Fortuna Silver Mines Q1 2023 Earnings Call Transcript

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Provided by Quartr
May 16, 2023

There are 11 speakers on the call.

Operator

Greetings, and welcome to the Fortuna Silver Mines First Quarter 2023 Financial and Operational Results Call. At this time, all participants are in a listen only mode and a question and answer session will follow the formal presentation. Please note, this conference is being recorded. I will now turn the conference over to your host, Carlos Vaca, Director of Investor Relations. Sir, you may begin.

Speaker 1

Thank you, Ali. Good morning, ladies and gentlemen. I would like to welcome you to the Fortuna Silver Mines 1st Quarter 2023 Financial and Operational Results Conference Call. Hosting the call today on behalf of Fortuna Will be Jorge Alberto Ganoza, President and Chief Executive Officer Luizarillo Ganoza, Chief Financial Officer Cesar Velasco, Chief Operating Officer, Latin America David Whittle, Chief Operating Officer, West Africa and Paul Wheaton, Senior Vice President, Exploration. Today's earnings call presentation will be available on our website, fortunasilver.com.

Speaker 1

As a reminder, statements made during this call are subject to the reader's advisories included in yesterday's news release and in the earnings call presentation. Financial figures contained in the presentation and discussed in today's call are presented in U. S. Dollars unless otherwise stated. Before I turn over the call to Jorge, I would like to indicate that this earnings call contains forward looking information that is based on the company's current expectations, Estimates and beliefs.

Speaker 1

This forward looking information is subject to a number of risks, uncertainties and other factors. Actual results could differ materially from a conclusion, forecast or projection in the forward looking information. Certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward looking information. Additional information about the material factors that could cause actual results to differ materially from the conclusion, forecast or projection In the forward looking information and the material factors or assumptions that were applied in drawing a conclusion or making a Forecast or projection as reflected in the forward looking information is contained in the company's annual information form MD and A, which are publicly available on SEDAR. The company assumes no obligation to update such forward looking information in the future, except as required I would now like to turn the call over to Jorge Alberto Dannoza, President, Chief Executive Officer and Co Founder of Fortuna.

Speaker 2

Thank you, Carlos. Good morning to all. Our business performed well during the Q1. We recorded net income of $0.04 per share, achieved production of 94,110 Gold equivalent ounces on track to meet annual guidance and our costs were all in line with our guidance projections for the period. The sustained worldwide inflation and corresponding cost creep that we all experienced over the past couple of years Has been compressing business margins across the precious metals mining industry.

Speaker 2

This despite initiatives To optimize our operations and streamline the business, gold and silver prices did not provide any significant relief on margins as of Q1 2023, but going into the Q2, metal prices and margins for the business are looking much stronger. Our average realized gold price for Q1 was $1893 which is essentially flat against what we realized in the comparable quarter for 2022 and only 7% higher against the realized price 2 years ago in Q1 2021. For silver, the story is even a bit more difficult. For 2023, we realized for this Q1, we realized $22.52 which is 14% lower against the $26.20 we realized in Q1 2021. Over the last years over the last year, Quarter against comparable quarter, our consolidated cash cost per ounce went from $7.72 per ounce To $9.23 per ounce, up 20%.

Speaker 2

Despite all these, our EBITDA came in at a healthy 65 $1,000,000 and the business generated net cash from operation operating activities of 41,800,000 After meeting all our sustaining capital demands, funding corporate expenses and paying $12,900,000 in tax, The business generated free cash flow of $8,700,000 Luis will expand on our management discussion of financial results later in this Subsequent to the end of the quarter, we have had a few relevant events of important that I want to mention. During April at the San Jose mine in Mexico, we had to contend with a 15 day stoppage derived from a union claim demanding increase in profit sharing Beyond what's stipulated by law, this dispute has been resolved and operations resumed. In early May as well, the Mexican government approved the new mining reform, Which we view as negative for investment in the country, unfortunately. For starters, mineral exploration open ground becomes an activity reserved for the government and existing mineral concessions and mine operations will be Subject to many questionable articles in the law, which provide for higher costs and uncertainties to investment. We expect there will be many constitutional appeals filed with the Supreme Court of Justice in Mexico against the new law Coming from mining companies and other interest groups.

Speaker 2

Another item to be aware of is Our first gold pour at the newly built Seguela mine, which is imminent, and we expect The core in this second half of May. And on May 8, we announced We reached an agreement with Chesa Resources to acquire 100% of the company for an all share consideration, Representing approximately 5.1 percent of the pro form a Fortuna. We expect this transaction to close in late August. Chester is of great strategic fit to Fortuna. Geographically, the Chester properties are located in Senegal, A near neighboring country to our existing operations in Cote D'ivo and Burkina Faso, a mining friendly jurisdiction, Senegal And a place where we can leverage our West African management infrastructure and expertise.

Speaker 2

The Diambasut project It's a high value advanced exploration opportunity with multiple targets still to be drilled test located in the heart of the Senegal Mali Shear zone Within a few kilometers of Tier 1 minutees in the portfolio of gold majors and the preliminary economic assessment Carried by Chester on the Amba suite outline a conventional open pit and CIL process that even with a sub million ounce gold resource as it Today can deliver robust internal rates of return above our minimum investment threshold. Paul Wheaton, our Senior Vice President, Exploration is with us. And Paul, can you please share our views on the exploration opportunities that Cesar presents to us?

Speaker 3

Yes, certainly. Thank you, Jorge. As Jorge said, Fiesta represents the next step for our West African growth Follows the Soguela development. And this is a project we've also been tracking for a few years now and watching it grow over time. So just a quick summary.

Speaker 3

It's located in Senegal. It's actually located in the southeast corner of Senegal, about $680 from Dakar. Easy to access. It's a well serviced major regional road that runs into that way. It's a highway.

Speaker 3

Low security risk. It's a mining Several Tier 1 scale mines within 50 kilometers of the project. Ches has highlighted a Just the scoping study highlighted a technically simple open pit mining concept across several pits with a conventional 2,000,000 tonne Panam operation, And we would see that as something we'd continue to pursue. We would also anticipate this being a project that we would follow very closely behind the Soguela development path, Given that when we acquired that 4 years ago, we had an inferred resource of 400,000 ounces. And today, we're about to 4 gold.

Speaker 3

So I'd anticipate that we'd see similar growth for Daimler soon. Just moving across to the geology side, why do we really like it? It's located in the really highly prospective Kinney and the Kadugo Inouye, which is a world class mining district, host of several large Tier 1 operations. The Danbury Sood project itself is located on a series display across the main Senegal Mali share zone, which is host of the majority of those large deposits. And I really like the structurally complex nature of the deposit that's there, highlights the ratio prospectivity.

Speaker 3

And also, you see there's a lot of similarities to the nearby For Kola and Gounkoto and Yalaya operations of B2Gold and Barrick, they're all within the closest to those is 12 kilometers away. So far, the Chester folks have identified 4 shallow gold deposits with a very well developed bauxite super gene signature to them. And we'd certainly see that evolving further with further exploration work as we're looking to carry out later on this year, we'll resume that work. At the moment, though, it's a very attractive exploration play for us. They've got the resources.

Speaker 3

They've currently got 625,000 ounces of indications at 1.9 grams And a further 235,000 ounces of infill at 1.5 grams. We see those growing over time as well as the work we've got to do at So as Jess has announced, the recent market at Kasasoka, there has been certainly some decent and nice Intervals reported there, the Gumba Gumba Norwood and the Western Display. So these are all drill ready targets with some preliminary work done to date. In addition to those, there's several new additional targets that we've identified using their data sets, and that's really one of the highlights for us. There's a portfolio here of new targets available for us to walk up and test.

Speaker 3

Then there's also the potential there for a wider regional consolidation. We see a lot of encouragement there. Derek and immediately adjacent to us is Kent Lane West. Let me share a lease boundary with him. They've got a project there, which is looking quite interesting.

Speaker 3

And then to the immediate West, Yes. So the Africa's Karakayeni project, which is also again highlighting the potential that we see through that area. So in short, what we see here is an advanced exploration play that we could see moving through the phases of feasibility in a fairly short order of time, On which we have a high potential for growth, very simple geology in the sense that we know what's there. It's got a nice degree of structural complexity, which adds a bit more excitement to the process. That is a project we should see, we can carry through fairly quickly and looking forward to getting into the ground later on this year.

Speaker 3

Thank you, Holli.

Speaker 2

Thank you, Paul. And we'll move now to get an update From our Chief Operating Officer. So David, do you want to get going?

Speaker 4

Thanks, Jorge. Operations in West Africa continued its solid performance during Q1 2023. The Yaramoko delivered gold production of 26,437 ounces. This was ahead of the mine plan. The additional production contributing to Yaramoko's all in sustaining costs And cash costs of $15.9 per ounce $8.19 per ounce respectively, Both ahead of the lower end of annual guidance.

Speaker 4

The Dallas construction remains on time and on budget with the 1st long haul projected for this month. Safety performance at Yaramoko was strong with no injuries reported. Unfortunately, Segal and exploration contractor received a finger injury, which is later classified as an LTI. In early April, a failure of the On-site tunneling structure at the Yaramoko portal occurred, which resulted in the loss of the for the underground mine for a period of 27 days whilst rehabilitation operations took place. Normal underground operations resumed on 1 May, with a processing plant treating existing stockpiles throughout the rehabilitation Period.

Speaker 4

Production for Q2 remains unchanged, and we do not anticipate any Yaramoko Underground Great Control and Brownfield Oil's Exploration programs continued with encouraging results, extending our planned mining boundaries on the western side of the ore body And increasing stope tonnages within the existing reserve boundaries. Construction progress at Seguela continues on time and on budget With the project being 99% complete as at the end of April. April saw a ramp up of mining and processing Delivered to the crushing and milling circuits and grade control drilling at the initial benches at antenna With more than 12,000 meters drilled, load clearing and construction to the Antim pit, The second deposit being mined is currently taking place with grade control drilling expected to start in late May 2023. All mining major equipment is now being mobilized to site from MogoAngil, the mining contractor We're now in the final stages of the construction of key infrastructure. In parallel with excellent progress on the ground, Operational readiness scopes are advancing well.

Speaker 4

The mining, technical, processing and maintenance teams have all been recruited With Motorengill scheduled to recruit the remaining members of the mining team over the coming months. Back to you, Jorge.

Speaker 2

Thank you, David. Cesar, can you give us your Update on LATAM operations, please.

Speaker 5

Sure, Jorge. Thank you very much. And as you mentioned before, Last week, our San Jose mine in Mexico resumed operations after a 15 day illegal blockade. We are now working on the production recovery plan and don't anticipate any impact on annual guidance at this stage. We're also assessing potential impacts on the additional costs related to the agreements reached with the union as well as production targets and safety performance for the year.

Speaker 5

During the Q1, San Jose produced 1,300,000 ounces Silver and 8,231 ounces of gold. These results are slightly below Q1 2022 Due to lower grades than planned as a result of higher dilution in one

Speaker 4

of the sublevel stopping areas And

Speaker 5

the small delay in the mining sequence at level 800. We anticipate mining better grade stopes in the upcoming months, though. Cash cost per ounce at San Jose has come under pressure from a stronger Mexican peso coupled with higher inflation and lower head grades. All these in sustaining costs for the quarter is in line with our guidance as lower production and higher cost of sales were offset By timing in CapEx execution. Moving down to Argentina.

Speaker 5

Gold production at the Lindero mine was 25,258 ounces, Aligned with the mining sequence for the quarter, head grades are expected to improve in the upcoming mining zones as per mine plan. Mine production for the quarter was 1,600,000 tons of mineralized material with a stripping ratio of 1.07:one, which is aligned with the operations planned for the year of 1.17:one. Lindero's ASIC It's in line with guidance for the year. Cash cost per ounce was impacted by higher labor and onetime services costs As well as the effect of lower grades but partially offset by lower CapEx execution and savings in key consumables. AISC is expected to come in at the high end of guidance for the year.

Speaker 5

In Peru, Despite social unrest and numerous road blockades throughout the country, in January February, Operations at the Caylloma mine have not been significantly affected. The operation delivered strong production for the Q1 With 8%, 19% and 10% higher production for silver, lead and zinc, respectively. The operation benefited from better head grades at levels 16 and 17, the deepest levels of the mine And higher tons processed during the period. Caylloma's all in sustaining cost for the quarter benefited from higher production, Lower cash cost and lower CapEx execution and is on target to achieve the lower cost range of annual guidance. That covers the 3 Latin American operations.

Speaker 5

Jorge, back to you.

Speaker 2

Thank you. Luis, you want to give your report on financial results, please?

Speaker 6

Yes. Good morning. So sales were $175,600,000,000 in the quarter, A decrease of $6,700,000 or 4% compared to Q1 2021. A slight was driven by 7% lower silver prices and 14% lower zinc prices. The volume effect on our sales year over year was neutral as slightly lower gold and silver sales were offset by higher zinc production at our Caylloma mine.

Speaker 6

Year over year, our key financial metrics reflect the impact from inflation rates experienced throughout 2022 as well as lower operating margins at Yaramoko and Lindero related to schedule decreases in head rate. These impacts resulted in cash cost per gold equivalent ounce sold of $9.16 for Q1 20 20 which was $144 above the prior year. As I just mentioned, this increase is a combined effect higher input costs across our operations, more processed tonnage to produce a lower number of ounces at Yaramoko and Lindero And the negative effect of relative prices in the calculation of gold equivalent production of approximately $29 per ounce. So adjusted net income for the quarter was $13,200,000 down $20,000,000 year over year And adjusted EBITDA was $65,300,000 down $15,000,000

Speaker 2

year over year.

Speaker 6

We have disclosed for the quarter consolidated all in sustaining costs, including corporate expenses of dollars €1,514 per gold equivalent ounce sold, which represents an increase of $2.30 per ounce year over year. The increase is explained by higher cost per ounce so described before, Higher sustaining CapEx of $109 of which twothree is timing of payments in the prior year, With an offset from lower corporate G and A of $24 per gold equivalent ounce sold. For Q2 of 2023, we expect to see somewhat higher consolidated all in sustaining costs Due to a pickup in sustaining CapEx and a stoppage at San Jose. And for Q3 and Q4 of this year, we Moving on to cash flows. Net cash from operating activities in the quarter was $41,800,000 compared to 33 $200,000 in Q1 of 2022 as changes in working capital and lower income taxes paid compensated for the lower EBITDA of $15,000,000 year over year.

Speaker 6

Free cash flow from operations was $8,500,000 compared to 9.6 $1,000,000 in the prior year. As Jorge emphasized, our reported free cash flow figure is after sustaining CapEx, Brownfields exploration and corporate expenses, it does exclude Seguela Construction and Greenfields exploration. Our additions to mineral properties and properties, plant and equipment as per the cash flow statement was $61,500,000 which consisted mainly of $30,000,000 of sustaining CapEx and brownfield exploration, $17,300,000 Seguela construction expenditures, dollars 4,500,000 of Other preproduction activities at Seguela, dollars 3,700,000 of greenfields exploration And capitalized interest of $2,800,000 Onto the balance sheet, We closed the quarter with a liquidity position of $129,700,000 which includes $45,000,000 undrawn $23,000,000 And finally, our total net debt, including the outstanding convertible debenture, is $166,000,000 resulting in a leverage ratio of total net debt to adjusted EBITDA of 0.7. Back to you, Jorge.

Speaker 2

Thank you. That concludes the management's discussion. So Carlos, for the Q and A.

Speaker 1

Thank you, Jorge. We would now like to open the call to any questions that you may have.

Operator

Thank you. At this time, we will be conducting a question and answer One moment please while we poll for questions. Thank you. We have a question from Tony Christ with Odyssey Investments. You may proceed.

Speaker 7

Thank you. My name is Chris. Hoiye, could you give any more specific indication of what you expect From the gold mine starting production this month, what you expect in the future? And the other comment I have is, I imagine You gentlemen are looking forward to a very exciting future.

Speaker 2

Thank you Good question, Chris. We already provided for 2023 our guidance estimates for Seguela. We have guided for gold production between 6,075,000 ounces. And for all in sustaining cost, we have provided a range that goes from $8.80 To $10.80 per ounce. So that is our more immediate Estimation based on our best assessment Where we are with the project and how the project has been evolving, which is really on time, on budget.

Speaker 2

I can only commend The good work that the entire West African team has Achieved and delivered throughout the construction, commissioning and now ramping up, right? We expect first gold pour in the coming days. It's Imminent. Before the end of this month, we should be having our first call. And but looking forward, Looking at the bigger picture, Seguela is a flagship asset for the company.

Speaker 2

It has many Key features. 1 is meaningful production. 2nd is low cost. It will be or lowest cost Mine operation. 3rd, it has today long life of reserves.

Speaker 2

Today as we See the mine based on reserves and the conversion work we're doing on Sandberg Resources, We can easily see beyond a decade of mining based on reserves. So and beyond that is tremendous exploration potential. We hold a commanding land position In the Seguela camp, I call it a camp, we have 30 kilometers from north to south along What's most prospective and productive mineralized gold belt? So Sometimes I am asked, so what follows after Seguela? And my immediate response to that is more Seguela.

Speaker 2

We have the expectation that Seguela can be a much Larger mine than what we are bringing into production today, which is already quite meaningful. Thank you.

Speaker 7

Thank you. Thank you so much.

Operator

Thank you. We have another question from Adrian Weil with Adrienne Bay Asset Management. You may proceed.

Speaker 8

Yes. Good afternoon. Two questions, if

Speaker 9

I may. First one, Do you have a sort of budget for exploration at the D'embo sorry, D'embo Sud Project for the next year. And then the second question would be, I just wondered if you had any high level View that you can give on the geographic spread of the company. And do you look at are you looking at region? Are you wanting to emphasize particular regions?

Speaker 9

Or are you looking Purely at each mine, each opportunity as it comes along.

Speaker 2

Thank you, Adrian. With respect to the Ambasut budget, the transaction, The Chesa acquisition is expected to close in October sorry, In late August. So we are currently working on

Speaker 4

our plans

Speaker 2

For the work that will start once the transaction is consummated in August, right? That will, of course, encompass an exploration budget. We do not have a budget at this time. But I can advance to you that exploration will be a focus for the Bambasud Work that's coming ahead. We also will likely be doing some engineering work.

Speaker 2

The Ambasut has a published preliminary economic assessment and Chesar management was working already on a feasibility So we although completion of the feasibility study, I wouldn't call it a priority for us right now. Certainly, we will look At aspects of the feasibility study, looking to see opportunities for optimization And bringing our own expertise and thoughts To the design and conceptualization of what could be a future mine there, right? So Exploration will be a priority, and we are working on those budgets and plans as we speak. We have some time Because the transaction is set to close in August, as I explained. With respect to the more strategic question, your second question On geographic spread for the company, and that is a key aspect of Fortuna.

Speaker 2

Fortuna is a company that today has a wide geographic spread, Right. We operate in 5 different countries in 2 continents. So this is a key strategic Spector for business and the subject of strategic discussion or has been the subject of strategic discussion. So What you will see is Fortuna anchored in the two regions where we are already established. That's So West Africa and the LatAm Cordilleran belt.

Speaker 2

Within these two Most productive mining regions, you will see us focused 1 in the countries where we already operate, in the Five countries where we operate. The 5 countries where we are established are mining jurisdictions, Mexico, Peru, the province of Salta, Which is proud of its mining heritage, Burkina Faso, the Ivory Coast and now expanding into Senegal. But You will see us first focus in the countries where we are already established. And as a second priority is near neighbors. So what we want to do is be able to leverage the existing infrastructure we have in our management hubs In the city of Abidjan in Cote D'ivoire and in the city of Lima in Peru, that's where our management hubs sit For the two regions and where we have expertise that we can leverage within the region.

Speaker 2

You should not look to see Fortuna stepping out of these regions. For example, sometimes I'm asked about Africa. Africa is quite a large place and diverse. We're not looking for opportunities across Africa. We're looking for opportunities in West Africa, No.

Speaker 2

In near neighbors, in the countries where we're already established, the same with LatAm. So we're not looking at opportunities In North America or Australia or the Philippines or places like that, no, we our core areas of focus are where we are already established. We Feel very comfortable there growing our business, and we believe we can manage the geographic dispersion we have in place today.

Speaker 3

Okay. Thank you. Thank you.

Operator

Thank you. Our next question is coming from Justin Stevens with PI Financial. You may proceed.

Speaker 10

Hey, guys. Just a few questions from my side here, more sort of on the exploration And sort of upside end of things. I know there was some talk Earlier this year about looking at Alizado, can you just maybe give us an idea on what the time line might be for the evaluation there, The potential to potentially bring that into the mine life and what we would be needed from a permit side of things.

Speaker 2

Yes. I can advance things from the permit side of things. Arecado is within our mining concession and Any ore that we mine there will be fed to existing infrastructure. So we don't see there any significant issues with permitting. And for the exploration side of things, I'll let Paul talk to Addisato.

Speaker 2

Paul?

Speaker 3

Yes. Thanks, Yes. We've last year, we wrapped up another phase of work around Arrozaro We're successful in expanding the footprint of the mineralization that's there. We're going to have some good optimization results Certainly very encouraging. The grades that we've got are comparable to what Lindero is.

Speaker 3

Given Lindero's long life of mine, There's no real need at the moment to continue to advance that because it doesn't displace anything that's better value. So We've added Aranzaro in at the end of the Lindero mine life. There's still some work to be done on the optimization of it, but we've certainly got a reasonable sized resource there at the moment. We will continue to look at the structural repeats of it. It's a polyphase intrusive that's there.

Speaker 3

And we do see some evidence of a reasonably strong, reasonably coherent structural overprint that I don't think it was recognized previously. But yes, we're not really doing a lot of work at Marazaro For the next year or so.

Speaker 8

Got it. That makes sense.

Speaker 10

Moving over to the Gil, end of things though, obviously, some pretty nice results coming out of Sunbird in the last little while as you've been drilling off there And good to see sort of that resource bump. Are you planning to put out another updated resource On that or is it just sort of expecting that to fall into the usual annual cadence

Speaker 4

and sort

Speaker 10

of line up with the annual reserve and resource updates?

Speaker 3

Paul? Yes. Thanks for that. Yes, look, Peter is going to have the Sunbirds. Sunbirds drilling just wrapped up now that's moved across the op Guys, to start the optimization and introduction into the life of mine later on this year.

Speaker 3

So it will come out as part and parcel of the regular update next year.

Speaker 8

Got it. That makes sense. And just on that,

Speaker 10

I mean, obviously, it's looking like it's got a decent amount of size there. What sort of or 2 different ways, either what sort of potential flexibility do you have in The plant or what do you sort of see as the main Seguilla process bottleneck if you were to try to look at increasing the throughput?

Speaker 2

David, you want to address this question on the bottlenecking of Seguela's plant and what our plants are with respect to assessing the expansion of Hello, Neil.

Speaker 4

Yes. I can answer that one, Jorge. Within the initially anticipated Setup of the plant and the DFS, it was expected that We would be able to increase the throughput for the plant around year 3 to about 1,500,000, 1,600,000 tons a year. That was ultimately based around changes with grind size and a couple of other Modifications through the plant. The design of the plant also has An option for the installation of the ball mill and pebble crusher later on in life as well To further expand the 3 points.

Speaker 4

At the moment, obviously, the focus We'll be to see where the real boundaries exist in the existing plant. At the moment, we're just establishing operation of the plant and we're Seeding oxide ore, sorry, it's a little bit early to be able to go through that process. But by A little bit later on this year, we should be starting to read pressure and we should be able to start looking at where some of the bottlenecks lie And be able to remove work on removing those bottlenecks. I think Seguela, over the following years, it's going to be a very, very Dynamic environment with the Sunbird deposit coming into the mine plan and some other Good exploration opportunities. I think the mine plan is going to be very dynamic over the And there's going to be probably a lot of engineering work to really determine Where the production from Seguela 6 and whether the constricting Factor will really be Plant 3 plus over the mine.

Speaker 4

I think both will be pushing each other along for a good couple of years later.

Speaker 10

Great. That's what we want to hear. That's it for me though. Thanks.

Operator

Thank you. Our next question is coming from Jasper Wyk with Valparais. Sir, you may proceed.

Speaker 8

Thank you, operator. Most of my questions have already been answered, but I have one question on your recent acquisition of Chester Resources. So you will be focusing on exploration and finding more ounces and more satellite fit at the Amba Sood. But do you have any sort of target in amount of ounces That you would like to that you would be able to settle for before moving into development and devising a feasible study on the AmbaSut? Thank you.

Speaker 2

Thank you. That's a good question, Jasper. We have a threshold and a view that The Ambasut with the work that Paul has outlined has a fair chance to go beyond 1,000,000 ounces. So that's with work in the immediate area of deposits That have been discovered and drilled and also with some of the other initiatives Outlined by Paul. So our view is that it can certainly get beyond 1,000,000 ounces.

Speaker 2

Now how big? Well, the drill bit will tell us, right? But beyond 1,000,000 ounces is, we believe, a reasonable expectation based on the information and our understanding today. And we have certain criteria. We want to see a life of reserves That support a mine for over a decade.

Speaker 2

We would like to see in our mine portfolio all of the assets At 10 years plus in reserves, and we would like to see Production that for a company of Versailles annual production from each asset, nor in the range of 150,000, 120,000 ounces annually, right? And so with respect to physical metrics, that is what we would like to see In every asset. And then of course, we have our financial thresholds with respect to our expectations on internal rates of return And things like that. But more on the fixed cycle side of metrics, 10 years of reserves minimum and meaningful production at competitive costs, Of course, right. And with the grades that we have at the Ambasut over 1.5 grams.

Speaker 2

We believe we can achieve low cost rounds and And it's conventional mining, conventional processing. So we just need to focus on the exploration and get it beyond That amount, which is the 1,000,000 ounces, right? Today, it's a sub 1,000,000 ounce deposit with all the and as we have said in the It looks very much like Seguela looked to the exploration team back in the day when the Seguela acquisition was made. When the Seguela acquisition was made back in 2019, Seguela was a 400,000 ounce deposit. Today, it's touching 2,000,000 ounces and continues to show potential to grow.

Speaker 2

So we see a similar opportunity in general terms.

Speaker 8

Thank you, Jorge. That was a great answer. And You provided some great color on that. Sounds reasonable. That was it for me, operator.

Operator

Thank you so much. At this time, we have no further questions on the telephone lines. So I will I

Speaker 3

hand the call back over to management.

Speaker 1

Thank you, Adi. If there are no further questions, I would like to thank everyone for listening to today's earnings call. Have a great day.

Operator

Thank you. This does conclude today's conference and you may disconnect your lines at this time. And we thank you for your participation.

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