Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Record production of 139,100 ounces of gold, exceeding quarterly guidance.
- Significant cost reductions with total cash costs down 9% and all-in sustaining costs down 13% from the first quarter.
- Strong financial performance with record quarterly revenues of $333 million and free cash flow of $107 million.
- Successful integration of the Magino acquisition, expected to drive production to 700,000 ounces per year by 2026.
- Largest exploration budget ever planned at over $60 million, yielding exceptional results across operations.
Negative Points
- Inflationary pressures, especially around labor, are expected to persist, potentially increasing costs.
- Lower production expected in the second half of the year due to the onset of the rainy season in Mexico and lower grades.
- Ongoing need for capital investments, including $88 million in the second quarter, which could strain cash flow.
- Operational challenges at Island Gold with lower mining rates earlier in the quarter due to equipment issues.
- Debt incurred to pay off Argonaut's term loan and revolving credit facility, resulting in a $250 million draw on the credit facility.
Q & A Highlights
Q: At Island Gold, it was great to see grades improve over 30% quarter-over-quarter. What was the average grade you were expecting in Q2, and are these higher grades expected to persist in the second half?
A: We were expecting grades of about 12 to 12.5 grams per tonne in Q2. For the second half of the year, we expect grades to be more in line with our reserve rate, around 11 grams per tonne.
Q: Have there been any surprises so far from an operating or financial standpoint regarding the Magino acquisition?
A: From an operating standpoint, based on our due diligence, there have been no surprises. We are looking to make continual improvements through the mining and milling operations and expect to pick up production as we move into the latter half of the year and into 2025.
Q: Is the Phase three plus expansion still on budget as well as on schedule?
A: We expect some savings from not needing to expand the Island mill, but we also have costs to expand the Magino mill. With inflationary pressures, we anticipate a modest increase compared to the original $750 million budget.
Q: Are you still expecting second-half production to be higher than the first half?
A: Given the strong first half, particularly in Mexico, and the onset of the rainy season in Q3, we expect a potential decrease in Mexico. Overall, we are comfortable with our guidance and will release updated guidance in September.
Q: How will you present guidance for Magino and Island Gold? Will it be integrated or separate?
A: For 2024, we will present them separately as they are running under separate mills. From 2025 onwards, as they operate under an integrated mill, we will look at them as one operation.
Q: Can you discuss the equipment refreshment cycle at Island Gold? Are there any plans for Q3 and Q4?
A: We received two new haul trucks in early June, and two more are scheduled for the second half of the year. This is part of our fleet replacement strategy based on operating hours. We will continue to replace older units as needed.
Q: Are you planning to transition to more hybrid production scoops at Young-Davidson?
A: Yes, the new hybrid units have been performing well with high availability. We plan to lean more towards these hybrid units as part of our fleet replacement strategy, which will improve overall cost efficiency.
Q: What led to the discovery of the conglomerate zone at Young-Davidson?
A: We compiled historic exploration results and recognized opportunities from limited sampling in 2008. Follow-up drilling from underground bays intersected high-grade mineralization in conglomerates, leading to this discovery.
Q: Will the current TSF permit and design accommodate potential reserve upside at Young-Davidson?
A: Yes, the existing tailings storage facility has capacity for our current reserve and resource base, with some upside potential.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
