Q2 2023 Taseko Mines Limited Earnings Call
Prince call all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad. If you would like to withdraw your question. Please press Star then the two thank you. Mr. <unk> you may begin your conference.
Thank you Joe welcome everyone and thank you for joining <unk> second quarter 2023 conference call.
The news release and regulatory filings announcing our financial and operational results was issued yesterday after market close and is available on our website at <unk> dot com and on SEDAR.
I am joined today in Vancouver by <unk>, President and CEO , Stuart Mcdonald, <unk>, Chief Financial Officer, Bryce Hamming, and our senior VP operations Richard Trombley.
As usual before we get into opening remarks by management I would like to remind our listeners that our comments and answers to your questions will contain forward looking information.
This information by its nature is subject to risks and uncertainties that may cause the stated outcome to differ materially from the actual outcome for further information on these risks and uncertainties I encourage you to read the cautionary note that accompanies our second quarter MD&A and the related news release as well as the risk factors particular to our company.
I would also like to point out that we will use various non-GAAP measures. During the call you can find explanations and reconciliations regarding these measures and the related news release and finally, all dollar amounts we will discuss today are in Canadian dollars unless otherwise specified.
Following opening remarks, we will open the phone lines to analysts and investors for questions I will now turn the call over to Stuart for his remarks.
Okay. Thank you, Brian and good morning, everyone. Thank you for taking the time to join our call. This morning.
Operationally it was a decent quarter at Gibraltar, we had copper production of 28 million pounds.
Which is up 12% from Q1 and unit costs also declined.
As we've spoken about previously the lower benches of the Gibraltar pit are producing higher grade more continuous ore zones in the pit.
Is set up very well for ore release over the balance of this year.
Head grade in the quarter averaged two 4% and we should see similar levels for the rest of the year.
Mill availability was the main operational challenge that we faced in the quarter. We had several maintenance downs in April and May as.
As a result mill throughput for the quarter was just below 80000 tons per day, which is below target.
Since since early July or since early June the situation is much improved.
We've been operating at closer to 90000 tonnes a day.
And the softer ore in the Gibraltar pit as being process very well.
Improved mill performance allowed us to produce 11 million pounds in June and again in July .
We're expecting second half copper production to be roughly 15% higher than the first half of this year and we remain confident in our original production guidance of 115 million pounds of copper.
Turning to our financial results now sales volumes in Q2 were lower than production as we had a small inventory build.
And the average realized price also dipped to $3 78 per pound from 402 in the prior quarter.
It also averaged about $4 last year.
These changes have a meaningful impact on Gibraltar earnings and cash flow and we have a lot of leverage to the copper price.
The price trend in recent weeks has been positive and it's currently hanging in the 390 per pound range.
It's up about 20.
Per pound since quarter end.
It's also notable this quarter that copper and moly price changes led to an $8 million write down of our ore stockpile inventory.
<unk> <unk> per share impact on GAAP earnings adjusted earnings adjusted earnings and EBITDA.
With that we still reported $22 million of adjusted EBITDA and earnings from mine operations of $28 million.
Our unit operating costs declined quarter over quarter down to $2 66 per pound.
That's a 10% reduction over Q1.
Partly due to lower diesel prices and cost reductions and a few other areas.
But the higher production level was the biggest factor.
Then offset was the lower moly byproduct credit as average molybdenum prices dropped from $33 per pound in Q1 to $21 per pound in the second quarter.
Overall, we expect our <unk> unit costs to continue to decline in the second half of this year as copper production increases.
Capital spending remained at elevated levels again in the second quarter, both at Gibraltar and Florence.
Work continued on construction of the new site for the in pit crusher at Gibraltar.
And as we noted in the past the actual crusher move has been deferred until Q2 next year.
But this has been a significant capital project for us about $50 million Canadian in total on a 100% basis.
Most of our spending has already been done with about $10 million left to go next year for the physical move.
After that move will be able to continue advancing into newer zones in the connector pit.
And of course spending it has continued at Florence as well as we continue to receive long lead items on site in preparation for a construction.
Bruce can add some more details on capex in a minute, but certainly the capital projects. This year have impacted our cash flow, especially in light of a lower copper price in the second quarter.
But with Gibraltar Capex, mostly behind US, we expect solid free cash flow generation from the mine over the remainder of this year.
As far as permitting process at Florence that message remains the same we're in regular contact with the EPA and we continue to see them, taking the final steps towards issuance of the final UIC permit.
And we don't see any significant issues or concerns emerging.
In fact in June the EPA circulated the final programmatic agreement for signature.
Which we see as another positive sign that they are readying to issue the UIC permit.
It's been a lengthy and tedious process and we need to keep patients and allow the agency to finish the final steps of their work.
But we do remain confident it will be a positive resolved very soon.
We're using the additional time to deliver the right financing package for the project.
The remaining capex that we disclosed a few months ago was about $230 million U S.
And with our existing liquidity and the funding commitments received from Mitsui and Bank of America, we already have a large portion of that financing in place.
Yes.
We continue to advance discussions on project level financings, which could include a copper royalty or a small project loan.
Progress is being made on both fronts and tracking with the expected permitting timeline.
Carmen.
And we don't see any significant issues or concerns emerging.
In fact in June the EPA circulated the final programmatic agreement for signature, which we see as another positive sign that they are readying to issue the UIC permit.
Two last topics to touch on and both have been in the news recently in BC first firstly the port strike.
It's been a lengthy and tedious process and we need to keep patients and allow the agency to finish the final steps of their work.
That that occurred in the first half of July and it delayed copper concentrate shipments to begin our third quarter.
It was a two week strike or two week labor disruption at least in created quite a backlog of cargo for CECO.
But we do remain confident there'll be a positive resolved very soon.
We're using the additional time to deliver the right financing package for the project.
And all the other shippers that operate on the West coast ports.
We're now supplementing our regular rail service with the trucking to try to reduce the site inventory levels in the coming months.
The remaining capex that we disclosed a few months ago was about $230 million U S.
And with our existing liquidity and our funding commitments received from Mitsui and Bank of America, we already have a large portion of that financing in place.
Secondly, the wildfire situation, it's been a very active fire season here in BC and in other parts of Canada as well too.
Yes.
To date, there's been no impact to Gibraltar operations. Although in July we did have a fire break out just a few miles from the mine site.
We continue to advance discussions on project level financings, which could include a copper royalty euro small project loan.
Progress is being made on both fronts and tracking with the expected permitting timeline.
But it was contained and no longer present any risks to the site. We're grateful for the work of the BC wildfire service and the many others that are working hard to keep communities around our province safe.
Two last topics to touch on and both have been in the news recently in BC first firstly the port strike.
And with that I'll turn the call over to price for some more details on our second quarter financials.
That that occurred in the first half of July and it delayed copper concentrate shipments to begin our third quarter.
Okay.
Over to you Bryce.
Thank you Stuart and welcome everyone as Stuart mentioned, it was a fairly straightforward quarter, but I'll provide some additional details sales in the quarter were 26 million pounds copper generating $120 million, sorry, $112 million of revenue both of which are in line with the first quarter.
It was a two week strike or two week labor disruption at least in created quite a backlog of cargo to CECO.
All the other shippers that operate on the West coast ports.
We're now supplementing our regular rail service with trucking to try to reduce the site inventory levels in the coming months.
CECO realized.
Our price dropped from $4.
In Q1 to $3 78 per pound in the second quarter. Despite the drop in copper price revenue remained strong as we now consolidate the 12, 5% of Gibraltar that we acquired from <unk> and this was the first full quarter of that additional ownership interest in our financial results.
Secondly, the wildfire situation, it's been a very active fire season here in BC and in other parts of Canada as well.
To date, there has been no impact to Gibraltar operations. Although in July we did have a fire break out just a few miles from the mine site.
But it was contained and no longer present any risks to the site. We're grateful for the work of the BC wildfire service and the many others that are working hard to keep communities around our province safe.
In the second quarter total site costs were $105 million. This was $7 million lower than the first quarter, we saw lower diesel costs as well as lower purchased electricity natural gas explosives and contractor services in the quarter.
And with that I'll turn the call over to price for some more details on our second quarter financials.
Another significant impact on our <unk> cost in the second quarter was the moly byproduct credit Stuart has already mentioned the steep drop in moly price in the low $30 range in Q1.
Over to you Bryce.
Thank you Stuart and welcome everyone as Stuart mentioned, it was a fairly straightforward quarter, but I'll provide some additional details sales in the quarter were 26 million pounds of copper generating $120 million, sorry, $112 million of revenue both of which are in line with the first quarter.
Not only affected our revenue, but also resulted in negative.
Price adjustments in the quarter for prior prior sales so our byproduct credit dropped <unk> 37, a pound 13 per pound in the second quarter.
CECO realized.
Our price dropped from $4 two in Q1 to $3 78 per pound in the second quarter. Despite the drop in copper price revenue remained strong as we now consolidate the 12, 5% of Gibraltar that we acquired from <unk> and this was the first full quarter of that additional ownership interest in our financial results.
Going forward, we should see this increase.
The lower site costs combined with higher production in the quarter drove our <unk> cost from $2 94 per pound in Q1 down to $2 66 in spite of the lower byproduct. We expect this decrease further in the second half as production increases.
In the second quarter total site costs were $105 million. This was $7 million lower than the first quarter, we saw lower diesel costs as well as lower purchased electricity natural gas explosives and contractor services in the quarter.
For the quarter, we had $22 million of adjusted EBITDA earnings were negatively impacted by a notable write down of our lower grade ore stockpiles due to the decline in copper moly prices and foreign exchange. This resulted in a charge to the P&L of $8 million, which is also reduced adjusted earnings by <unk> <unk> per share as we don't normalize for this noncash.
Another significant impact on our <unk> cost in the second quarter was the moly byproduct credit Stuart has already mentioned the steep drop in moly price.
Cash charge.
GAAP earnings in Q2 was $10 million or <unk> <unk> per share.
The low $30 range in Q1.
Not only affected our revenue, but also resulted in negative.
<unk> net loss of $4 million or <unk> <unk> per share loss, most significant difference between GAAP earnings and adjusted net loss was the unrealized foreign exchange gain related to the weakening U S dollar, which reduces the value of our debt in Canadian dollar terms.
Price adjustments in the quarter for prior prior sales so our byproduct credit dropped <unk> 37, a pound 13 pound in the second quarter.
Going forward, we should see this increase.
Based on our average realized price of $3 78 per pound in Q2, we continue to have a healthy operating margin of over $1 per pound with ongoing volatility. It's worth highlighting to you that we still have our price protection in place for the next five months, which secures a minimum copper price of $3 75 per pound for 35 million pounds.
The lower site costs combined with higher production in the quarter drove our <unk> cost from $2 94 per pound in Q1 down to $2 66 in spite of the lower byproduct. We expect this decrease further in the second half as production increases.
For the quarter, we had $22 million of adjusted EBITDA earnings were negatively impacted by a notable write down of our lower grade ore stockpiles due to the declining copper moly prices and foreign exchange. This resulted in a charge to the P&L of $8 million, which is also reduced adjusted earnings by <unk> <unk> per share as we don't normalize for this noncash.
7 million pounds, a month copper price showing signs of recovering we could look to add to this hedge position to cover 2024 in the coming months ahead, if the markets allow and as we prepare for Florence construction.
Capital spending in the second quarter was notably higher we spent $31 million at Gibraltar in sustaining and capital project expenditures with notable spend on the in pit crusher relocation project as well as a major maintenance on one of our large mining shovels, which was a $10 million program and our sustaining capital costs.
Cash charge.
GAAP earnings in Q2 was $10 million or <unk> <unk> per share and adjusted net loss of $4 million or <unk> <unk> per share loss. Most significant difference between GAAP earnings and adjusted net loss was the unrealized foreign exchange gain related to the weakening U S dollar, which reduces the value of our debt in Canadian dollar terms.
Most of that spending for the crushers now complete until the equipment is physically move next year in Q2.
Based on our average realized price of $3 78 per pound in Q2, we continue to have a healthy operating margin of over $1 per pound with ongoing volatility. It's worth highlighting to you that we still have our price protection in place for the next five months, which secures a minimum copper price of $3 75 per pound for 35 million pounds or.
We also purchased new equipment for the mill and take component replacement center fee on our fleet in the quarter, so sustaining capital and spend on capital projects at Gibraltar will be much lower in the second half of this year.
At Florence, we capitalized $13 million in the second quarter for the total year to date spend of 27 million Canadian dollars, we will see the Florence burn rate reduced in Q3 until the final permit is received and we begin construction.
7 million pounds, a month copper price showing signs of recovering we could look to add to this hedge position to cover 2024 in the coming months ahead, if the markets allow and as we prepare for Florence construction.
We ended the second quarter was approximately $180 million of available liquidity with 86 million Canadian in cash.
Capital spending in the second quarter was notably higher we spent $31 million at Gibraltar.
Just to wrap up I'll touch on some of our financing transactions that we announced and closed in the quarter. The first was the increase to our corporate credit facility from $50 million.
In sustaining and capital project expenditures with notable spend on the in pit crusher relocation project as well as a major maintenance on one of our large mining shovels, which was a $10 million program and our sustaining capital costs.
U S $80 million, we had announced in February of this year that is.
He had been extended but also increase subject to credit approval and.
Most of that spending for the crushers now complete until the equipment is physically move next year in Q2.
In June <unk> capital was officially added to the syndicate and the amendment to the $80 million was fully credit improved we continue to see commercial banks.
We also purchased new equipment for the mill and data component replacement center fees on our fleet in the quarter, so sustaining capital and spend on capital projects at Gibraltar will be much lower in the second half of this year.
Supporting us in our copper business and our growth ambitions.
Yes, Theres significant transaction was an amendment to our Gibraltar silver stream with the Cisco gold royalties, a long standing partner of the company. We increased the paid payable silver from 75% to 87, 5% to coincide with our purchase of our 12, 5% interest in Gibraltar from soldiers in Q1.
At Florence, we capitalized $13 million in the second quarter for the total year to date spend of $27 million Canadian we will see the Florence burn rate reduced in Q3 until the final permit is received and we begin construction.
We ended the second quarter was approximately $180 million of available liquidity with 86 million Canadian in cash.
We received just shy of $40 million Canadian for that increase in silver deliveries.
Just to wrap up I'll touch on some of our financing transactions that we announced and closed in the quarter.
And finally, we also put in place an ATM during the quarter as a standby options to support our Florence construction needs if needed over the coming years.
The first was the increase to our corporate credit facility from $50 million.
U S $80 million, we had announced in February of this year that the facility had been extended but also increase subject to credit approval.
We see this as just another tool in the toolbox that accompany preparing for construction should have we did not issue any shares under the ATM in the quarter.
In June <unk> capital was officially added to the syndicate and the amendment to $80 million was fully credit improved we continue to see commercial banks.
With that we're ready to take questions now operator.
Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the one on your Touchtone phone you will hear three Tom pump acknowledging your request any questions will be pulled in the order. They are received should you wish to decline from the polling process. Please press star followed by the two.
Supporting us in our copper business and our growth ambitions.
Yes, there are significant transaction was an amendment to our Gibraltar silver stream with the Cisco gold royalties, a long standing partner of the company, we increased debated payable silver from 75% to 87, 5% to coincide with our purchase of our 12, 5% interest in Gibraltar from <unk> in Q1.
If you are using a speaker phone please lift the handset before pressing any keith.
First question comes from Ed Brucker with Barclays. Please go ahead.
Hey, Thanks for taking my question today, My first one just on Florence.
We received just shy of $40 million Canadian for that increase in silver deliveries.
There's a lot of.
And finally, we also put in place an ATM during the quarter as a standby option to support our Florence construction needs if needed over the coming years we.
Some of the pre buys that you've been doing machinery.
There.
Do you think.
Production timeline for Florence has shortened at all or do you think kind of starts finished still 18 months.
We see this as just another tool in the toolbox that accompany preparing for construction should have we did not issue any shares under the ATM in the quarter.
Yes, Hi, Ed It's Stuart it's still it's still in our view an 18 month project.
With that we're ready to take questions now operator.
I think the some of the spending that we've done has has certainly de risked that timeline and it's allowed us to start to start promptly on receipt of the permit but it's still an 18 month project.
Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the one on your Touchtone phone, you'll hear three Tom pump acknowledging your request any questions will be pulled in the order. They are received should you wish to decline from the polling process. Please press star followed by the two.
Got it.
The timing between receiving the permit and construction is relatively short.
If you are using a speaker phone please lift the handset before pressing any keys.
Relatively short I mean, we certainly need to.
First question comes from Ed Brucker with Barclays. Please go ahead.
A little bit of time to mobilize the team and we have cut our spending.
Hey, Thanks for taking the question today My first one just is.
In the last six months here in terms of.
On Florence.
There's a lot of.
Contractor readiness and things like that so it takes it will take a month or six weeks to get people mobilized to Nemo and then we'll be into it on the schedule will be.
Some of the pre buys that you've been doing machinery.
There.
Do you think.
Production timeline for Florence has shortened at all or do you think kind of start to finish it's still 18 months.
Or the spending will ramp up from there.
Got it and just my last question given that it.
Yes, Hi, Ed It's Stuart it's still it's still in our view an 18 month project.
August now hope to get the EPA decision. There 18 months from now kind of puts you close to the.
I think the some of the spending that we've done has has certainly de risked that timeline and it's allowed us to start to start promptly on receipt of the permit but it's still an 18 month project.
When the 2026 years there are going to go current so just wanted to get your thoughts on that maturity and if you would do anything proactive with it.
Got it and the time in between receiving the permit and construction is relatively short.
Well, yes, I mean, certainly keeping its not really top of mind for US right. Now I think we want to get Florence permitted and financed and going into construction, but certainly as we get into the second half next year.
Relatively short I mean, we certainly need to a.
A little bit of time to mobilize the team we have cut our spending.
We will be keeping a close eye on markets.
In the last six months here in terms of.
Looking for an opportunity to to refinance side I think.
Contractor readiness and things like that so it takes it will take a month or six weeks to get people mobilized and then we will and then we'll be into it on the schedule will.
And we have a good a good story to tell obviously with <unk> coming online is going to be very meaningful.
Or the spending will ramp up from there.
Growth story for the equity and for bondholders as well in terms of its cash flow generation and its impact on our credit so.
Got it and just my last question given that it's.
But no no no specific plans on the refinancing at this stage.
August now hope to get the EPA decision. There 18 months from now kind of puts you close to the one the 2020 six's or are going to go current so just wanted to get your thoughts on that maturity and if you would do anything proactive with it.
Got it thanks that's helpful.
Your next question comes from Craig Hutchinson with TD Securities. Please go ahead.
Hi, good morning, guys.
Well.
Alright.
Yes, I mean certainly keeping.
My question is on molybdenum.
It's not really top of mind for us right now.
I look at your technical Port last year.
We want to get Florence permitted and financed and going into construction, but certainly as we get into the second half next year.
We're kind of targeting an annual run rate close to around two and a half million pounds a year.
It looks like you're trending closer to 1 billion pounds. This year now that you are deeper in the benches at Gibraltar can we.
We'll be keeping a close eye on markets.
Looking for an opportunity to to refinance that I think.
Back to a fairly significant uptick in moly production over the next couple of quarters and into next year.
And we have a good a good story to tell obviously with Lawrence coming online is going to be very meaningful.
Growth story for the equity in for bondholders as well in terms of its cash flow generation and its impact on our credit so.
Hey, good morning, Craig Richard here.
Molybdenum at the start of.
Gibraltar pit.
We saw grades being well below kind of life of mine averages and we do expect the grade does keep going deeper to kind of get back closer to the life of mine averages. So.
But no no no specific plans on the refinancing at this stage.
Got it thanks that's helpful.
Your next question comes from Craig Hutchison with TD Securities. Please go ahead.
That combined with the higher throughput in the mill, we will see improved.
Hi, good morning, guys.
Moly production for the remainder of the year.
Good morning. My question is on molybdenum, if I look at your technical Port last year.
Okay, Great and then just encouraged by your comments that you expect.
Gibraltar generative free cash flow here.
And are targeting an annual run rate close to around two 5 million pounds a year.
In the second half, but can you give us.
Kind of a sense of what the total capital spend is for Gibraltar and what I mean by that is capitalized stripping sustaining or anything.
It looks like you're trending closer to 1 billion pounds. This year now that you are deeper in the benches.
Development related.
Walter can we expect a fairly significant.
For the second half Youre focusing on.
Tick and moly production over the next couple of quarters and into next year.
Yes, please yes.
It's really going to its really going to drop off on the.
Hey, good morning, Craig Richard here.
The capital projects.
So molybdenum at the start of Gibraltar.
Crusher work as we know that there is essentially done for the year and the final piece there will pick up in Q2 next year.
Gibraltar pit.
We saw grades being well below kind of life of mine averages and we do expect the grade as we keep going deeper kind of get back closer to the life of mine averages. So.
Yes.
And then the other piece that hit us in this quarter was was major maintenance.
That combined with the higher throughput in the mill, we will see improved moly.
$10 million for the shovel on that that's a one off as well it doesn't we don't expect any of those items to hit us in the second half. So we should be really kind of.
Moly production for the remainder of the year.
Okay, Great and then just encouraged by your comments that you expect Gibraltar.
Normal run rates for for Capex here in the second half I don't know what that something in the range of.
Gibraltar generative free cash flow here.
In the second half, but can you give us.
You have a sense of what the total capital spend is for Gibraltar and what I mean by that is capitalized stripping and sustaining or anything.
I don't know $10 million to $15 million, perhaps over the next six months something something more something more typical maybe closer to 10.
Development related.
Yes, and then and then capital strip.
For the second half Youre focusing on.
Capital strip is coming from our work, we're deep into or in the Gibraltar pit.
Yes, please yes.
It's really going to its really going to drop off on the.
The capital strip in the first half of the year came from the stripping we're doing on the connector for zone.
The capital projects.
Crusher work as we know that there is essentially done for the year and the final piece there will pick up in Q2 next year.
And thats not much happening there in the third quarter it will pick up a little bit again at the end of the year in the last few months, but generally capital strip should be.
Yes.
And then the other piece that hit us in this quarter was was major maintenance.
No it should be should be pretty low here for the second half.
Might see another 10 million Bucks in Q4, perhaps.
$10 million for the shovel on that that's a one off as well it doesn't we don't expect any of those items to hit us in the second half. So we shouldnt be really kind of.
That's a very rough number.
Okay, great. Thanks, guys.
Your next question comes from Alex <unk> with Stifel. Please go ahead.
Normal run rates for for Capex here in the second half I don't know what that something in the range of.
Hi, Good morning, everyone. Just two questions from me first on Florence.
I don't know, 10% to $15 million, perhaps over the next six months something something more something more typical maybe closer to 10.
I'm curious with it.
Have you guys secured I mean, obviously, we haven't secured yet since you don't have the final EPA permit but.
Yes, and then and then capital strip.
Capital strip is coming from our work, we're deep into or in the Gibraltar pit.
Asset <unk>.
<unk> for the mine when it when it gets up and going.
Capital strip in the first half of the year. It came from the stripping that we're doing on the connector for zone.
I am wondering with asset prices in various regions coming down now is there an opportunity to.
And thats not much happening there in the third quarter it will pick up a little bit again at the end of the year in the last few months, but generally capital strip should be.
To secure supply.
Believe the prices now in the spot market are probably less than what you used in your <unk>.
Tech report a few months ago. So.
No it should be should be pretty low here for the second half.
So that's the first question and the second one.
At Gibraltar.
See another 10 million Bucks in Q4, perhaps.
It's good to see costs coming down you guys are guiding to to better cost in the second half of the year as well.
That's a very rough number.
What's driving that the strip ratio for the last few quarters has been a little bit lower than I expected. So that's good but im just curious what sort of strip ratio.
Okay, great. Thanks, guys.
Your next question comes from Alex <unk> with Stifel. Please go ahead.
Our haul distance, there's a little bit shorter or what else is in there that's driving the lower costs.
Hi, Good morning, everyone. Just two questions from me first on Florence.
Do you want to speak to asset supply.
I'm curious with it.
Have you guys secured any obviously you.
Yes, no problem.
We haven't secured yet since you don't have the final EPA permit but.
Yes, so Alex this is Richard.
For the acid supply we've been in we've been in ongoing discussions with suppliers in the market.
Asset sources for the mine when it when it gets up and going.
Im wondering with asset prices in various regions coming down now is there an opportunity to.
There's a lot of interest in supplying the foreign site. So certainly staying in close contact with what the market is doing and.
To secure supply I believe the prices now in the spot market are probably less than what you used in your in the Tech report a few months ago.
We've gotten really positive and strong indications from the opposite suppliers about.
So thats first question and the second one at.
What we can expect going forward.
At Gibraltar.
Those conversations are ongoing and really we will finalize anything until we get the UIC permit and see the timing there is some pretty interesting developments with supplier storage being put in place close to the project site, which greatly helps on the asset price.
It's good to see costs coming down you guys are guiding to to better cost in the second half of the year as well.
What's driving that the strip ratio for the last few quarters has been a little bit lower than I expected. So that's good but im just curious what sort of strip ratio.
Our haul distance, there's a little bit shorter or what else is in there that's driving the lower costs.
Yes, Okay. So I was hoping to hear because.
Otherwise, if you're bringing in from California quite a bit more expensive.
Do you want to speak to asset supply ship, yes, no problem.
Court cost.
Yes, yes.
Yes, Alex your question on the cost at Gibraltar I think the big item there is just.
Yes, well this is Richard.
For the acid supply we've been in we've been in ongoing discussions with suppliers in the market.
Production, increasing right. It's all of the denominator as you know where the weather year.
There's a lot of interest in supplying the foreign site. So certainly staying in close contact with what the market is doing and.
Milling.
Two two or two five or your costs are the same and so it's getting the pounds out which is the biggest driver of of reducing our costs.
We've got really positive and strong indications from the opposite suppliers about.
I think we noted our site spending was a little bit lower.
What we can expect going forward on.
Those conversations are ongoing and really we will finalize anything until we get the UIC permit and see the timing there is some pretty interesting developments with supplier storage being put in place close to the project site, which greatly helps on the asset price.
In Q2 versus Q1.
Costs have come off.
And a few a few savings here and there on the site but.
<unk>.
As I said, it's a fixed cost operation, we have our fleet running.
$24, seven and we really have to get the pounds up to get our unit costs down.
Yes, so I was hoping to hear because.
Otherwise, if you're bringing in from California quite a bit more expensive.
I think if you look at the second half with our production guidance that we can achieve that we should see a meaningful reduction in <unk> one.
Court cost.
Yes, yes.
Yes, Alex your question on the costs that Gibraltar I think the big item there is just.
Below below.
Q2 levels.
Production, increasing right. It's all of the denominator as you know where the weather year.
Okay, Alright makes sense.
Milling.
Okay. That's it for me thank you.
Two two or two five or your costs are the same and so it's getting the pounds out which is the biggest driver of reducing our cost.
Your next question comes from Alex <unk> with Canaccord Genuity. Please go ahead.
Good day, guys and thanks for taking the call just two questions. First one is are you concerned at all with mill availability given.
I think we noted our site spending was a little bit lower.
In Q2 versus Q1.
Costs have come off.
The rights over the last three quarters. So I'll, just say acknowledge that that fourth quarter was affected by severe weather.
And a few a few savings here and there on the site but.
And the second one is along the lines of financing. So obviously you've expanded the headroom on the revolver and you've got the ATM facility that you're also considering the royalty how do you sort of think that these things will move.
<unk>.
As I said, it's a fixed cost operation, we have our fleet running.
$24, seven and we really have to get the pounds up to get our unit costs down.
I think if you look at the second half with our production guidance that we can achieve that we should see a meaningful reduction in C. One.
You get the permit will you be drawing down on that.
All of the revolver.
That happened in tandem with the ATM facility.
Below Hello.
Or are they.
Independent of each other.
Below Q2 levels.
Okay, Alright makes sense.
Alex for the mill availability question.
<unk>.
Okay. That's it for me thank you.
The downtime that we've incurred here in the first half of the year has really been focused in the grinding circuit and dealing with some maintenance and alignment issues that we have going on in the grinding circuit, we have those resolved now.
Your next question comes from Alex <unk> with Canaccord Genuity. Please go ahead.
Good hi, guys and thanks for taking the call just two questions. First one is are you concerned at all with mill availability given the.
We're continuing to monitor closely as we go forward, but all indications from our performance in June and July as we should be back to normal kind of.
The rights over the last three quarters. So I'll, just say acknowledge that that fourth quarter was affected by severe weather.
Downtime incurred downtime events in the mill, which.
And the second one is along the lines of financing. So obviously you've expanded the headroom on the revolver and you've got the ATM facility that you're also considering the royalty how do you sort of think that these things will move once you get the plan that will you be drawing down on the on all of the revolver.
Mill availability, then there's going to be in line with kind of our expectations. We don't expect that to continue long answer, but don't expect that to continue.
Okay.
Yes, maybe just maybe I can just speak briefly on the financing the way we're thinking about it right now.
Will that happen in tandem with the ATM facility.
Alex It's Stuart speaking here we've got.
Or are they or are they.
Independent of each other.
75 million committed.
I'll look for the mill availability question.
From Mitsui and bank of America.
And it's a 200 to 230 million U S of remaining spend were looking to raise.
The downtime that we've incurred here in the first half of the year has really been focused in the grinding circuit and dealing with some maintenance and alignment issues that we had going on in the grinding circuit, we have those resolved now.
Something in the range of $100 million of project level financings.
Give or take and that as I noted that as we've been talking about for a while it's going to be a combination of.
We're continuing to monitor closely as we go forward, but all indications from our performance in June and July as we should be back to normal kind of.
Royalties and project that I think we're making progress.
Yes on those discussions and we're optimistic.
Downtime incurred.
We will have some announcements soon on that.
Time events in the mill, which.
So thats a 175 I think out of the $2 30, I think the last.
Mill availability, then there's going to be in line with kind of our expectations. We don't expect that to continue long answer, but don't expect that to continue.
So it would be if we're successful the last the last piece is going to come down from the corporate level from <unk> for the last 50 or $60 million and as you noted we have the revolving credit facility.
Okay.
Maybe just maybe I can just speak briefly on the financing the way we're thinking about it right now.
We have $180 million Canadian.
Alex It's Stuart speaking here we've got.
75 million committed.
Available liquidity right now.
From Mitsui and bank of America.
And cash flow from Gibraltar, and then we do have the ATM there as a backstop as well it's not in our it's not our intention to use that as a primary.
And it's a 230 million U S of remaining spend were looking to raise.
Something in the range of $100 million U S.
Funding source at this time and we haven't drawn it yet so.
Project level financings.
Yes, that's kind of how we're thinking about the total package in terms of the order of how we spend money I think that will come down to how the final financing negotiations.
Give or take and that as I noted that as we've been talking about for a while that is going to be a combination of.
Royalties and project that I think we're making progress on those discussions and we are optimistic we will.
Play out at Florence in terms of Who's whose capital is going in first but where we are.
Or have some announcements soon on that.
So thats 175, I think out of the $2 30, I think the last.
Yes, we're confident that that the money will be there and that we're in a strong financial position for us.
It would be for success for the last the last piece is going to come down from the corporate level from to CECO for the last 50 or $60 million and as you noted we have the revolving credit facility.
Great Okay, Thanks, Joey and Richard.
There are no further questions at this time. Please proceed.
We have $180 million Canadian.
Okay. Thank you. Thanks, operator, thanks, everyone again for joining and enjoy the rest of your summer and we'll talk to you in the fall.
Available liquidity right now.
And cash flow from Gibraltar, and then we do have the ATM there as a backstop as well it's not in our it's not our intention to use that as a primary funding.
Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.
Funding source at this time and we haven't drawn it yet so.
Yes, that's kind of how we're thinking about the total package in terms of the order of how we spend money I think that'll come down to how the final financing negotiations.
Play out at Florence in terms of Who's whose capital is going in first but where we are.
Yes, we're confident that the money will be there and that we're in a strong financial position for us.
Got it okay, Thanks, Joey and Richard.
There are no further questions at this time. Please proceed.
Okay. Thank you. Thanks, operator, thanks, everyone again for joining and enjoy the rest of your summer and we'll talk to you in the fall.
Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.