Q2 2024 Gatos Silver Inc Earnings Call
Dale Andres: Ladies and gentlemen, thank you for standing by and welcome to Gatos Silver's second quarter 2024 results conference call. Presenting today will be Dale Andres, CEO of Gatos Silver and Andre Van Niekerk, Chief Financial Officer.
Operator: and quarter-two-thousand-twenty-four results conference calls. Percenting today will be Dale Andres, CEO of Gatos Silver, and Andre Van Niekerk, Chief Financial Officer.
Operator: as of October 27, 2024 Resolved Conference. Chief Financial Officer. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad.
Operator: This concludes today's call. You may now disconnect. Please wait; the conference will begin shortly.
Operator: We welcome you to today's session with a question-and-answer period, where other members of Gatos Silver management team will be available. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to enjoy a question, press star one again.
Speaker Change: We will conclude today's session with a question and answer period, where other members of Gatos' silver management team will be available. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad.
Operator: At this time, all participants are placed on mute to prevent any background noise.
Speaker Change: If you would like to enjoy a question, press the star 1 again.
Speaker Change: At this time, all participants are placed on mute to prevent any background noise.
Operator: Trading your attention to Slide two. Please note today's call contains forward-looking statements. Various reads and uncertainties may cause actual results to vary.
Speaker Change: Turning your attention to slide 2
Speaker Change: Please note today's call contains forward-looking statements.
Speaker Change: Various risks and uncertainties may cause actual results to vary.
Operator: Gatos Silver does not assume the obligations to update any forward-looking statements.
Gareth Silver: Gatos Silver does not assume the obligation to update any forward-looking statements.
Dale Andres: And now, I would like to turn the call over to Dale Andres. Please go ahead, sir.
Gareth Silver: And now I would like to turn the call over to Dale Andres. Please go ahead, sir.
Dale Andres: Thank you, operator, and good morning, everyone. Turning to slide three, I'd like to start with highlighting the excellent financial performance in the quarter. The Los Gatos joint venture had record revenues, record cashflow from operations, and record-free cashflow. This was primarily due to the strong operating performance and higher middle prices in the quarter. As previously announced, the Los Gatos joint venture has yet another record for milk throughput during the quarter. And we continue to make meaningful progress towards achieving our medium-term target of sustaining a 3,500 ton per day rate through the mill. Second quarter production results put us in a strong position to achieve our annual guidance.
Unnamed Speaker: Various risks and uncertainties may cause actual results to vary.
Dale Andres: Thank you, operator, and good morning, everyone.
Dale Andres: Turning to slide three, I'd like to start with highlighting the excellent financial performance in the quarter.
Dale Andres: The Los Gatos Joint Venture had record revenues, record cash flow from operations, and record free cash flow.
Dale Andres: Thank you, operator, and good morning, everyone. This was primarily due to strong operating performance and higher metal prices in the quarter. As previously announced, the Los Catos Joint Venture set yet another record for mill throughput during the quarter, and we continue to make meaningful progress towards achieving our medium-term target of sustaining a 3,500-ton-per-day rate through the mill. Our second quarter production results put us in a strong position to achieve our annual guidance.
Dale Andres: This was primarily due to the strong operating performance and higher metal prices in the quarter.
Dale Andres: As previously announced, the Wascato Strength Venture set yet another record for mill throughput during the quarter, and we continue to make meaningful progress towards achieving our medium-term target of sustaining a 3,500 tonne per day rate through the mill.
Dale Andres: Second quarter production results puts us in a strong position to achieve our annual guidance.
Dale Andres: As a result of the strong operating performance this quarter, all in sustaining cost metrics for the full year are expected to remain in the lower half of our guidance range, despite the continued strong pace, although that is starting to weaken and inflationary pressures in the first half of the year. I would also like to highlight the Los Gatos joint venture's free cash flow of almost $41 million in the second quarter of 2024, a 60% increase compared to the first quarter. Keeping to our quarterly cadence, the joint venture made a $40 million distribution in July, and as a result, Gatos Silver had a cash balance of nearly $109 million at the end of July.
Dale Andres: As a result of the Strong Operating Performance quarter, I would also like to highlight the Los Gatos Joint Ventures free cash flow of almost $41 million in the second quarter of 2024, a 60% increase compared to the first quarter. During the second quarter, we shifted our main focus from infill drilling in the Southeast Deep to more greenfields exploration drilling on both near mine and other targets in the highly prospective Los Gatos district. But first, turning to slide four.
Dale Andres: As a result of the strong operating performance this quarter,
Dale Andres: Our all-in sustaining cost metrics for the full year are expected to remain in the lower half of our guidance range despite the continued strong pay so although that is starting to weaken and inflationary pressures in the first half of the year.
Dale Andres: I would also like to highlight the Los Gatos Joint Ventures free cash flow of almost $41 million in the second quarter of 2024, a 60% increase compared to the first quarter.
Dale Andres: Keeping to our quarterly cadence, the joint venture made a 40 million dollar distribution in July and as a result Gatos Silver had a cash balance of nearly 109 million dollars at the end of July .
Dale Andres: We're going to our new light for mine plan is progressing well, and we are on track to announce the results in September. We are aiming to increase throughput and also extend the mine life. During the second quarter, we shifted our main focus from infill drilling in the southeast deeps to more green fields exploration drilling on both near mine and other targets in the highly prospective Los Gatos District. I'll talk about that more later on in the presentation. But first, turning to slide four, milk throughput for the second quarter was 32,240 tons per day, the sixth consecutive quarterly record.
Dale Andres: Work on our new Life of Mind plan is progressing well and we are on track to announce the results in September .
Dale Andres: We are aiming to increase throughput and also extend the mine life.
Dale Andres: During the second quarter we shifted our main focus from infill drilling in the southeast deeps to more greenfields exploration drilling on both near mine and other targets in the highly prospective Los Gatos district. I'll talk about that more later on in the presentation.
Dale Andres: Milled throughput for the second quarter was 3,240 tons per day, the sixth consecutive quarterly record. Mill throughput and metal grades were higher than in the second quarter of 2023, resulting in silver production being 15% higher compared to the second quarter of last year. And finishing this past quarter at 2.3 million ounces of silver equivalent production, which includes zinc, lead, and gold and a little bit of copper at 3.9 million ounces for the quarter, mill throughput increased 1% quarter over quarter with the mill regularly running at an operating rate of between 3500 and 3700 tons per day, and that's on a calendar day basis.
Dale Andres: But first, turning to slide 4, mill throughput for the second quarter was 3,240 tons per day, the sixth consecutive quarterly record.
Dale Andres: Milk's throughput and metal grades were higher than in the second quarter of 2023, resulting in silver production being 15% higher compared to the second quarter of last year. And then finishing this past quarter, 2.3 million ounces in silver equivalent production, which includes zinc, lead, and gold, and a little bit of copper at 3.9 million ounces for the quarter. Milk's throughput increased 1% quarter over quarter, with the mill regularly running at an operating rate of between 3,500 and 3,700 tons per day, and that's on a calendar day basis. As we have stated previously, mining is the bottleneck to achieve further throughput improvements, and we have a number of initiatives underway to address this bottleneck, including rebuilding the underground equipment fleet and various operational improvement projects, which are focused on planning, maintenance, and operational execution.
Dale Andres: Mill throughput and metal grades were higher than in the second quarter of 2023, resulting in silver production being 15% higher compared to the second quarter of last year.
Dale Andres: And finishing this past quarter at 2.3 million ounces in silver equivalent production, which includes zinc, lead, and gold, and a little bit of copper at 3.9 million ounces for the quarter.
Dale Andres: Mill throughput increased 1% quarter-over-quarter with the mill regularly running at an operating rate of between 3,500 and 3,700 tons per day and that's on a calendar day basis.
Dale Andres: As we have stated previously, mining is the bottleneck to achieve further throughput improvements, and we have a number of initiatives underway to address this bottleneck, including rebuilding the underground equipment fleet and various operational improvement projects, which are focused on planning, maintenance, and operational execution. Site operating unit costs were approximately $101 per tonne this quarter, and that's 3% lower than the comparable quarter last year. Cash costs for the quarter were 14% higher than in the second quarter last year, and that was primarily due to higher production rates.
Dale Andres: As we have stated previously, mining is the bottleneck to achieve further throughput improvements, and we have a number of initiatives underway to address this bottleneck.
Dale Andres: including rebuilding the underground equipment fleet and various operational improvement projects which are focused on planning, maintenance, and operational execution.
Dale Andres: Slight operating unit costs were approximately $101 per ton this quarter, and that's 3% lower than the comparable quarter in last year. Cash costs for the quarter were 14% higher than in the second quarter last year, and that's primarily due to the higher production rates. Our continuous improvement initiatives continued to offset the strong peso and the inflationary cost pressures. All-in sustaining costs per payable ounce of silver, and that's after byproduct credits, were $6.57, and that's 57% lower than the second quarter last year, and lower guidance range for 2024. And again, that was helped by strong bi-product production and sales.
Dale Andres: Site operating unit costs were approximately $101 per tonne this quarter, and that's 3% lower than the comparable quarter in last year.
Dale Andres: Cash costs for the quarter were 14% higher than in the second quarter last year and that's primarily due to the higher production rates.
Dale Andres: Our continuous improvement initiatives continue to help offset the strong peso and the inflationary cost pressure; all in, sustaining costs per payable ounce of silver, and that's after byproduct credit, were $6.57, and that's 57% lower than the second quarter last year and below our guidance range for 2024. And again, that was helped by strong by-product production and sales. All in sustaining costs per payable ounce on a silver equivalent basis, which is which is a co-product basis. We're just over $15, and that's 13% lower than in the second quarter last year, and well within our guidance range for 2024. And a bit more on guidance, moving to slide five.
Dale Andres: Our continuous improvement initiatives continue to help offset the strong peso and the inflationary cost pressures.
Dale Andres: All in sustaining costs per payable ounce of silver, and that's after byproduct credits.
Dale Andres: were $6.57, and that's 57% lower than the second quarter last year and below our guidance range for 2024. And again, that was helped by strong by-product production and sales.
Dale Andres: All-in sustaining costs per payable ounce on a silver equivalent basis, which is co-product basis, were just over $15, and that's 13% lower than in the second quarter last year, and well within our guidance range for 2024. And a bit more on guidance moving to slide five, based on the strong production in the first half of the year, we continue to expect throughput rates at Sarah Lascato's to average in the top half of our 3,000 to 3,300 ton per day guidance range for the year, and we continue to expect full year production to be in the upper half of our guidance range for 2024.
Dale Andres: All in sustaining costs per pay balance on a silver equivalent basis, which is co-product basis. We're just over $15 and that's 13% lower than in the second quarter last year and well within our guidance range for 2024.
Dale Andres: Based on the strong production in the first half of the year, we continue to expect throughput rates at Cerro Los Gatos to average in the top half of our 3,000 to 3,300 ton per day guidance range for the year. And we continue to expect full-year production to be in the upper half of our guidance range for 2024. As you can see in the table, silver and silver equivalent production is at approximately 53% on a year-to-date basis, compared to the midpoint of guidance, and our unit cost metrics are tracking below the midpoint in the first half of the year.
Dale Andres: And a bit more on guidance, moving to slide 5, based on the strong production in the first half of the year, we continue to expect throughput rates at Cerro Los Gatos to average in the top half of our 3,000 to 3,300 ton per day guidance range.
Dale Andres: for the year. And we continue to expect full year production to be in the upper half of our guidance range for 2024.
Dale Andres: As you can see in the table, silver and silver equivalent production are at approximately 53% on a year-to-date basis compared to the midpoint of guidance, and our unit cost metrics are tracking below the midpoint in the first half of the year. We still expect the exploration and definition drilling spend to be about 18 million for 2024, and sustaining capital expenditures to be approximately 45 million, with the majority of the CAPEX spent on underground development, with continued focus on opening up the southeast area and mine equipment rebuilds.
Dale Andres: As you can see in the table, silver and silver equivalent production are at approximately 53% on a year-to-date basis.
Dale Andres: compared to the midpoint of guidance and our unit cost metrics are tracking below the midpoint in the first half of the year.
Dale Andres: We still expect the exploration and definition drilling spend to be about $18 million for 2024, and sustaining capital expenditures to be approximately $45 million, with the majority of the CAPEX being spent on underground development, with continued focus on opening up the southeast area and mine equipment rebuilds.
Dale Andres: We still expect the exploration and definition drilling spend to be about $18 million for 2024 and sustaining capital expenditures to be approximately $45 million.
Dale Andres: with the majority of the CapEx spent on underground development with continued focus on opening up the southeast area and mine equipment rebuilds.
Andre Van Niekerk: I'll now turn the call over to Andre to present our financial results. Thank you, Dale. Moving to slide six.
Dale Andres: I'll now turn the call over to Andres to present our financial results.
Unnamed Speaker: Thank you, Dale. Moving on to slide six. Good morning, everyone.
Andre Van Niekerk: Good morning, everyone. The 70% owned Los Gatos Joint Ventures, strong operating performance, and strong realized metal prices resulted in another quarter of robust cash flow generation. Cash flow provided by operations was approximately $54.5 million dollars, a new quarterly record.
Andre: Thank you Dale. Moving to slide six. Good morning everyone.
Unnamed Speaker: The 70%-owned Los Gatos joint venture's strong operating performance and strong realized metal prices resulted in another quarter of robust cash flow generation. Cash flow provided by operations was approximately $54.5 million, a new quarterly record. The LGJV generated free cash flow of $40.8 million this quarter, 60% higher than the $25.5 million in Q1 2024 and 107% higher than the $19.7 million in Q2 2023, also a new record for the LG
Andre: The 70% owned Los Gatos joint venture's strong operating performance and strong realized metal prices resulted in another quarter of robust cash flow generation.
Andre: Cash flow provided by operations was approximately $54.5 million, a new quarterly record.
Andre Van Niekerk: The LGJV generated free cash flow of $40.8 million dollars this quarter, 60% higher than the $25.5 million in Q1 2024, and 107% higher than the $19.7 million in Q2 2023, also a new record for the LGJV. The increase from the comparable quarter last year was primarily due to significantly higher revenues, partially offset by our operating costs, largely due to higher volumes. Cash flow used in investing activities was $13.7 million dollars in Q2 2024, $900,000 lower than in Q2 2023. Of that amount, $11.4 million was spent on sustaining capital expenditures and $1.9 million on resource development running.
Speaker Change: The LGJV generated free cash flow of $40.8 million this quarter, 60% higher than the $25.5 million in Q1 2024, and 107% higher than the $19.7 million in Q2 2023.
Unnamed Speaker: The increase from the comparable quarter last year was primarily due to significantly higher revenues, partially offset by our operating costs, largely due to higher volumes. Cash flow used in investing activities was $13.7 million in Q2 2024, $900,000 lower than in Q2 2023. Of that amount, $11.4 million was spent on sustaining capital expenditures and $1.9 million on resource development drilling.
Andre: Also, a new record for the LGJV.
Andre: The increase from the comparable quarter last year was primarily due to significantly higher revenues, partially offset by our operating costs, largely due to higher volumes.
Andre: Cash flow used in investing activities was $13.7 million in Q2 2024.
Speaker Change: $900,000 lower than in Q2 2023. Of that amount, $11.4 million was spent on sustaining capital expenditures and $1.9 million on resource development drilling.
Andre Van Niekerk: The LGJV made a capital distribution of $25 million dollars in April 2024, and as a result of the continued strong free cash flow generation in the second quarter, the joint venture made a $40 million dollar capital distribution in July, subsequent to the end of the quarter.
Unnamed Speaker: The LGJV made a capital distribution of $25 million in April 2024. And as a result of the continued strong free cash flow generation in the second quarter, the joint venture made a $40 million capital distribution in July, subsequent to the end of the quarter. Now turning to slide 7 to look at the financial results of the Los Gatos Joint Venture for the quarter.
Speaker Change: The LGJV made a capital distribution of $25 million in April 2024, and as a result of the continued strong free cash flow generation in the second quarter, the joint venture made a $40 million capital distribution in July , subsequent to the end of the quarter.
Andre Van Niekerk: Now turning to slide 7 to look at the financial results of the look at the joint venture for the quarter. Revenue increased 62% to $94.2 million dollars in the second quarter of 2024. Higher volumes of metal sold and higher realized metal prices contributed to the significant increase in revenue for the quarter. The provisional revenue adjustment was $700,000 dollars, a positive adjustment compared to a $3.1 million negative adjustment in Q2 2023. Cost of sales increased by 24%, primarily due to a 29% increase in the percentage of concentrated sold and the associated higher mining and processing costs as a result of an 11% increase in more throughput.
Speaker Change: Now turning to slide 7 to look at the financial results of the Los Gatos joint venture for the quarter.
Unnamed Speaker: Revenues increased 62% to $94.2 million in the second quarter of 2024. Higher volumes of metal sold and higher realized metal prices contributed to the significant increase in revenue for the quarter. The provisional revenue adjustment was a $700,000 positive adjustment compared to a $3.1 million negative adjustment in Q2 2023. Cost of sales increased by 24%, primarily due to a 29% increase in the tonnage of concentrate sold and the associated higher mining and processing costs as a result of an 11% increase in mulled throughput. Costa Rican cells are further impacted by the stronger Mexican baso in Q2 2024 compared to Q2 2023.
Speaker Change: Revenues increased 62% to $94.2 million in the second quarter of 2024.
Speaker Change: Higher volumes of metal sold and higher realized metal prices contributed to the significant increase in revenue for the quarter.
Speaker Change: The Provisional Revenue Adjustment was a $700,000 positive adjustment compared to a $3.1 million negative adjustment in Q2 2023.
Speaker Change: Cost of sales increased by 24% primarily due to a 29% increase in the tonnage of concentrate sold and the associated higher mining and processing costs as a result of an 11% increase in mill throughput.
Andre Van Niekerk: Cost of sales were further impacted by the stronger Mexican base in Q2 2024 compared to Q2 2023. Depreciation, depletion, and amortization expense decreased by approximately 5%, primarily due to the increase in mineral reserves and the extension of the life of mine, partially offset by capital additions. An income tax expense of $12.5 million was recorded compared to $4.7 million in Q2 2023. Income tax expense increased primarily due to higher taxable income at the LGJV.
Speaker Change: Costa cells are further impacted by the stronger Mexican baso in Q2 2024 compared to Q2 2023.
Unnamed Speaker: Depreciation, depletion, and amortization expense decreased by approximately 5%, primarily due to the increase in mineral reserves and the extension of the life of the mine, partially offset by capital additions. An income tax expense of $12.5 million was recorded compared to $4.7 million in Q2 2023. Income tax expense increased primarily due to higher taxable income at the LTJV. Finally, the LGJV recorded net income of approximately $20.5 million, a significant increase from the $700,000 net income recorded in Q2 2023, mainly as a result of higher revenues.
Speaker Change: Depreciation, depletion and amortization expense decreased by approximately 5% primarily due to the increase in mineral reserves and the extension of the life of mine, partially offset by capital additions.
Speaker Change: An income tax expense of $12.5 million was recorded compared to $4.7 million in Q2 2023. Income tax expense increased primarily due to higher taxable income at the LTJV.
Andre Van Niekerk: Finally, the LGJV recorded net income of approximately $20.5 million dollars, a significant increase from the $700,000 income recorded in Q2 2023, mainly as a result of the higher revenues.
Andre Van Niekerk: During this slide 8, to review the financial results for Gatosolva, net income for the second quarter of 2024 was $9.2 million dollars compared to a net loss of $3.6 million in Q2 last year. Basic and diluted earnings were 13 cents per share this quarter compared to net loss per share of 5 cents in Q2, 2023. Equity income in the foliage increased to 14.5 million dollars primarily due to the increase in net income of the LGJB.
Unnamed Speaker: During slide eight, I will review the financial results for Gatos Silver. Net income for the second quarter of 2024 was $9.2 million, compared to a net loss of $3.6 million in Q2 last year. Basic and diluted earnings were $0.13 per share this quarter, compared to a net loss per share of $0.05 in Q2 2023. Equity income in affiliates increased to $14.5 million primarily due to an increase in net income of the LGJB.
Speaker Change: During this slide 8, to review the financial results for Gatos Silver.
Unnamed Speaker: The company incurred general and administrative expenses of $7.9 million, compared to $6.2 million in Q2 2023. The $1.7 million increase is primarily due to a $1.2 million increase in non-cash stock-based compensation expense as a result of equity grants since September 2023 after an extended backup period, and also a $600,000 increase in legal and consulting fees. Most of these IR costs are non-recurring, and we do not expect them to continue beyond 2024.
Speaker Change: Net income for the second quarter of 2024 was $9.2 million, compared to a net loss of $3.6 million in Q2 last year.
Speaker Change: Basic and diluted earnings were $0.13 per share this quarter compared to a net loss per share of $0.05 in Q2 2023.
Speaker Change: Equity income and affiliates increased to $14.5 million primarily due to the increase in net income of the LGJB.
Andre Van Niekerk: The company encouraged general and administrative expenses of $7.9 million compared to $6.2 in Q2, 2023. The $1.7 million increase is primarily due to a $1.2 million increase in non-cash stock-based compensation expense as a result of equity grants in September 20, 23 after an extended back-up period and also a $600,000 increase in legal and consulting fees. Most of these costs are non-recurring and we do not expect it to continue beyond 2024. GNI excluding non-cast stock-based compensation expense for $6.3 million compared to $5.7 in Q2, 2023.
Speaker Change: The company incurred general and administrative expenses of $7.9 million compared to $6.2 million in Q2 2023.
Speaker Change: The $1.7M increase is primarily due to a $1.2M increase in non-cash stock-based compensation expense as a result of equity grants since September 2023 after an extended back-up period.
Speaker Change: and also a $600,000 increase in legal and consulting fees.
Speaker Change: Most of these IR costs are non-recurring and we do not expect it to continue beyond 2024.
Unnamed Speaker: GNI excluding non-cash stock price compensation expense of $6.3 million compared to $5.7 million in Q2 2023. And lastly, other income includes $1.5 million of the quarterly management fees received from the LGJV for the quarter. Turning to slide 9, as mentioned earlier, the joint venture made a capital distribution of $25 million to its partners Gatos Silver and Deva during the second quarter, of which we received $17.5 million. As a result, Gatos Silver ended the second quarter with a cash balance of $82.5 million.
Speaker Change: GNI excluding non-cash stock based compensation expense for $6.3 million compared to $5.7 in Q2 2023.
Andre Van Niekerk: And lastly, other income includes $1.5 million of the quarterly management fees received from the LGJB for the quarter.
Andre Van Niekerk: During this slide 9, as was mentioned earlier, the joint venture by the capital distribution of 25 million to its partners, Katoslav Rentela, during the second quarter, of which we received $17.5 million. As a result, Katoslav Rentela ended the second quarter with a cash balance of $82.5 million.
Speaker Change: As a result, Gatos Silver ended the second quarter with a cash balance of $82.5 million.
Andre Van Niekerk: In July, the LGJB made another capital distribution of $40 million, of which the company received $28 million, bringing the company's cash balance to $108.9 million at July 31, 2024. The LGJB ended the second quarter with a cash balance of $45.5 million and at a cash balance of $24.4 million at July 31, 2024. Both GSI and the joint venture continued to remain debt-free.
Unnamed Speaker: In July, the LGJV made another capital distribution of $40 million, of which the company received $28 million, bringing the company's cash balance to $108.9 million at July 31st, 2024. The LGJV ended the second quarter with a cash balance of $45.5 million and had a cash balance of $24.4 million at July 31st, 2024. Both GSI and the joint venture continue to remain debt free.
Dale Andres: I will now hand it back to you.
Dale Andres: Thanks, Andre. On slide 10, highlights how our business improvement initiatives are helping to drive cost performance together with the increased milk throughput. Site operating costs per tonne have decreased by 9 percent over the past three years, and that's despite inflationary pressures and the substantial strengthening of the Mexican peso over that time period. We are continuing to focus on the efficiency of our underground workforce and equipment, including continuing our rebuild program on our equipment and advancing other productivity initiatives to sustainably mine at our current 3,200 to 3,300 tonne per day rate, with targets to further extend up to 3,500 tons per day in the medium term.
Dale Andres: On slide 10, it highlights how our business improvement initiatives are helping to drive cost performance. Together with increased mill throughput, site operating costs per ton have decreased by 9% over the past three years, and that's despite inflationary pressures and the substantial strengthening of the Mexican Peso over that time period. We are continuing to focus on the efficiency of our underground workforce and equipment, including continuing our rebuild program on our equipment and advancing other productivity initiatives to sustainably mine at our current 3,200 to 3,300 ton per day rate, with targets to further extend up to 3,500 tons per day in the medium term.
Speaker Change: Thanks Andres. On slide 10, it highlights how our business improvement initiatives are helping to drive cost performance together with the increased mill throughput.
Speaker Change: and the substantial strengthening of the Mexican Peso over that time period.
Dale Andres: Turning to slide 11, we remain on track to provide our updated lifeline plan and mineral reserves in the third quarter of 2024, and as I said previously, with targeting September, we are working to incorporate a higher throughput rate in the new mine plan, as the current plan averages 2,950 tons per day, so driving towards our 3,500 target would be a significant increase. However, we still expect an extension to the life of mine notwithstanding this higher rate. The new reserve will be based on an additional 66 kilometers of drilling that's been completed over the previous 12-month period, and that was up to the end of the first quarter of this year.
Dale Andres: Turning to slide 11, we remain on track to provide our updated life of mine plan and mineral reserves in the third quarter of 2024. And, as I said previously, we're targeting September. We are working to incorporate a higher throughput rate in the new mine plan, as the current plan averages 2950 tonnes per day. So driving towards our 3500 target would be a significant increase. However, we still expect an extension to the life of the mine, notwithstanding this higher rate.
Speaker Change: Turning to slide 11, we remain on track to provide our updated life of mine plan and mineral reserves in the third quarter of 2024. And as I said previously, we're targeting September .
Speaker Change: We are working to incorporate a higher throughput rate in the new mine plan, as the current plan averages 2,950 tonnes per day, so driving towards our 3,500 target would be a significant increase.
Dale Andres: The new reserve will be based on an additional 66 kilometers of drilling that was completed over the previous 12 month period, and that was up to the end of the first quarter of this year. And as a reminder, the Southeast Deeps conversion drilling, which was completed during that 12 month period, up to March 2024, was done on 50 meter spacing. We still have two drills dedicated to further expansion of this zone along strike, with additional strong results for this area reported in our most recent exploration release in late July.
Dale Andres: And as a reminder, this healthy steep conversion drilling, which was completed during that 12-month period up to March 2024, was done on 50 meter spacing. We still have two drills dedicated to further expansion of this zone along strike, with additional strong results for this area reported in our most recent exploration release in late July. On the planned recovery side of things, we are completing detailed engineering for a copper separation circuit and anticipate making a decision in the second half of this year on that. We are also evaluating technology and various options for increasing the recovery of silver, gold, and zinc from fines that are currently being lost to tailings.
Dale Andres: On the plan recovery side of things, we are completing detailed engineering for a copper separation circuit and anticipate making a decision on that in the second half of this year. We are also evaluating technology and various options for increasing the recovery of silver, gold, and zinc from fines that are currently being lost to tailings. Turning to slide 12.
Dale Andres: Turning to slide 12, we are highlighting a balanced approach to our organic growth strategy. The images on this slide show a few of the key targets that are located within kilometers of the existing mine workings. The second quarter marked a clear pivot in our execution towards unlocking value in the Los Gatos District. With the completion of the Southeast Deep's infill program for the 2024 Reserve and Resource Update, efforts were immediately redirected towards brownfield extension and growth-related drilling. At the same time, our significant increase in greenfields work in the district provides the required balance between life extension and district exploration.
Dale Andres: We are highlighting a balanced approach to our organic growth strategy. The images on this slide show a few of the key targets that are located within kilometers of the existing mine workings. The second quarter marked a clear pivot in our execution towards unlocking value in the Los Gatos district. With the completion of the Southeast Deep's infill program for the 2024 reserve and resource update, efforts were immediately redirected towards brownfield extension and growth-related drilling.
Speaker Change: Turning to slide 12, we are highlighting a balanced approach to our organic growth strategy.
Speaker Change: The images on this slide show a few of the key targets that are located within kilometers of the existing mine workings.
Speaker Change: The second quarter marked a clear pivot in our execution towards unlocking value in the Los Gatos District.
Dale Andres: At the same time, our significant increase in greenfields work in the district provides the required balance between life extension and district exploration, ensuring we can continue to advance our knowledge of key targets across all levels of the exploration pipeline, and that's from early stage mapping across our 103,000 hectare property through to resource and, hopefully, reserve additions. While we advance our drilling programs, we remain committed and excited about the potential of our field mapping programs, which are continuing to help unlock value in this exciting district and firm up additional targets for us to drill. Slide 13, it shows tangible results of how we're executing on this strategy in the district.
Speaker Change: At the same time, our significant increase in greenfields work in the district.
Speaker Change: provides the required balance between life extension and district exploration.
Dale Andres: Ensuring we can continue to advance our knowledge of key targets across all levels of the exploration pipeline, and that's from early stage mapping across our 103,000 hectare property through to resource and hopefully reserve additions. While we advance our drilling programs, we remain committed and excited about the potential of our field mapping programs, which is continuing to help unlock value in this exciting district and firm up additional targets for us to drill.
Speaker Change: While we advance our drilling programs, we remain committed and excited about the potential of our field mapping programs, which is continuing to help unlock value in this exciting district and firm up additional targets for us to drill.
Dale Andres: On slide 13, it shows tangible results of how we're executing on this strategy in the district. Starting in the Northwest, we have our San Luis target, located 4.5 kilometers from Saraldos Gatos infrastructure. We mobilized a drill rig to this target in the mid-part of the last quarter, and we've already completed two holes. Both holes in San Luis have returned wide intervals of faulting, painting, and solidified brushes with elevated precious and-based metal results. We are excited about the potential results that lay ahead of us, and we continue to drill test this target. Moving closer to the mind, we have the Saraldos Gatos deeps, which were targeting the potential faulted portion of the central and northwest zones at depth, and so this is similar to the southeast deeps.
Dale Andres: Starting in the northwest, we have our San Luis target, located 4.5 kilometers from Cerro Los Gatos infrastructure. We mobilized a drill rig to this target in the mid part of the last quarter, and we've already completed two holes. Both holes in San Luis have returned wide intervals of faulting, veining, and silicified breccias with elevated precious and base metal results.
Speaker Change: Starting in the northwest, we have our San Luis target, located 4.5 kilometers from Cerro Los Gatos infrastructure.
Dale Andres: We are excited about the potential results that lay ahead of us, and we continue to drill test this target. Moving closer to the mind, we have the Cerebus Gatos Deep, where we're targeting the potential faulted portion of the central and northwest zones at depth. And so this is similar to the southeast deep.
Dale Andres: We are mobilizing a new drill rig, and we actually have mobilized a new drill rig to fight, and this was done last quarter that began drilling a 1200 meter deep geological framework hole within the target footprint in the central deeps. This target is a key priority in our strategy. We, as any success, will immediately open up a large and currently untested search area directly below our current mine infrastructure. Further to the southeast, we also have our reported manual target, and that's located approximately two kilometers from the mine. Results are confirming a complex structural corridor returning geochemically anomalous results.
Dale Andres: We are mobilizing a new drill rig, and we actually have mobilized a new drill rig to site. And this was done last quarter, which began drilling a 1200 meter deep geological framework hole within the target footprint in the central deep. This target is a key priority in our strategy, as any success will immediately open up a large and currently untested search area directly below our current mine infrastructure. Further to the southeast, we also have our Port Agueno target, and that's located approximately two kilometers from the mine.
Speaker Change: We are mobilizing a new drill rig and we actually have mobilized a new drill rig to site and this was done last quarter that began drilling a 1,200 meter deep geological framework hole within the target footprint in the in the central deeps.
Speaker Change: This target is a key priority in our strategy as any success will immediately open up a large and currently untested search area directly below our current mine infrastructure.
Speaker Change: Further to the southeast we also have our Port Agüeño target and that's located approximately two kilometers from the mine.
Speaker Change: Our results are confirming a complex structural corridor returning geochemically anomalous results.
Dale Andres: Our initial drill program continues to indicate all the right ingredients are present for a possible discovery. We will continue to advance our balance strategy to unlock value in the Las Gatos District through the remainder of 2024 and plan to build off the exciting start realized in the second quarter.
Dale Andres: Our initial drill program continues to indicate all the right ingredients are present for a possible discovery. We will continue to advance our balanced strategy to unlock value in the Las Gatos district through the remainder of 2024 and plan to build off the exciting start realized in the second quarter. So, in summary, on slide 14, we continue to safely drive mill throughput increases together with our productivity improvements and cost optimization, which continues to be a core part of our business and operating strategy.
Speaker Change: Our initial drill program continues to indicate all the right ingredients are present for a possible discovery.
Speaker Change: We will continue to advance our balanced strategy to unlock value in the Las Gatos district through the remainder of 2024 and plan to build off the exciting start realized in the second quarter.
Dale Andres: So, in summary on slide 14, we continue to safely drive milk throughput increases, together with our productivity improvements and cost optimization, which continues to be a core part of our business and operating strategy. We remain focused on developing our new life of mine plan by September that incorporates the Southeast Deeps conversion drilling. And together with other value enhancing initiatives, including higher throughput rates and the copper circuit, which I mentioned earlier. And we continue to be very excited as we continue our exploration drilling on our near mine targets. And that's on Port-Aguenio, both the northwest and central deeps targets and our district drilling in the large and highly prospective district that we have, and that includes the San Luis prospect.
Speaker Change: So, in summary, on slide 14, we continue to safely drive mill throughput increases together with our productivity improvements and cost optimization, which continues to be a core part of our business and operating strategy.
Dale Andres: We remain focused on developing our new life of mine plan by September that incorporates the Southeast deeps conversion drilling and, together with other value-enhancing initiatives, including higher throughput rates and the Copper Circuit, which I mentioned earlier. And we continue to be very excited as we continue our exploration drilling on our near mine target. And that's on Port Agueno, both the northwest and central deeps targets, and our district drilling in the large and highly prospective district that we have, which includes the San Luis Prospect.
Speaker Change: and together with other value-enhancing initiatives, including higher throughput rates and the copper circuit, which I mentioned earlier.
Speaker Change: And we continue to be very excited as we continue our exploration drilling on our near-mine targets, and that's on Puerto Gueno, both the Northwest and Central Deeps targets.
Speaker Change: and our district drilling in the large and highly prospective district that we have, and that includes the San Luis Prospect.
Dale Andres: And importantly, we continue to generate strong operating margins and cash flow, with regular distributions expected from the joint venture and a growing cash balance at the corporate level that now exceeds $100 million, which is available to support future growth of the company.
Dale Andres: And importantly, we continue to generate strong operating margins and cash flow with regular distributions expected from the joint venture and a growing cash balance at the corporate level that now exceeds $100 million, which is available to support future growth of the company. I'll now hand it back to the operator for questions.
Speaker Change: And importantly, we continue to generate strong operating margins and cash flow with regular distributions expected from the joint venture and a growing cash balance at the corporate level that now exceeds $100 million, which is available to support future growth of the company.
Operator: I'll now hand it back to the operator for questions. At this time, I would like to remind everyone that in order to ask a question, please press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster.
Speaker Change: I'll now hand it back to the operator for questions.
Operator: At this time, I would like to remind everyone, in order to ask a question, please press star then the number 1 on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Kevin O'Halloran from BMO Capital Markets. Your line is now open.
Speaker Change: At this time,
Speaker Change: I would like to remind everyone, in order to ask a question, please press star then the number 1 on your telephone keypad. We'll pause for just a moment to compile the Q&A roster.
Kevin O'halloran: Your first question comes from the line of Kevin O'Halloran from BMO Capital Markets. Your line is now open.
Speaker Change: Your first question comes from the line of Kevin O'Halloran from BMO Capital Markets. Your line is now open.
Kevin O'halloran: Hey, Dale and team, thanks for taking my question.
Kevin O'halloran: Hey Dale and team, thanks for taking my question. Maybe starting with the bigger picture question, can you give us any thoughts around the Mexican election in June and any expectations or anything you're hearing or seeing from the incoming administration with respect to mining that might impact you?
Dale Andres: Maybe starting with the bigger picture question, can you give us any thoughts around the Mexican election in June and any expectations or anything you're hearing or seeing from the incoming administration with respect to mining that might impact you? Yeah, thanks. Thanks, Kevin. Yeah, we're optimistic that things will be more pro-business under the new administration. We're seeing the bulk of the ministerial appointments to date, being pro-business and I would just point out the Minister of Economy and particular Marcello Or Bird. And I know the new incoming minister is also already met with the mining industry as a priority.
Kevin O'halloran: Hey Dale and team, thanks for taking my question. Maybe starting with the bigger picture question, can you give us any thoughts around the Mexican election in June and any expectations or anything you're hearing or seeing from the incoming administration with respect to mining that might impact you?
Dale Andres: Yeah, thanks. Thanks, Kevin.
Dale Andres: Thanks Kevin. We're optimistic that things will be more pro-business under the new administration.
Dale Andres: Yeah, we're optimistic that things will be more pro-business under the new administration. We're seeing, you know, the bulk of the ministerial appointments to date being pro-business. And I would just point out the Minister of Economy, in particular, Marcelo Obrard.
Speaker Change: We're seeing the bulk of the ministerial appointments to date being pro-business, and I would just point out the Minister of Economy in particular, Marcelo Obrard.
Dale Andres: And I know the new incoming minister has also already met with the mining industry as a priority. So we're hopeful that things will improve for the industry. Just as a reminder, we don't need any immediate permits to continue operating. But I think it is healthy and, you know, for the future growth of our district, obviously, we'd like to see that area improved for the industry. And we're hopeful that that will be the case with the new administration coming in October.
Speaker Change: And I know, you know, the new incoming minister has also already met with the mining industry as a priority.
Kevin O'halloran: So we're hopeful that things will improve for the industry. Just as a reminder, we don't need any immediate permits to continue operating. But I think it is healthy and for the future growth of our district, obviously, we'd like to see that area improve for the industry. And we're hopeful that that will be the case with the new administration coming in in October. Great, thanks for that.
Speaker Change: So, we're hopeful that things will improve for the industry. Just as a reminder, we don't need any immediate permits.
Speaker Change: to continue operating.
Speaker Change: But I think it is healthy, and for the future growth of our district, obviously, we'd like to see that area improved for the industry, and we're hopeful that that will be the case with the new administration coming in in October .
Dale Andres: Great, thanks for that. My second question, you addressed this a little bit in your comments already, but can you give us a sense of your exploration priorities and maybe the pace of drilling that we can expect on near mine targets versus regional exploration now that the infilling is wrapped up?
Dale Andres: My second question, you addressed this a little bit in your comments already, but can you give us a sense of your exploration priorities and maybe the pace of drilling that we can expect on near-mind targets versus the regional exploration now that the in-filling has wrapped up? Yeah, so I think we're currently, if I'm not mistaken, we're at five surface rigs. I think we're going to be going up to six. Two of those will remain on the southeast deeps and continuing to extend mineralization and hopefully reserves and resources, and ultimately reserves. As you would have seen from our July release, we have hit some additional intersections in the second quarter since the cutoff date for every life of mine plans, so we're going to continue to extend and expand the mineralization in that area. So that continues to be a priority.
Speaker Change: Great, thanks for that. My second question, you addressed this a little bit in your comments already, but can you give us a sense of your exploration priorities and maybe the pace of drilling that we can expect on near-mine targets versus regional exploration now that the infilling is wrapped up? Thank you. Great.
Dale Andres: Yeah, so I think we're currently, if I'm not mistaken, we're at five surface rigs. I think we're going to be going up to six. Two of those will remain on the southeast deeps and continue to extend mineralization and, hopefully, reserves and resources and ultimately reserves. As you would have seen from our July release, we have hit some additional intersections in the second quarter since the cut-off date for our New Life of Mine plan, so we're going to continue to extend and expand the mineralization in that area. So that continues to be a priority.
Speaker Change: Yeah, so I think we're currently, if I'm not mistaken, we're at five surface rigs. I think we're going to be going up to six. Two of those will remain on the southeast deeps.
Speaker Change: continuing to extend mineralization and hopefully reserves and resources and ultimately reserves.
Speaker Change: As you would have seen from our July release, we have hit some additional intersections in the second quarter since the cut-off date for our New Life of Mind plan. So we're going to continue.
Speaker Change: to extend and expand the mineralization in that area, so that continues to be a priority.
Dale Andres: But I would say the other four rigs, we plan to have at least two of those on Greenfield, and right now we have one on Central, you know, the central deeps. We may look at putting the sixth rig either on that or more broadly out in the district, and that's really speaking to the third quarter.
Dale Andres: But I would say the other four rigs, we plan to have at least two of those on Greenfield. And right now, we have one on Central, the Central Deep. We may look at putting the sixth rig either on that or more broadly out in the district, and that's really speaking to the third quarter. Obviously, it depends on success.
Speaker Change: But I would say the other four rigs, we plan to have at least two of those on Greenfield and right now we have one on the central deeps.
Speaker Change: We may look at putting the sixth rig either on that or more broadly out in the district.
Dale Andres: Obviously, it depends on success, but as we ramp up to the fourth quarter, we're also looking at going further afield into the northwest of the property around the province area, and we definitely want to get the drills turning up in that area, which is just as a reminder, it's about 15 or so kilometers to the northwest of the mine, and we haven't done drilling in that area. I don't think since, you know, for more than 10 years, since the early days, but there's some really exciting mapping and targeting that we're doing out there. Our geologists come back from the field every day, more and more excited about that area.
Speaker Change: And that's really speaking to the third quarter.
Dale Andres: But as we ramp up to the fourth quarter, we're also looking at going further afield into the northwest of the property around the Lintz area. And we definitely want to get the drills going in that area, which, just as a reminder, is about 15 or so kilometers to the northwest of the mine. And we haven't done drilling in that area, I don't think since, you know, for more than 10 years since the early days.
Speaker Change: Obviously, it depends on success, but as we ramp up to the fourth quarter, we're also looking at going further afield into the northwest of the property around the Lintz area.
Speaker Change: 15 or so kilometers to the northwest of the mine and we haven't done drilling in that area I don't think since you know for more than 10 years since the early days but there's some really exciting
Dale Andres: But there's some really exciting mapping and targeting that we're doing out there. Our geologists come back from the field every day more and more excited about that area. And yeah, we're looking forward to getting the drills up there.
Speaker Change: mapping and targeting that we're doing up there. Our geologists come back from the field every day, more and more excited about that area and yeah we're looking forward to getting the drills up there.
Kevin O'halloran: And yeah, we're looking forward to getting the drills up there. Great. Thanks. That's helpful.
Kevin O'halloran: Great, thanks. That's helpful. Last one for me, just a quick one on the rebuild program. Can you remind us about
Kevin O'halloran: Final one for me, just a quick one on the rebuild program.
Speaker Change: Great, thanks. That's helpful. Final one for me, just a quick one on the rebuild program. Can you remind us about the timing on that? Is it still on track to wrap up in H2 here? And then should we expect to see that helping to bump up mining rates in the second half?
Dale Andres: Can you remind us about the timing on that still on track to wrap up in H2 here? And then should we expect to see that helping to bump up mining rates in the second half? Yeah, we started our rebuild.
Kevin O'halloran: Yeah, we started our rebuild. Thanks again for the follow up, Kevin. We started our rebuild program.
Dale Andres: Thanks again for the for the follow up. Kevin, we started our rebuild program on our mining equipment last year. We've been continuing that program this year, and it continues into the first part of 2025. Obviously, our priority equipment was up first and foremost, but that would include our trucks, our loaders, our boulders, our jumbles. We really are refreshing the entire underground fleet. And we've been able to accomplish these increases that we've seen. You know, we've used some rental equipment to help offset while we've had the equipment help for rebuild. But the program probably has less than a year to go.
Dale Andres: We started our rebuild program on our mining equipment last year, and we've been continuing that program this year, and it continues into the first part of 2025. Obviously, our priority equipment,
Speaker Change: Yeah, we started our rebuild, thanks again for the follow up, Kevin. We started our rebuild program on our mining equipment last year. We've been continuing that program this year and it continues into the first part of 2025. Obviously, our priority equipment was up first and foremost.
Dale Andres: But that would include, you know, our trucks, our loaders, our boulders, our jumbos. We really are refreshing the entire underground fleet.
Speaker Change: But that would include our trucks, our loaders, our boulders, our jumbos. We really are refreshing the entire underground fleet.
Dale Andres: And we've been able to accomplish these increases that we've seen, you know, we've used some rental equipment to help offset while we've had the equipment help for the rebuild, but the program probably has less than a year to go, or probably about 70 to 80% of the way through. We should be finished the bulk of that by the first quarter of next year, and the priority equipment is obviously first. So we've done the vast majority of that.
Speaker Change: And we've been able to accomplish these increases that we've seen. You know, we've used some rental equipment to help offset while we've had the equipment help for rebuild.
Dale Andres: We're probably about 70 to 80 percent of the way through. We should be finished the bulk of that by the first quarter of next year. and the priority equipment is obviously first, so we've done the vast majority of that. That helps us. That's not the only answer to increasing up to 3,500 tons per day, which we've said is our medium-term target. We're making good progress towards that. But it's using that equipment, and it's everything like shift-change times, blasting efficiencies, all continuing to optimize our backfill program, or cycling of long-hole stokes. All of these types of things help us drive to that 3,500 tons per day mark, but definitely having a refreshed equipment fleet is going to help that as well.
Speaker Change: But the program probably has less than a year to go. We're probably about 70 to 80% of the way through. We should be finished the bulk of that by the first quarter of next year.
Speaker Change: And the priority equipment is obviously first, so we've done the vast majority of that.
Dale Andres: That helps us, but it's not the only answer to increasing production up to 3500 tonnes per day, which we've said is our medium-term target. We're making good progress towards that, but it's using that equipment, and it's everything like shift change times, blasting efficiencies, all continuing to optimize our backfill program, and our cycling of long haul stokes. All of these types of things help us drive to that 3,500 ton per day mark, but definitely, having a refreshed equipment fleet is going to help that as well.
Speaker Change: That helps us. That's not the only answer to increasing up to 3,500 tons per day, which we've set as our medium-term target. We're making good progress towards that.
Speaker Change: But it's using that equipment and it's everything like shift change times, blasting efficiencies.
Speaker Change: all continuing to optimise our backfill program, our stifling of long haul stokes. All of these types of things help us drive to that 3,500 tonne per day mark, but definitely having a refreshed equipment fleet is going to help that as well.
Kevin O'halloran: Great, thanks for that, Dale.
Kevin O'halloran: Great, thanks for that, Dale. That's it for me.
Operator: That's it for me. Congrats on the strong quarter, and I'll jump back in the queue. Thanks. Thanks, Scott.
Speaker Change: Great, thanks for that Dale. That's it for me. Congrats on the strong quarter and I'll jump back in the queue. Thanks.
Operator: Again, if you would like to ask a question, please press star, the number one on your telephone keypad.
Speaker Change: Thanks, Kevin.
Speaker Change: Again, if you would like to ask a question, please press star then the number 1 on your telephone keypad.
Operator: There are no further questions for this time, Mr. Andres.
Dale Andres: I turn the call back over to you. Okay, thanks.
Speaker Change: There are no further questions at this time. Mr. Andres, I turn the call back over to you.
Dale Andres: Thanks for listening, everyone. We look forward to updating you on our progress in the third quarter. Thank you.
Andres: Okay, thanks for listening everyone. We look forward to updating you on our progress in the third quarter.
Operator: This concludes today's call.
Speaker Change: Thank you.
Operator: You may now disconnect. Please wait. The conference will begin shortly.
Speaker Change: This concludes today's call. You may now disconnect.
Kevin O'halloran: Congratulations on a strong quarter, and I'll jump back in the queue. Thanks. Thanks again.
Operator: Again, if you would like to ask a question, please press star then the number 1 on your telephone keypad. There are no further questions at this time. Mr. Andres, I turn the call back over to you. Okay.
Dale Andres: Okay, thanks. Thanks for listening, everyone. We look forward to updating you on our progress in the third quarter.
Operator: Thank you.