For long term, we'll look at that at the end of the year. We're kind of going through our budgets for 2024 at this point and just getting that kicked off.

Yeah for the remainder of our year, we're generally put in or.

Our cost guidance right around what we did with H ones. So we averaged just above 17 for H one maybe its closer to 18018, New Orleans, probably would be where would be comfortable saying that for long term, we'll look at that at the end of the year, we're kind of going through our budgets for 2024 at this point and just getting that kicked off.

Speaker 4: Through different discussions with various banks, we do expect the pace to continue that depreciation that we've seen for the last 20 years. But...

Through different discussions with various banks, we do expect the peso to continue that depreciation that we've seen for the last 20 years, but.

Speaker 4: Again, we don't have the crystal ball. When does that turn around? And we no longer see appreciation in the face though. It's hopefully in the next six months, but again, don't have a crystal ball on that. And when we come out with guidance for 2024, we typically state what we're using for an affect rate at that time.

Again, we don't have a crystal ball when does that turn around and so we no longer see appreciation in the peso.

It's hopefully in the next six months, but.

Again don't have a crystal ball on that and when we come out with guidance for 2024, we typically state what we're using for an FX rate at that time.

Speaker 5: Got it. Okay. Fair enough, I'll get back in queue. Appreciate your time. Thank you, Tyco. Thanks for the...

Got it Okay fair enough I'll get back in queue I appreciate your time.

Thanks, Tycho thanks for the questions good to hear your voice.

Speaker 2: The next question comes from Craig Hitchent Huttonson with PD Security. Please go ahead. Hi guys.

The next question comes from Craig Ketchum Hutchinson with TD Securities. Please go ahead.

Hi, guys. Thanks for taking my question, Hey, Craig how are you.

Speaker 6: Do you want to thank? Just on chair and air out with regards to Mexican peso. Can you give us a sense of how much it exposed to get domestic currency, the peso versus how much it exposed to the US dollar?

Okay. One thing I'm, just Ontario, now with regards to the Mexican peso can you give us a sense of how much is exposed to guests domestic currency the peso versus how much is exposed.

The U S dollar.

Speaker 4: Yeah, I mean obviously labor costs are significantly exposed to the to the pace of compared to the dollar. A lot of the items that we've procured have been in US dollars and we've committed 144 million of the 230. So for the $90 million left to be exposed, we're expecting somewhere between 30 and $50 million to be tied to the Mexican peso. So not significant at this point in time.

Yeah, and obviously labor costs are significantly exposed to.

To the to the peso compared to the dollar a lot of the items that we've procured a bedding in U S dollars and we've committed $144 million of the 230.

So for the $90 million left to be exposed, we're expecting somewhere between 30 and $50 million to be tied to the Mexican peso. So not significant at this point in time.

Speaker 6: Okay, great. And then in terms of your operations, what's the kind of rough breakdown?

Okay, Great and then in terms of your operations as it.

Or what's the kind of a rough breakdown.

Speaker 6: aggantensity and blling dust. In terms of exposure, yes.

I think white city and Boeing does in terms of the exposure yeah.

Speaker 4: Yep, 30 to 35% of our, depending, I think, following those hovers, around 32% and one is feel a little bit higher, around 34% or 35% of our costs are incurred in labor. Obviously, labor is completely exposed. So for the remaining 65% about half is tied to the Mexican peso. So in total, you're looking at 55 to 65% of our costs are tied to the Mexican peso.

Yeah, 30% to 35% of our depending I think Paul and he knows hovers around 32% and we're going to see a little bit higher around 34% or 35% of our costs are incurred in labor, obviously laborers completely exposed.

For the remaining 65% about half is tied to the Mexican peso. So.

In total you're looking at $55 to 65% of our costs are tied to the Mexican peso.

Okay.

Speaker 6: And if you're some of my fans, I'm just going to talk about the inflation and pressure to see my effects. Is there a potential to up size that from the 120 that's sort of been agreed to at this pointer?

And just on the financing having just been you talked about the inflation pressures as you know FX is there.

So to upsize that from the $1 20, that's sort of been agreed to at this point or.

Speaker 4: that it's sort of been finalized and that's the number we can expect. Yeah, no, it's been finalized and I think for us in the management team, we think that's kind of the upper end that we want to take on from a debt standpoint. We did put in the $60 million ATM facility that we haven't drawn on to give ourselves protection. Ultimately, if we do end up above the $230 million, we prefer that to come from equity just because we don't want to get too levered to debt. Okay.

That's sort of been finalized and that's the number we can make stuff yeah, no. It's been finalized and I think for us as a management team. We think that's kind of the upper end that we want to take on from a debt standpoint.

We did put in the $60 million ATM facility that we haven't drawn on to give ourselves protection ultimately.

If we do end up above the $230 million, we prefer that to come from equity just because we don't want to get too too levered to that.

Okay.

Alright, thanks, guys.

Speaker 7: Thanks for the questions, Craig.

Thanks for the questions Craig.

Speaker 2: The next question comes from Lucas Pipes with Be Rily Securities. Please go ahead.

The next question comes from Lucas pipes with B Riley Securities. Please go ahead.

Speaker 8: Thank you very much, operator. Good afternoon, everyone. I also wanted to start out on the cost side and maybe more broadly, kind of what sort of measures you've taken today to ring fence cost installation are there things you're looking at at the operational level. I would appreciate any additional colleague might be able to share. Thank you.

Thank you very much operator, good afternoon, everyone. I also wanted to start out on the cost side and maybe more broadly kind of what what sort of measures you've taken today to to ring fence the cost inflation.

Thanks, you are looking at operational level I would appreciate any additional color you might be able to share. Thank you.

Speaker 4: Yeah, thanks, Lucas. It's a difficult thing to ring fence inflation and ultimately the strength of the Mexican pace when it comes to labor, but from an efficiency standpoint it makes sure we're offering as best we can. I think we've done that well at Polonitos, we can be better at that.

Yeah. Thanks Lucas.

It's a difficult thing to ring fence inflation and ultimately the strengthening of the Mexican peso when it comes to labor, but from an efficiency standpoint, and making sure. We're operating as best we can I think we've done that well at all and he does garner Sue we can be better at that we're.

Speaker 4: We're looking at improving our ventilation or pumping, reducing our electricity usage with pumping and being more efficient in that standpoint.

We're looking at improving our ventilation, our pumping reducing our electricity usage with pop pain and being more efficient in that standpoint.

Speaker 4: We're also looking to be more efficient on our advances underground.

Also looking to be more efficient on our advances underground, making sure that we have we're using the right amount of explosives the right amount of steel.

Speaker 4: making sure that we have, we're using the right amount of explosives, the right amount of steel, rather than potentially using more than what we should have been. And so I think it's really an efficiency standpoint from our operations team that we can find little winds here and there and whether it's about these.

Rather than potentially using more than what we should've been and so I think it's really an efficiency standpoint from our operations team that we can find little wins here and there and whether it's about the inputs going in so the number of units that were using as opposed to those costs those units because there's only so much you can do from a.

Speaker 4: Inputs going in to the number of units that we're using as opposed to those cost those units because there's only so much you can do from

Speaker 4: Like for example, the strengthening of the pay store, our labor costs, we need those labors. This question is, do we need as much labor as what we have? That's where we can make those adjustments. Of course, we've been kind of in a good fortune that want us to be with the discoveries we made in 2019 in the high grade. I think some of that grade is gonna pick up in the back after year that will improve our costs on a per ounce basis.

Like for example, the strengthening of the peso our labor costs, we need the labor question is do we need as much labor is what we have that's where we can make those adjustments of course, we've been kind of in our good fortunes I want us to be with the discoveries. We made in 2019 and the high grade I think some of that grade is going to pick up in the back half of the year that will improve our COO.

<unk> on a per ounce basis.

Speaker 4: It's little things and being vigilant on those little things and making sure we're operating as best we can.

It's little things in.

Dean village vigilant on those little things and making sure we're operating as best we can.

Speaker 8: Thank you for that and a follow up on Gwana Tobi. The higher grades with the all-core so-or-body, how?

Thank you for that and a follow up on quantum to be.

The higher grades with the all core cell ore body.

Speaker 8: how sustainable is that over the, you mentioned the back half of the year, but as we look into 2024, should we continue to see those benefits improve or kind of stabilize the second half level. Thank you.

How sustainable is that over the.

You mentioned the back half of the year, but as we look into 2024 should we continue to see those benefits improve or kind of stabilized.

Can have.

Speaker 4: Yeah, I think it would stabilize. We do have a good life with El Perso remaining. I mean, obviously we have Malace, we have Seneca Crews, Sur, other areas that we're able to mine, but Seneca Crews, our El Perso is kind of the heart of where our production's coming from and that will continue for the foreseeable future, especially into 2024 and 2025.

Yeah, I think it would stabilize we do have a good life without her so remaining I mean, obviously, we have <unk>, we have Santa Cruz sur or other areas that we were able to mine, but Santa Cruz or El Paso is kind of the heart of where our our production is coming from and that will continue for the foreseeable future, especially into 2024%.

2025.

Speaker 8: I appreciate that. Thank you then. One quick last one for me just to really eat, eat, eat, eat, eat, eat. What's the outlook there and major milestones for the market to look forward to? Thank you.

Hi, I appreciate that thank you and then one quick last one for me just at Arena.

Hum.

What's the what's the outlook there.

Major milestones for the market to look forward to.

Speaker 4: Yeah, no, that's a very fair question. I'm glad you brought that up. For us, Pittharia, as most of our listeners probably know, we've purchased that in 2023 for $70 million when we've really been pushing there. And...

Yeah, No. That's a very fair question and I'm glad you brought that up.

Oh for US pick Korea has most of our listeners probably know we purchased that in 2023 for $70 million and we've really been pushing there.

Speaker 4: the end of 2023 and early 2024 did a lot of re-logging of the historical data.

The end of 2023 in early 2024, we did a lot of our re logging of the historical data and for this year, we had $3 $3 million budget most of that to push the ramp to.

Speaker 4: For this year, we have $3.3 million budget and most of that to push the ramp to what we think is or what our predecessors thought was a Manto zone. And it was about 300 meters away to get there. We've had some delays. We've had some workarounds on the old historical ramp. It looks like we're gonna have to push a parallel ramp.

Two what we think is or what our predecessors thought, whereas our Manto zone and it was about a 300 meters away to get there. We've had some delays we've had some workarounds on the old historical ramp it looks like we're going to have to push a parallel ramp which means rather than being 300 meters will have to be 500 to 600 meters ourselves.

Speaker 4: which means rather than being 300 meters, we'll have to be 500 to 600 meters ourselves.

Speaker 4: which will delay our drilling program and end up being either late Q4 more likely into 2024. So we're not going to have as much news on Pithria this year, which was expected kind of the end of the year from a drilling standpoint and an economic analysis next year. So I'll push into next year just because of this ramp. But we do have big expectations still with Pithria. Obviously we've defined a resource of over 600 million ounces and those.

Which will delay our drilling program and end up being either late Q4 more likely into 2024. So.

We're not going to have as much news on <unk>. This year, which was expected kind of at the end of the year from a drilling standpoint, and an economic analysis next year. So I would push into next year, just because of this ramp.

But we do have big expectations still with pizzeria, obviously, we've defined a resource of over 600 million ounces, but.

But we are looking at an expectation seen if we can make this an underground operation similar to what silver standard had looked at back in 2009.

Speaker 4: with looking at an expectation, seeing if we can make this an underground operation, similar to what Silver Standard had looked at back in 2009.

Speaker 4: Obviously always wish things went faster than what sometimes they do and hopefully we can still get through that an economic analysis in 2024.

Obviously, you always wish things went faster than what sometimes they do and hopefully we can still get to that in our economic analysis in 2024.

Speaker 8: Really appreciate all the color and detail. Do you and the team best of luck? Thanks, Lougood. Thanks for the questions.

Really appreciate all the color and detail to you and the team best of luck.

Thanks, Lucas Thanks for the questions Hope all is well.

Okay.

Speaker 2: The next question comes from Dustin Stevens with PI Financial. Please go ahead.

The next question comes from Justin Stevens with Pi financial Please go ahead.

Speaker 9: Hey everyone, most of my questions have been crossed off. So yeah, I got one last one. Um, obviously the, the one of the V grades that could hit you too, um, but you're expecting an uptake in queue for you and beyond. Um, was this sequence in, the sequencing impact there mostly developed and related? And if so, do you think you'll be able to, to sort of stay ahead and keep enough stopes? I'm high grade sections to keep that grade pretty flat going forward.

Hey, everyone.

Most of my questions have been crossed off base here, but I got one last one.

I would say the one city grids take a hit Q2.

But you are expecting an uptick in Q3 and beyond what's the sequencing sequencing impact there mostly development related.

So do you think you'll be able to sort of stay ahead and keep enough stopes and high grade sections to keep that Greg pretty flat going forward.

Speaker 4: Yeah, a couple of factors went into that sequence thing. We actually lost one of our high grades. So we've had spent a lot of Q2 cleaning that up and refixing up so we can go back in here in Q3.

Yeah.

Couple of factors went into that sequencing, we actually lost or at one of our high grade Stopes and we've had spent a lot of Q2 cleaning that up and re fixing up. So we can go back in here in Q3.

Speaker 4: Development's been a little bit behind, but not terribly behind. But we have a recovery plan to make sure our development stays ahead so we don't have these changes in our mind-plan sequencing.

Development has been a little bit behind but not terribly behind but we are we have a recovery plan to make sure. Our development stays ahead. So we don't have these changes in our plants our mine plan sequencing.

Speaker 4: It's kind of the bug of all underground operations and making sure that we have sufficient mind development and not getting ahead of ourselves and pulling out more or eventually that always catches up to you. But we do expect Q3, Q4 to stabilize. And again, grades to be slightly below Q1, I thought Q1 was pretty high grades and we really think that's going to be a deep plan, but there'll somewhere between Q2.

It's kind of the bugaboo ball underground operations, and making sure that we have sufficient mine development and not getting ahead of ourselves and pulling out more or eventually that always catches up to you, but we do expect Q3 Q4 to stabilize and again grades to be slightly below Q1, I thought Q1 was pretty high grades that we really significant.

We beat plan, but they'll somewhere b b.

Between Q2 and Q1.

Speaker 9: Just on that, the high-grade scope, was that just like an isolated ground condition issue or?

Just on that.

The high grade Stope was that just like an isolator ground condition issuer.

Speaker 4: Yeah, we believe it was isolated. Always looking at that, but we've had very good ground in the Elkursal and continue to respect to have good ground.

Yeah, we believe it was isolated.

We're always looking at that but we've.

We've had very good grounding in health care so.

And continue to expect to have good grim.

Speaker 9: Great. And I guess one of the, just maybe an idea of time potentially. I know you've been looking to twin some holes at Runner and sort of re-op to that resource. Is that just sort of, should we expect that just by the end of the year?

Great and then I guess.

One other just.

Maybe an idea essentially I know you have to.

Look into 'twenty hauls up runner.

And so they're re up that resource is that.

Should we expect that just by the end of the year.

Speaker 4: No, I think that's going to fall into 2024. We haven't really pushed on Bruner this year. We did gill or drilling permits, but again.

No I think that's going to fall into 2024, we haven't really pushed on bruner. This year, we did gather all our drilling permits.

Again.

Speaker 4: There's no plan. And we want to make sure that we keep that car. Priorities obviously on Karen, or everything. Yeah, exactly. Yeah.

There's no plans and we want to make sure that we keep that priority is obviously on parent Aaron.

Yeah, exactly yes exactly.

Speaker 9: Great. Alright, thanks, and I'll look at Fortune. And the update back in Q3. Thank you.

Great Alright, thanks Sundar.

They have to get back in Q3.

Thank you thanks for the questions Justin.

Speaker 2: Next question comes from Cosmos 2 with CIBC. Please go ahead.

The next question comes from Cosmos <unk> with CIBC. Please go ahead.

Hi, Thanks I'm Dan.

Speaker 10: Maybe my first question is on Bonanito's. I think in the MDNA you mentioned that you know, Q2 experience higher gold grade increased throughput offset by lower silver production and lower silver grade. I guess my question is that higher gold grade and lower silver grade, is that going to continue? And is that going to revert some time into the future?

Janet.

Maybe my first question is a bunch of details.

I think in the MD&A you mentioned that.

It'll Q2 experience.

Gold grades increased throughput offset by lower silver production and lower silver grades.

I guess my question is that higher gold grades and lower silver grade is that going to continue and is that kind of revert.

Some time into the future.

Yeah, Thanks for the questions Cosmos.

Speaker 4: I mean, we actually get quite variations between volinitos, between golden silver. And in general, I think our silver equivalent grades were in line with expectations with budget and volinos is performing as expected. Q3, Q4, it would probably line up pretty good with H1's gold grades in silver ratio and then going forward similar at that point. As well.

I mean, we actually get quite variations between Bohlen Ido is between gold and silver in general I think our silver equivalent grades were in line.

With expectations with budget and following is performing as expected.

Q3, Q4, it would probably the lineup pretty good with H ones gold grades and silver ratio.

And then going forward similar at that point.

Great.

And then.

Speaker 10: You know, look at your guidance. Dan, as you mentioned, you know, production guidance has been maintained, cost guidance has been maintained.

You know looking at your guidance I'm, Dan as you mentioned you know production guidance has been maintained cost guidance has been maintained.

Speaker 10: But as we talked about underscore, there's a lot of questions about inflation for an exchange.

But as we talked about on this call you know theres a lot of questions about inflation foreign exchange FX rates.

Speaker 10: FX rates and you I guess in the MA DMA even make the comment that you know some of these inflationary pressures are expected to continue the near term Expect actual cost metrics to be higher than cost metrics previously provided by the company's 2023 guidance

I guess, Andy I mean, D&A you don't make the comment that some of these inflationary pressures are expected to continue in the near term.

Actual cost metrics to be higher than cost metrics previously provided by the company in 2023 guidance. So what does that mean are we potentially looking at sort of full year.

Speaker 10: So what does that mean? Are we potentially looking at for the full year cost to potentially come in higher? Or is that just looking out into?

Cost to you know potentially come in higher or is that just looking out into <unk>.

Speaker 10: Q3, I wasn't too sure what the wording around. No, yeah, I can be more clear on that cause most. Ultimately, as you said, from a production standpoint, we're at 4.7 million silver equivalent ounces produced, our upper bound range is 9.5 million silver equivalent. So we're tracking really well from a production standpoint to the upper bound. Unfortunately, from a cost standpoint,

Q3, I wasn't too sure what the wording around no yeah, I had a I could be more clear on that Cosmos. Ultimately as you said from a production standpoint, we're at $4 7 million silver equivalent ounces produced our upper <unk> Upper bound range is $9 5 million silver equivalent so we're tracking really well from a production standpoint.

The upper upper bound unfortunately from a cost standpoint.

Speaker 4: All in sustaining costs have been $22.15 cash costs have been no near 12 or 1221 for the first half of the year

All in sustaining costs and $22.15 cash cost.

There are 12 or <unk> 21 for the first half of the year, we're expecting our cost to be above the upper upper bound range of our guidance.

Speaker 4: We're expecting our cost to the above the upper bound range of our guidance.

Speaker 4: So we're not that restating the number, but we do expect the second half of the year, our cost metrics to be similar to H1, which again puts us above the upper bound range of our original guidance.

So we're not restating the number but we do expect the second half of year, our cost metrics to be similar to H, one, which again puts us above the upper upper bound range of our original guidance.

Speaker 10: And I guess it all then. Sorry.

Understood.

And I guess, you know yeah, sorry, you were saying.

Speaker 4: Nope, no, it's good. I'm glad you understand I wanted to make that clear.

No no its good I'm glad you understood I just wanted to make that clear.

Speaker 10: Okay, I guess, you know, as we talked about what the key components is the Mexican peso, I just looked at it again, I don't think right now you are hedged in any way in terms of Mexican peso and then as you mentioned, you don't have a crystal ball, I don't have a crystal ball either. So is there any thinking behind potentially hedging away that risk longer term, especially with some of the costs associated with tearing the rest of the country?

Okay. I guess, you know as we talked about what are the key components.

Mexican peso.

Just looked at it again I don't think right now you are hedged in any way in terms of Mexican peso and then as you mentioned all the Crystal ball I don't have the crystal ball either so is there any.

Thinking behind potentially hedging away that risk.

Longer term, especially with some of the costs associated with Terra anymore.

Speaker 4: Yeah, it's a very good question. And there's two parts to that almost. From an operating standpoint, we aren't going to enter into any FX hedges for Guanacivir bolognese. I think a lot of the literature that we still get is we expect

Yeah, It's a very good question and <unk>.

Two parts that almost from an operating standpoint, we arent going to enter into any FX hedges for garnet severe Bonnie dose.

I think a lot of the literature that we still get as we expect peso to be stay relatively strong through 2023.

Speaker 4: Peso to be day relatively strong through 2023, but to reverse course and get back on historical trend of depreciation against the US dollar. So that's part of the thought patterns on why nothing from an operating standpoint.

The to reverse course and get back on historical trend of depreciation against the U S. Dollar.

So that's part of the thought patterns on why nothing in from an operating standpoint.

Speaker 4: from a Terran era standpoint it's different, right? Because we have a big incurrence and because of the debt that we're putting in place with Soxin and ING it's $120 million, there is an FX component hedging with regards to Terran era.

From a <unk> standpoint, it's different right because we have a big occurrence because of the debt that we're putting in place.

<unk> Chen and I N G. Its $120 million there is an FX component hedging with regards to turn there.

Speaker 4: It's not significant. Craig, as you earlier asked, a question about what remains from an FX standpoint. We've provided that detail to those banks and we'll have to incur some FX hedging in place for as a covenant for.

Not significant Craig get it earlier asked the question about what remains from an FX standpoint, we've provided that detail to those banks and we will have to incur some FX hedging in place for that for as a covenant for.

Speaker 4: the loan facility. Again, for everybody else on the call, with that loan facility, there's also a gold hedge requirement for the first two to three years amounts to between 50,000 to 60,000 ounce of the gold on that three-year basis. So averaging 20,000 ounce of the gold per year. And we'll get into that detail when that gets all finalized. Hopefully this quarter costs.

The the loan facility.

Again for everybody else on the call.

With that loan facility. There is also a gold hedge requirement for the first two to three years amounts to between 50000 60000 ounces of gold.

On that three year basis, so averaging 20000 ounces of gold per year.

And we will get into that detail when that gets all finalized hopefully this quarter cosmos.

Speaker 10: Right. And then one last question, as you mentioned, rainy seasons come together in Mexico. You've gone too many things.

Right and then one last question as you mentioned the rainy season has come together in Mexico, you've gone through multiple seasons.

Speaker 10: And so I just want to, you know, kind of talk about how have you prepared for it at the operations and also a ternera. Reading there's, you know, upcoming major milestones at ternera, but it's a lot of delivery some concrete work. I don't see a lot of major earth works. So, but again, how have you kind of, you know, thought about the risks around rainy season coming upon him?

So I just want to kind of talk about how have you prepared for at the operations and also our churn era.

I think there's you know upcoming major milestones that here and there, but it's a lot of deliveries from concrete work I don't see a lot of major earthworks.

Again, I'll have you kind of thought about the risks around a rainy season coming upon in Mexico.

Speaker 4: Yeah, obviously, as you stated with our operations, we've dealt with rainy seasons for 17 years, 16 years that the operations are pretty well adverse to handling it. And you don't see big changes in our production profiles because of the rainy season. We've had issues in the past various years, whether it's clay in the crushers that impact it, but only on a, I'd say minute level from a

Yeah, obviously it says you stated with our operations we've dealt with rainy seasons for 17 years 16 years at the operations I think they're pretty well adverse.

Handling it and you don't see big changes in our production profile is because of the rainy season.

We've had issues in the past various years, whether it's clay in the crushers that impacted but only on a I'd say my new level.

From a from a tariff standpoint, I think we've done a very good job preparing for it. That's the reason we put so much work into the roads.

Speaker 4: From a Taren-Ara standpoint, I think we've done a very good job preparing for it. That's the reason we put so much work into the roads.

Speaker 4: and the drainage around the roads and requirements for drainage. But I'm probably going to pass this question off with Don who's sitting in Mexico is on the call. He knows this very well and probably can give you a better answer than I can. Don, do you want to give Cosmos a little bit of color around our...

And the drainage around the roads and requirements for Janus, but I'm, probably going to pass. This question off with Don who is sitting in Mexico is on the call. He knows this very well and probably can give you a better answer than I can Dan do you want to give caused us a little bit of color around our R are the work we've done around rainy season for Turner.

Speaker 4: The work we've done around rainy season for Terran era.

Speaker 11: Sure, there's quite a few things that we've done and similar to what it done on other projects previously.

Sure.

Quite a few things that we've done and similar to what you've done on other projects previously in that simple things like we pour we pour lean concrete down in the bottom of the excavation so of it so that the.

Speaker 11: Simple things like we pour, we pour lean concrete down in the bottom of the excavation. So that...

Speaker 11: so that the contractor has something to work off of when it is rainy, ready with pumps and things like that, or for excavations where they may accumulate rainfall, that kind of thing. The other thing is that we've done in some other places is put up some tent and overhead structures, real simple things, but if the contractor's prepared, which our contractor is,

The contractor has something to work off of when it is rainy ready with with pumps and things like that or.

For excavations wherever they may they may accumulate rainfall that kind of thing. The other thing is that <unk> done in some other places as is put up some tent and overhead structures real simple things, but but.

But if the contractors prepared which our contractor is in there.

Speaker 11: that we have a concrete contractor on site now, then we can get through it. So we've been prepared for it, and are our preparing for it, and anticipate we can need the challenge. Great, thanks, Dawn. As you...

We have the concrete contractor on site now.

Then then we can we can get through it so we've been prepared for it.

And are preparing for it and then anticipate we can meet the challenge.

Great. Thanks, Todd as you look out the window right now.

Okay.

Speaker 11: Out the window right now, it's, I've got mostly, mostly blue sky and a little, and a little bit cloudy afternoon. It's the clouds come in and we get the afternoon rains, but kind of typical for right now on this part of the rain season. Thank you, Dawn. Sorry for putting you on the spot here, but again, thanks Dan for answering.

It's out the window right now I've got mostly mostly blue sky and a little cloudy.

Afternoon.

The clouds come in and we get the afternoon range, but kind of typical for right now in this part of the rainy season.

Yeah. Thank you sorry for putting you on the spot, but the and again, thanks again for answering all my questions.

Speaker 4: No, those are great questions, Cosmos, and we're always happy to answer them. So...

No those are great questions Cosmos, and we're always happy to answer them. So.

This concludes the question and answer session I would like to turn the conference back over to Dan Dickson for any closing remarks.

Speaker 2: I would like to turn the conference back over to Dan Dixon for any closing.

Speaker 4: Well, thank you all for being here. Everybody listening to our Q2 financial results call.

Well. Thank you operator, and thank you everybody listening to our Q2 financial results call.

Speaker 4: I can tell by the questions. I think everybody understands the importance of Tarenair and the executing on Tarenair over the next year and a half per endeavor. Of course, management's always eager to have you to answer calls from analysts and hopefully we expect good results here in Q3 from a production standpoint and we maintain our eye on cost and try to drive that down as best we can. Thanks everyone and have a good day.

I can tell by the questions I think everybody understands the importance of Taro naira and executing on turn out over the next year and a half for endeavour.

Of course management is always eager to ask you to answer calls from analysts and hopefully we expect good results here in Q3 from a production standpoint, and we maintain our eye on costs and try to drive that down as best we can thanks, everyone and have a good day.

Speaker 2: It includes today's conference call. You may disconnect your lines. Thank you for participating and have a present day.

This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.

[music].

Yeah.

[music].

Okay.

Yeah.

Uh huh.

Yes.

Yes.

Speaker 1: are

Okay.

[music].

Okay.

Yes.

[music].

Yes.

[music].

Speaker 1: I.

Yes.

Okay.

Okay.

[music].

Yeah.

[music].

Yes.

Okay.

[music].

Okay.

[music].

Uh huh.

[music].